If you’ve been caught off guard by a higher-than-expected cloud bill, you may be asking how to incorporate cloud cost optimisation into your strategy to keep rising costs under control. To master cloud cost optimisation, it’s essential to understand the factors behind cost increases.  These may include unplanned or unauthorised configuration changes, unanticipated demand for your applications, as well as poor housekeeping or security controls.

In this article, our cloud expert, Joss Mureddu, shares his decades of experience in identifying the key elements to mastering cloud cost optimisation, including:

• Understanding cloud cost drivers
• Cloud cost optimisation strategies
• The importance of implementing strong governance
• Architecting for success.

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1.Understanding Cloud Cost Drivers

The widespread adoption of public cloud services has empowered businesses of all sizes to leverage modern, scalable infrastructure without the burden of managing physical equipment. Cloud platforms offer flexibility, choice, and speed, enabling rapid responses to a change in customer needs and market dynamics. However, these benefits come with associated cloud costs, which can quickly spiral out of control if not managed effectively.

2. Why are my cloud costs higher than I expected them to be?

There are several reasons why actual costs can be higher than estimated costs. These factors vary from changes in the planned configuration of a group of servers during your cloud deployment or migration to unanticipated demand in the applications that your organisation, customers, or employees rely upon.  Additionally, it could result from the costs associated with processing, storing, and accessing data hosted in the cloud.

Higher costs can also be a symptom of poor housekeeping, policy, or security practices.  In some instances, it could be that the cost of running the infrastructure is in line with your initial estimates or projections, but the costs of monitoring or protecting them (for example backup or disaster recovery) are much higher than expected.

Getting costs back under control needn’t be challenging – consider the following advice to understand how to get – and keep cloud spend in check.

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3. Cloud Cost Optimisation Strategies

Understanding your cloud costs

Knowing which services you use, how they are billed, and how much you need to pay is essential. To optimise cloud costs, examine usage patterns in resource usage and compare this with your anticipated demand. This will help you understand whether your resources are configured most cost-effectively.

Optimise resource usage

Optimising cloud costs can take many forms, but consider the following to help reduce your cloud bill:

• Turn off: Shutting down resources like virtual machines that aren’t required 24/7 (or at all) can offer immediate savings.
• Clean up: Check that resources like disks, network interfaces, and static IP addresses are deleted or reallocated when their primary resource (such as a virtual machine) is deleted.
• Right size: Changing the size of resources to match the demand of the application, service, or user base can reduce costs without compromising availability or performance.
• Update: Migrating to newer versions of the same resources that run your applications and services can boost performance and offer lower pay-as-you-go costs.
• Reserve: Choose long-term commitments and heavily discounted rates from cloud providers by committing to use resources to run applications or services that are not likely to change in terms of demand or size over the next 3 years.
• Savings Plan: If a certain application is evolving to make use of modern platform-based and application-oriented services like Azure Functions or AWS Lambda while other applications still rely on infrastructure-based services like virtual machines, committing to a minimum hourly charge will provide discounted rates across a flexible range of similar services.
• Spot resources: If your applications can tolerate interruptions, consider spot discounts to benefit from significant discounts offered to make use of additional, unused compute capacity in your cloud provider’s platform – you can specify the maximum hourly rate you’d like to pay. However, be prepared for your application’s host resources to be turned off if another cloud customer needs them on a pay-as-you-go basis, or if the ‘market rate’ exceeds the maximum you set.
• Monitor applications: Implement monitoring tools to better understand application and host infrastructure demand to ensure a balance between availability and performance requirements, using this data to shape your cost optimisation decisions.

4. Implement strong governance

Strong governance reduces the risk of accidental or intentional changes to resources and the critical applications they host. Consider these tips to help create guardrails that can contribute to cost and operational efficiency:

• Role-based access control: By giving your team access only to the resources and administrative tools they need, you reduce the risk of cloud resources being created, changed, or deleted.
• Secure access: Implementing single sign-on and multi-factor authentication reduces the likelihood of malicious users accessing your cloud platform, limiting the likelihood of data loss or corruption as well as the creation of expensive resources.
• Split the bill: Use multiple accounts or subscriptions to keep costs separate and visible – mapping each billing container to a team, department, or business area allows you to view the costs for each area much faster.
• Tag resources: Using resource tags can help to find related resources quickly in your cloud platform console. Common use cases include environment, application or service, application owner and department. Tags can also be used when configuring services like backup, disaster recovery, and updates which can save further time and cost when configuring them.
• Budget and alert: Implementing budgets can provide early warning should costs increase faster than expected, giving you time to identify and resolve the root cause before receiving your cloud bill.
• Policy controls: Implement rules for who can create resources, as well as where they can be created. The same is true for resource change and deletion – you can limit inconvenience to your organisation and customers by implementing rigid controls.

5. Architect for success

Plan for your application to evolve and make use of modern application-centric services and explore the features of scalable services to automatically grow and shrink applications. This will provide customers or end users with a reliable service that doesn’t require you to provision more resources than you need to, either in size or quantity.

You’ll also save time by removing the need to constantly manage demand and infrastructure provisioning by deciding how large you want your cloud resources to grow, and how they do so. This will make sure your application or service can continue to run during periods of demand.

Before committing to a scalable service, it is important to understand if your application will work under a ‘scale-out’ scenario, where more of the same host resources, like virtual machines, can be created according to thresholds that you determine based on application or resource (CPU, RAM, network) demand.

All cloud services and solutions platforms offer scalability across compute and database services that are built around the ‘scale-out’ method which increases the number of resources running your application based on the minimum and maximum number of resources you’d like, as well as rules governing when to increase and decrease it. If your application can tolerate interruptions, spot pricing can be used to reduce the cost of those additional resources while they’re in use.

It is possible to use cloud platform automation tooling to scale up, versus scale out.  But to increase the size of a single server hosting an application will likely require your application or service to suffer downtime while a new, larger host is provisioned.

Cloud cost optimisation tools

Before investing in expensive third-party cloud cost management tools, review the recommendations in your cloud platform provider’s advisory tool to identify quick wins and to get a better understanding of your overall platform health.

Additionally, be sure to review the recommendations in areas other than those directly related to cost – these can have an impact on cost controls by encouraging better use of resources and changes to security controls and user permissions throughout your cloud environment.

Cloud Cost Optimisation in Action

Financial Services

• We helped a financial services customer to reduce their compute and data storage costs by analysing their cost data, resource configurations, and storage capacity.
• As part of this work, we identified cost savings by using automation to turn non-critical servers off outside of business hours, including weekends. This resulted in an application compute cost reduction of 75% without impacting productivity.
• By standardising older virtual machines to match the version and series of newer ones, we identified an opportunity to use a flexible compute reservation that enabled virtual machines of the same series but of different sizes to benefit from reduced costs. This allowed the team to plan for standardised deployments but offered a range of different virtual machine sizes to be used.
• As part of the standardisation work, we reviewed how storage was being used across multiple cloud regions and identified a saving of 40% that a shared reservation offered. This helped our customer maintain data for compliance and regulatory purposes in the most cost-effective way.

Summary

Managing cloud costs and implementing an effective cloud cost optimisation strategy doesn’t need to be difficult. Understanding how you use cloud resources today, and how you provision and manage them can give you clear insights into when, where, and how to reduce your cloud spend.  It’s worth considering, that for every pound saved in cloud costs, there is more to spend on innovation and growth, effectively turning cloud cost optimisation into a powerful strategic driver.  Gartner predicts that by 2025, over 51% of enterprise IT spending will be on public cloud computing. This means that more than half of your IT budget will go to the cloud. So, it’s crucial to ask yourself: do you know how much of your cloud spending is truly optimised?

If you aren’t sure where to begin, speak to Telefónica Tech and arrange a review of your cloud solutions and costs.

AUTHOR: JOSS MUREDDU

CLOUD EXPERT, TELEFÓNICA TECH UK&I