Effective cloud cost optimization: 3 essential steps for success

While moving to the cloud is smart, staying there can be expensive. According to the 2024 Flexera cloud report, business leaders reported wasting over 24% of their total cloud costs on the public cloud. If you end up with unused or idle resources, the wrong server size, or a cloud service provider that does not meet your business needs, your cloud infrastructure might become more costly than on-premises.

So, what are the signs that you need cloud cost optimization, how to achieve it successfully, how much can you save, and what businesses have already benefited from it? Discover in this article.

Signs you need cloud cost optimization

You need to remember that by reducing costs, you might compromise something else if you choose the wrong approach. For example, by removing one of the cloud providers to cut cloud expenses, you risk getting into a cloud vendor lock-in. Also, keep in mind that reducing costs in the cloud is not the ultimate goal. The goal is to reduce costs based on the desired outcomes for your business. If a specific cloud spending brings business value, you shouldn't reduce these cloud costs.

To reap the cloud cost optimization benefits, you need to clearly understand its effects on your operations. However, in some cases, you should know for sure that you require cloud cost optimization. Signs you need it are the following:

1. You are a midsize company or an enterprise

Such businesses typically have complex and long-lasting projects, bigger budgets, and more employees. Thus, it is more challenging for such companies to understand if all their resources are allocated correctly. A higher number of employees also raises the risk of human error, which can lead to extensive cloud expenses. For instance, your employees can forget to shut down the additional cloud resources that they used to complete a task.

2. You have a non-consistent workload

Many businesses have peak periods. For example, Black Friday and holiday seasons are such periods for retail platforms. One way to withstand these high loads is to purchase additional cloud resources and then get rid of them. If your workload is frequently changing, you must keep tabs on cloud resources you need and don't need.

3. You don't have a clear understanding of your cloud spendings

If your organization keeps overspending its cloud budget, this is a clear sign that you need cloud cost optimization. You must know what cloud services you use and how your business benefits from them. If you lack this understanding-it is time to find a trusted tech partner that will help you track all your cloud resources and optimize what should be optimized.

4. Your cloud budget can be used more effectively

Even if you understand your spending, you can still use these resources more effectively. In this case, your tech partner can help you find alternative and more innovative approaches to the processes you already have.

If your business case matches at least one of these points, consider cloud cost optimization. But how to do it correctly? Let's find out together.

3 major steps of successful cost optimization in the cloud

1. Cloud audit

Auditing is a critical part of infrastructure optimization, and the cloud is no exception. You should ask, what is cloud cost optimization specifically for your business? During this stage, you need to find solid reasons why optimization is required, what consequences it may lead to, and how your optimized cloud infrastructure may perform in the long run. Understanding what cloud resources you have and what is actually used is vital.

Established vendors typically have a separate team to audit each project. At N-iX, for instance, this is called the product discovery. During this phase, the N-iX team shapes the scope of your solution based on the goals of different stakeholders, the user journey map, and market research. The team validates the assumptions and hypotheses from different perspectives of business analysis, UX, and IT architecture and produces all the deliverables required to kick off the implementation phase efficiently.

Also, remember that you need a strong team of DevOps experts to perform a thorough cloud audit. You can also benefit significantly from implementing cloud FinOps as it allows for controlling costs, improving financial transparency, and aligning cloud expenses with business goals. Within this stage, it is vital to:

• Find unused or unattached resources

The easiest way to optimize costs in the cloud is to look for unused resources. For example, an employee may purchase a temporary server to perform a particular task and forget to turn it off when the job is done. Or, someone may forget to remove storage attached to terminated instances. Such common mistakes result in charges for resources you are no longer using and thus should be optimized.

• Identify and consolidate idle resources

Idle resources could cost your organization thousands of dollars. A resource is defined as idle if it is not fully utilized-e.g., if you use 20% of a particular instance, it is 80% idle. And your cloud vendor still charges you 100%. So, ensure your vendor finds the idle resources to tackle them afterward.

2. Planning

When the audit is done, and you know you can use your cloud more efficiently, it is time for the planning stage. Your team must decide which optimization method fits your business best.

For instance, creating Kubernetes clusters/Docker containers is a tried and trusted N-iX approach to optimizing cloud infrastructure. By doing so, we, for example, can create a system of five virtual machines and run ten applications on them. With such an approach, our clients can reduce the hosting costs and avoid problems if one of the machines breaks down. If one of the machines happens to fail, the system transfers services hosted on it to other machines automatically. At the same time, if the machine becomes operational again, the services will return to their initial place.

3. Implementation

When a team has a clear understanding and vision of how the cloud optimization process will look, they continue to the implementation stage. With the help of skilled DevOps experts, you can:

• Reduce infrastructure usage where it can be reduced;
• Automate the CI/CD process and perform provisioning of cloud infrastructure;
• Delete underused instances;
• Right-size your workloads;
• Resize resources if they are not used;
• Leverage autoscaling to your benefit;
• Move rarely accessed storage to cheaper vendors;
• Set alert notifications for crossing predetermined spend thresholds;
• Leverage spot instances for serverless and things that don't require high availability;
• Invest in reserved instances;
• Host in a different region;
• Use discounts many cloud vendors offer.

N-iX has been working with the cloud for over a decade now. During this time, we have come up with some best practices that help us deliver timely and quality cloud solutions. Let's take a look at these best practices.

Top cloud cost optimization best practices

1. Utilize heat maps

Heat maps are essential for cloud cost optimization as they show peaks and valleys in computing demand. This data is valuable for establishing start and stop times to cut expenses. For instance, heat maps can indicate whether development servers can safely shut down on weekends.

2. Right-size computing services

One of the cloud cost optimization techniques is the practice of aligning your computing resources with your current requirements. Right-sizing will allow you not to overpay for unused capacity. Apart from server sizes, you can optimize its memory, database, computing, graphics, storage capacity, throughput, and more.

3. Invest in cost-saving tools offered by cloud vendors

There are many cloud vendors offering tools for cloud cost optimization. However, in this article, we will focus on the most significant market players: Microsoft Azure and Amazon Web Services. While a wide variety of tools can help, only a reliable tech partner can assist you with choosing the tools that will bring the most value to your business.

In this article, however, we provide several examples of tools that can help you optimize cost in the cloud for listed providers.

Azure cloud cost optimization

• Azure Advisor: With this tool, you can identify idle virtual machines (VMs), ExpressRoute circuits, and other underused resources, as well as get recommendations on which resources to shut down and see how much you would save.
• Microsoft Cost Management: With the Microsoft Cost Management tool, you can track all costs related to your Azure consumption, download billing statements, set budgets, and more.
• Microsoft Azure Well-Architected Review: While this tool doesn't directly assess your Azure resource consumption, it provides recommendations that can enhance the quality of a workload. Apart from cost optimization, this framework consists of pillars of architectural excellence such as reliability, security, operational excellence, and performance efficiency.

Read more: Azure cost optimization: 9 effective strategies

AWS cloud cost optimization

• AWS Cost Explorer Resource Optimization: This tool will identify Amazon EC2 instances with low utilization, reduce costs by stopping or right-sizing, and get a report of EC2 instances that are either idle or have low utilization. You can reduce costs by either stopping or downsizing these instances.
• AWS Instance Scheduler: This AWS tool allows you to stop instances automatically. You can also use AWS Operations Conductor to automatically resize EC2 instances (based on the recommendations report from AWS Cost Explorer).

Read more: Optimize your cloud spending: best practices for AWS cost reduction

4. Choose wisely between multi-cloud and single-cloud approaches

This is one of the cloud cost optimization strategies for increasing availability and uptime. Some enterprises opt for the multi-cloud approach to avoid vendor lock-in. On the other hand, these organizations may risk losing potential discounts by using a single cloud vendor.

Suppose you spend $500,000 on AWS, $300,000 on Azure, and $200,000 on Google Cloud Platform. In this case, you miss out on reaching a $1M tier with a single vendor. The value of that $1M tier may be substantial discounts on overall cloud expenses and preferred status with that particular vendor. So, the multi-cloud approach is not one-size-fits-all, and you should keep that in mind.

5. Consider moving to a microservices infrastructure

Many organizations migrate to the cloud from on-premises without modifying their systems, believing it's a quick and cost-saving option. However, this approach can transfer on-premises inefficiencies to the cloud, increasing costs.

Moving from legacy applications to a microservices-based architecture can save significant time and money. Thus, you can selectively move specific components to the cloud and eliminate inefficiencies, reducing potential cloud waste. A microservices architecture improves resource efficiency through independent scaling and deployment of modular services.

6. Utilize real-time monitoring and analytics

Timely access to critical data enables team members to make informed decisions, increasing profitability and product quality. Early identification of cost savings opportunities is essential to preventing late implementation.

Monitoring expenditure indicators and identifying abnormal patterns helps assess spending levels and reduce potential budget waste risks. Businesses usually track metrics such as CPU utilization, storage usage, network traffic, error rates, etc. Analyzing them allows organizations to make quick cost decisions, adapt to changing demands, and immediately capitalize on opportunities for saving costs in the cloud.

7. Find a reliable technology partner

Partnering with a trusted vendor is a great cloud cost optimization strategy. Thus, the IT outsourcing cloud market is constantly growing and is expected to reach over $1.77T by 2028, according to Statista. With a trusted partner, you can avoid the recruitment headache, mitigate all risks, scale your team quickly, and develop your solution within your required time and cost estimates.

Cloud cost optimization in action: N-iX success stories

​​1. Reducing costs by 30% for a global telecom vendor

Lebara is one of Europe's fastest-growing mobile virtual network operators (MVNO), with millions of active customers and employees across six countries worldwide. The client needed to perform a wide range of solutions. The project consisted of several phases:

1. Re-platforming: Our experts worked on cost optimization and lead time decrease by migrating from on-premises to the cloud;
2. Tech-stack upgrade: N-iX team has migrated the solution from on-premises WCF and BizTalk to Azure and from Azure Service Fabric to Azure Kubernetes Services;
3. Enhancing flexibility and scalability of the solution.

Cloud migration allowed our client to improve scalability. The reduction in new infrastructure costs amounted to around 25-30%. The client also managed to improve innovation and lead time.

2. Saving infrastructure maintenance costs for a leading technology company

Our partner provides stock photography, footage, music, editing tools, and custom content tailored to a brand's needs. They have an over 300M image library, with 200,000 more added daily. This platform needed modernization, as it was inconvenient for its managers to track the process without notifications. They also needed a place to consolidate all the notifications. If the customer did not address their need, they would spend more time managing the processes and, in turn, would lose money.

We have chosen AWS to solve this problem. It makes it easier to build, deploy, and scale applications. Thus, our client can focus on business problems instead of updating and managing tools.

Together with the client, we have modernized the system to optimize workflows, allowing the managers to save time and respond to any updates immediately. The platform has become more convenient for managers and more efficient for users.

Since the system has no consistent workload, managers do not work at night, and no notifications are required. In the morning, the load increases, and AWS Lambda automatically scales without any need for maintenance by developers. Amazon RDS offers reliable storage and also allows the company to save money on its maintenance. In particular, we reduced the staff of DevOps engineers who were supposed to support the infrastructure.

3. Optimizing costs for the in-flight Internet provider

Gogo is a leading provider of broadband connectivity for the aviation market, with more than 20 years of experience and over 1,000 employees. The business is growing and needs to support business functions and decisions with analyzed and prepared data. Therefore, Gogo has decided to go for tech transformation and chose N-iX as a partner. N-iX has built a team of specialists with vast experience in the cloud and such technologies as Hadoop, Apache Spark, Tableau, etc.

N-iX team has successfully migrated Gogo solutions to the AWS cloud platform and built a unified data platform. We've helped the client to:

• Completely re-build the solution using open-source technologies, such as Spark;
• Develop the system for predicting failures and replacing devices from scratch;
• Build several highly efficient analytics platforms.

As a result, we have helped the client to cut maintenance costs significantly.

Why entrust your cloud cost optimization to N-iX?

1. Our expertise in the cloud includes on-premise-to-cloud migration, cloud-to-cloud migration, as well as multi-cloud and hybrid cloud management;
2. N-iX boasts a talent pool of more than 2,200 specialists, including 400 cloud experts that can help you boost your project delivery or build a solution from scratch;
3. We offer professional DevOps outsourcing services, including cloud adoption (architecture, migration, optimization), building and streamlining CI/CD processes, security issues detection/prevention (DDOS & intrusion), firewall-as-a-service, and more;
4. N-iX is a certified AWS Advanced Tier Services Partner, Microsoft Solutions Partner, and Google Cloud Platform Partner;
5. N-iX complies with PCI DSS, ISO 9001, ISO 27001, and GDPR standards to ensure your cloud environment is secure.