The vast benefits of Cloud computing make it an easy sell to organizations that are thinking about making a shift. For many, it’s a great way to reduce their IT spending. They shift to a pay-as-you-go model with Cloud computing, paying for only the resources that they utilize, much as they would with any conventional utility like electricity or natural gas.
This is particularly beneficial for startups and smaller companies. They don’t need to make a significant investment in hardware and other resources. They can simply use a Cloud service provider’s resources as/when needed to reduce their costs. This justification may not be that simple for large enterprises.
Most already invest considerable resources into their data centers and related equipment. That initial investment coupled with the partial depreciation on the hardware requires them to perform a more diligent cost-benefit analysis for their Cloud operations.
The economics of Cloud computing can be difficult to understand as it is. There are countless solutions to choose from with variations in CPU cores, memory and local storage. Optimizing the use of these pay-as-you-go resources is vital to keeping costs in control.
What is Cloud Economics
Cloud Economics is the evaluation of the costs and benefits of Cloud computing whereby organizations are able to ascertain how they can utilize it to derive maximum value for their business.
This will help organizations answer a few important questions about the viability of the Cloud computing model for the business, such as whether the total cost of ownership for a Cloud solution will be lower than a conventional on-premises setup, and what return on investment they can expect to see by shifting to the Cloud or changing their Cloud service providers.
Economies of scale is a primary principle of Cloud economics. Simply put, when organizations purchase computing resources at a significant scale, their costs will be lower. This reduces their upfront CAPEX since they don’t need to purchase their own equipment. They’re only required to pay for the resources that they use, which also gives them the freedom to scale up or down as required.
Cloud computing’s global footprint is another principle of Cloud economics. Organizations can have their servers located in multiple regions across the globe without the need to maintain separate IT teams in each location. This enables them to improve the quality of service for users across the globe while also reducing costs.
Why Cloud Cost Optimization Is So Important
The organizational planning that provides a thorough understanding of the costs and requirements related to the use of Cloud technology and leads to finding cost-effective ways to maximize the return on investment is called Cloud cost optimization.
The idea behind this planning is to no longer pay for more resources that the organization actually needs. The ultimate goal here is to have access to the precise number of resources required — no more and certainly no less. This helps organizations free up their capital which they can use for other business goals.
Cloud cost optimization helps reduce overall Cloud spend by eliminating waste, right-sizing, identifying mismanaged resources, and reserving capacity to receive more discounts. Studies have shown that up to 70% of Cloud costs tend to be wasted, making Cloud cost optimization so important.
6 Best Practices for Cloud Cost Optimization
1. Increase accountability for resource utilization
If decision-making is decentralized in your organization, individuals may have the ability to spin up instances and drive up your Cloud costs with not much accountability. For example, a developer might spin up a temporary server to test certain functions and then simply forget to turn it off.
ppens more frequently than you might think and is one of the biggest contributors to unnecessary Cloud costs. Increasing accountability for resource utilization will ensure that individuals are mindful of the resources that they use and are also diligently powering them down when they’re no longer needed.
2. Identify and shutdown unused resources
If you’re only just focusing on Cloud cost optimization, it would be useful to first identify how many unused resources your organization continues to pay for. They may include temporary servers that weren’t turned off or storage that remains attached to instances that have been terminated.
Eliminating all of these resources will go a long way in optimizing your Cloud costs. Go one step further and rely on power scheduling. There may be instances that don’t need to be used around the close. Schedule these non-essential instances to shut down on the weekends or overnight to reduce costs.
3. Use heatmaps to track demand
You can further optimize your Cloud costs by using heatmaps to track demand. Heatmaps are a visual aid that can show the highs and lows in computing demand. This information can be used to establish start and stop times for resources in order to bring down costs.
Leverage automation with this information to schedule which instances can be safely turned off. Automation will make that happen precisely and increase efficiency in the process.
4. Right size required services
Right-sizing is a very important Cloud cost optimization strategy. It ensures that the Cloud instances being used are the perfect fit for your business needs. Overprovisioning for resources leads to higher costs and even causes performance issues.
This can often be a difficult task for Cloud managers since they have countless combinations to choose from. Analyze the service requirements and structure them in the size most efficient for your organization. This will also help with Cloud optimization, enabling you to extract peak performance from the resources being paid for.
5. Reserve capacity for discounts
Most Cloud service providers offer discounts to customers for reserving the resources that they need in advance. This enables them to access more Cloud services for less while also remaining flexible.
The Cloud service providers will often provide a significant discount for purchasing reservations. The longer you reserve these resources for, the higher the discounts will tend to be. Most also allow customers to exchange reservations if their needs change over time.
6. Consider the Single Cloud vs. Multi-Cloud costs
Many Cloud managers tend to prefer multi-Cloud solutions over single Cloud just so they’re not locked into one vendor. This strategy certainly has its benefits, particularly with regards to availability and uptime. However, this limits the organization’s ability to take advantage of the volume discounts that many Cloud service providers offer.
Vendors tend to offer volume discounts to customers that spend larger amounts. They may also receive preferred service from the vendor on account of their spending and long-term relationship. Organizations that could reliably run their services with a single Cloud setup should consider making the switch from multi-Cloud.
If you’re still struggling with higher Cloud costs, a bespoke optimization strategy can help you immensely. At CloudView Partners, we assist our clients in extracting the most out of their Cloud setups without overprovisioning and overpaying. Get in touch today and we’ll be happy to create a tailored Cloud cost optimization strategy for you.