Cloud adoption is soaring, with businesses migrating more and more operations to the cloud. 85% of large enterprises already have a multi-cloud strategy. The high cloud adoption translates to an increase in enterprise cloud spending. Global spending on public cloud services will reach $679 billion in 2024 and surpass $1 trillion by 2027. 

Why take the trouble to optimise the cloud?

Enterprises embrace cloud services for scalability, resilience, and several other benefits. But high costs often erode these gains and strain enterprise financials. 

Optimising cloud costs reduces expenses and makes cloud adoption viable both in the short and long term. Cloud cost optimisation also delivers several spin-off benefits. 

Cloud cost optimisation improves visibility into cloud spending. It also lends structure to the enterprise cloud footprint. The clear-cut ROI makes attributing cloud services to specific services easy. The C-suite also tends to loosen the purse strings when seeing a definite ROI. 

Cloud cost optimisation requires improving the efficiency of cloud resources. Efficiency and automation improve productivity. The IT team becomes free of arduous and time-consuming maintenance tasks. They can spend more time and energy on higher-value tasks. DevOps teams especially become free from constant fire-fighting exercises. They can spend their time and energy on critical enterprise services and applications.

Cloud cost optimisation also makes it easy to optimise enterprise costs. Monitoring cloud expenditures for unused resources makes explicit underutilised features and mismanaged tools. It also flags untagged costs. Detailed financial information makes it easier to map budgets and resources. Controlling the sharing of resources also becomes easier. Businesses can charge back the service backwards, depending on the resources consumed.

Another big reason why enterprises need cloud optimisation is for innovation. As technology becomes a level playing field, innovation becomes imperative for competitive differentiation. With no certainty of results, the high cost of carrying out innovation experiments puts off many enterprises. The cloud offers ready-to-scale, cost-effective infrastructure to conduct innovation-related experiments. For instance, AWS-designed custom silicon optimised for the cloud accelerates innovation. AWS Graviton-powered instances deliver 40% better price performance over comparable x86-based processors.

How to go about it?

For many enterprises, the benefits or imperativeness of cloud cost optimisation are obvious. But they are at a loss about how to optimise cloud spending. 

Have a defined plan for cost management.

The solution is a defined cost management plan. Gartner estimates that enterprises overspend on cloud services by up to 70% without one! 

As best practices, 

• Set up access policies to restrict users to only the necessary services. Use IAM permissions to prevent users from incurring unexpected and unneeded usage. 
• Track cloud spending actively. Use services such as AWS’s Budgets to set cost expectations and receive alerts when spending exceeds thresholds.
• Shut down non-critical during off-peak hours to avoid paying for resources not used actively.

Check overspending

Many enterprises overspend due to inefficiencies and a lack of visibility into cloud usage. The usual culprits are some enterprise users leaving a workload running or starting a service and forgetting to turn it off.

Many enterprises use cloud services to experiment. They set up infrastructure fast but drop the plan if it does not deliver the expected results. Often, they forget to remove services they no longer need. The service provider continues to bill for these services. 

Focus on resource allocation

The pay-as-you-go nature of cloud computing ensures flexibility but often leads to overspending. Amazon Web Services (AWS), the market leader, estimates that overspending can amount to 35% to 45% of the total spend. 

Most overspending is due to inefficient or sub-optimal resource allocation. Controlling overspending and maximising ROI requires proactive cost and resource management. 

Good cost optimisation strategies related to resource allocation include:

• Monitoring resource utilisation and associated expenses. Monitoring tools trigger alerts when usage exceeds limits or violates baselines. 
• Tracking spending across departments. Allocating costs to specific projects improves enterprise-wide accountability and transparency.
• Selecting the most appropriate instance type for the business. Instance types have a big impact on cloud costs. Subscription and reserved instances work best for stable business workloads. Pay-as-you-go instances work best for stateful and dynamic business workloads. Pre-emptive instances suit stateless and fault-tolerant business workloads. Among these instance-type options, identify the most cost-effective ones.
• Identifying the cheapest storage options. Many users choose expensive storage classes even when they have access to cheaper storage with the same facilities. They continue with the more expensive default option. Moving to lower-cost classes reduces costs by up to half. Consider AWS’s S3 storage service, the most used cloud service for everything from website content to backup storage. S3 offers several storage classes at different costs.-performance tradeoffs. The default standard storage class is the most responsive and expensive. 
• Identify and use free or discounted services. Many service providers offer free resources, which may suit non-critical workloads. For instance, AWS Free Tier offers many services free up to specified limits. As usage grows, providers offer volume discounts. Users save up to 72% by committing to savings plans and reserved instances for predictable usage. Amazon EC2 Spot Instances offer discounts of up to 90% for fault-tolerant workloads.

Automate

Many enterprises overprovision to be on the safe side. They worry about performance and add more resources than needed, negating the cloud’s advantages.

The solution is automating rightsizing. Rightsizing involves matching compute and storage to the actual workload requirements. This is easier said than done, considering the complex and dynamic nature of today’s workloads. 

As solutions:

• Automate resource scheduling based on usage patterns. Use auto-scaling to analyse and adjust resource provisioning. 
• Most cloud service providers facilitate auto-scaling and other automation options. Alibaba Cloud, for instance, offers several automated services to improve efficiency. AliBaba’s auto-scaling application maintains instance clusters across billing methods, instances, and zones. The auto-provisioning option ensures immediate provisioning to suit the ever-changing business needs.

Embrace FinOps

FinOps entails the financial management of cloud resources. The key elements of a FinOps approach include

• Creating a cloud budget with spending limits and allocating resources to business priorities.
• Predicting cloud expenditures and identifying areas for cost savings.
• Building a culture of cost awareness. Two key drivers of such a culture are encouraging employees to reduce waste and use resources responsibly.

These principles provide the framework and accountability for implementing optimisation strategies. 

For most enterprises, cloud spending is not a static figure. Even the best IT managers cannot predict cloud costs, which vary depending on strategies and usage. Regardless, optimisation controls cost, reduces waste, improves efficiency, and unlocks value.