5 best practices for effective cloud cost optimisation

Across all industries, cloud infrastructure grows more and more important for businesses every day – and that makes cloud cost optimisation an essential part of business operations, too.

Without proper management, cloud expenditure can wreak havoc on your business budget. That’s exactly what cloud cost optimisation aims to prevent, and we’re here to help you make sure it’s done right.

In this article, we’ll cover what cloud cost optimisation is, why it’s so important and five best practices for effective cloud cost optimisation.

What is cloud cost optimisation?

Cloud cost optimisation is the process of managing and reducing a company’s cloud spending without compromising performance or service quality.

The goal of cloud cost optimisation is to improve visibility into your cloud environment and to ensure your resources are used right. It’s about balancing cost with performance, security and availability to get just the right blend for optimal efficiency.

Cloud cost optimisation is a strategic approach. It goes beyond simple cost-cutting to analyse your current cloud usage, identifying inefficiencies and eliminating waste to ensure you get the most out of the money you spend on cloud resources.

You might also be interested in: ‘SaaS spend management 101’

The benefits: Why cloud cost optimisation is important for your business

Cloud cost optimisation isn’t something you can do once and then forget about. It’s an ongoing strategy that needs to be prioritised. With that being said, the benefits are worth the effort.

Let’s take a look at some of the most important ones:

• Reduced cloud costs: Without careful oversight, cloud costs can quickly become a money sink. By prioritising cloud cost optimisation, you can eliminate wasteful spending and free up funds for other important business areas and activities.
• Better resource efficiency: Cloud cost optimisation is about adjusting your cloud resources to perfectly fit your needs. It stops you from buying more than you actually use and reduces unused capacity – basically, it ensures you’re only paying for what you actually need.
• Smarter budgeting and forecasting: Effective cost control measures come with predictability. You’ll be able to accurately forecast your cloud expenditure and avoid unpleasant surprises – and that improves your strategic planning.
• Improved transparency: Cloud cost optimisation gives you a clearer view of how and where you’re spending your cloud budget. Seeing exactly what you’re paying for helps hold teams accountable and ensures your cloud spending aligns with both your technology needs and business goals.
• Enhanced performance: Having more resources than you need can compromise performance. By optimising costs, you gain a clearer understanding of what each workload actually requires. This helps you set the right performance limits for every task and leads to faster processing times and a better user experience.

In short, there’s much to gain from prioritising cloud cost optimisation. Even so, being aware of the benefits is one thing – knowing how to unlock them is another. That’s what we’ll get into next.

5 best practices for effective cloud cost optimisation

To get the most out of your cloud cost optimisation, it’s important to get it right. To help you do just that, we’ve compiled a list of five best practices for effective cloud cost optimisation. Let’s get into it.

1. Rightsize your resources

Above, we mentioned better resource efficiency as one of the benefits of cloud cost optimisation. To achieve this, you need to regularly review your resources – e.g. compute instances, databases and storage – and adjust them to fit your current needs.

Assess the actual usage of your instances. If an instance is using far less CPU, memory or storage that it was provisioned for, consider moving it to a smaller, more cost-effective instance. In the same vein, if a service is underprovisioned or causing performance issues, you might want to scale up to boost efficiency.

2. Use autoscaling to adjust your resources

An important element of cloud cost optimisation is ensuring your cloud resources are based on your actual demand  – and that’s where autoscaling comes in.

Autoscaling automatically adjusts your cloud resources based on real-time demand. It deploys more resources when demand increases and scales them down when it decreases. It’s that simple.

Set up auto-scaling policies based on performance metrics like CPU usage, memory consumption or incoming traffic. Cloud providers typically offer built-in autoscaling features that can be configured to meet your needs.

3. Monitor your resources – and cut the ones you don’t use

Dormant virtual machines, unattached storage volumes, unused IP addresses – when it comes to cloud environments, unused resources can quickly build up. Even when idle, these resources often keep draining your budget, and that makes it important to keep an eye on them.

Regularly audit your cloud environment for unused or underutilised resources and cut the ones you don’t use. Cloud providers typically offer dashboards and reports to help you keep track of your usage.

4. Leverage reserved instances or savings plans

If you know you’ll be using certain cloud resources – e.g. servers – consistently over a long period, you can save a lot of money by committing to a plan in advance.

Reserved instances or savings plans offer discounted rates for long-term commitments (typically 1 to 3 years) if you commit to a certain usage level in advance. In return, you get a sizable discount compared to paying on a monthly basis.

Look into which resources your business uses regularly and where it makes sense to commit to a reserved instance or savings plan. Most providers allow you to choose if you want to pay upfront or in smaller instalments.

5. Set budgets and alerts

Most cloud providers offer tools that let you set budget limits and receive notifications when you’re getting close to your budget or if something unusual happens with your costs. This way, you can avoid overspending and keep your cloud costs within your budget.

Use cloud management tools to set monthly budgets for various teams, projects or resources. Set up alerts that notify you when spending hits a certain percentage of those budgets, or when unusual cost spikes occur.

You might also be interested in: ‘5 best cloud cost management tools in 2024’

Wrapping up

Cloud cost optimisation is about balancing cost with performance, security and availability to get just the right blend to ensure your cloud expenditure doesn’t get out of hand.

By following the best practices above, you’re on the right track to keep your cloud spend under control and get the most out of your resources.