What Are Companies Doing To Cut Their Cloud Costs?
Cloud costs are on the rise, and companies are taking note. Last summer, Google announced a 25% to 50% rise in their cloud storage pricing and added data transfer costs. Other major providers like AWS and Azure have also raised prices steeply since the start of last year, contributing to a significant inflation of cloud costs, or “cloudflation.”
It’s no surprise, then, that 82% of enterprises surveyed in late 2022 cited cloud cost management as their top cloud challenge, above even security concerns. More and more companies are beginning to look at their budgets and wonder if their digital transformation initiatives were worth it. Some organizations have even begun to scale back their cloud usage in a process called cloud repatriation, migrating cloud data back to on-prem data centers.
Others, though, want to continue pursuing the benefits of the cloud — just with a closer eye on costs. Below, we’ll explore six of the top approaches that companies and their CIOs are taking to optimize their existing cloud investments and manage costs.
How Are Companies Cutting Costs in the Cloud?
1. Appointing internal teams
According to a recent article in the Wall Street Journal, more CIOs are establishing internal teams to oversee their cloud spending. The author gives the examples of a French energy company that built a dedicated team to manage its Amazon Web Services spending and a Danish brewery that did the same to manage their overall cloud costs.
Many of these cloud management teams fall within the relatively new discipline of FinOps, although others may be established within existing teams and departments. At their best, these internal teams are highly cross-functional, incorporating elements of engineering, finance, and product development to optimize spending in the cloud.
This practice is catching on quickly: Research by the nonprofit FinOps Foundation shows that as many as 60% to 80% of organizations are currently establishing FinOps teams.
2. Adopting cost optimization tools
Managing cloud costs can be time consuming. An organization’s computing needs — and the resulting price tag — can increase and decrease quickly, and cloud bills are notoriously difficult to compare across providers.
As a result, some CIOs are outsourcing their cloud management to third-party optimization tools and apps. These tools can offer everything from cost-saving recommendations and cloud bill analytics to customized dashboards. As a whole, they help teams better understand their current cloud usage and predict their future needs so they can decide which resources to scale back.
For their part, the major cloud providers have started introducing their own cost management tools, like Azure Cost Management and Google Cloud Cost Management, to provide better transparency to customers around their cloud expenditures.
3. Implementing cloud governance policies
Another way companies are reducing their cloud costs is by implementing cloud cost governance policies. These policies often define clear rules around using and monitoring cloud usage as well as accountability, decision rights, risk management, and more.
While individual policies will differ by company, The Open Group defines five core components that most effective cloud governance policies will have:
- A cloud strategy that’s driven by overall business objectives
- Compliance with industry standards to ensure a consistent, integrated approach to different cloud vendors and services
- Clear and collaborative contracts and SLAs among cloud stakeholders
- Change management processes to ensure that all cloud changes are executed in a consistent and standardized way
- Dynamic monitoring of the ever-changing cloud landscape and an agile response process to these changes to achieve continuous improvement
While a cloud governance policy may seem like a formality, defining cloud rules and expectations can help team members become more consistent and conscientious in their resource usage, leading to lower costs overall.
4. Pursuing a multi-cloud strategy
The companies who are choosing to go all-in on the cloud are increasingly adopting a multi-cloud strategy: using two or more cloud providers to meet their different needs. This strategy can help businesses avoid vendor lock-in, take advantage of different pricing models, and even negotiate better deals.
With the right tool to help migrate data seamlessly among cloud storage locations, companies can also offset the impact of price hikes from a single cloud provider by moving their data around when costs rise.
Beyond that, a multi-cloud strategy is an effective way for businesses to optimize their workloads across different cloud providers according to their specific needs. For instance, some workloads may require high processing power or low latency, while others may require minimizing costs. Similarly, some companies might need the specific machine learning capabilities or database services of a particular provider. By selecting the appropriate cloud provider for each workload, companies can optimize their costs, performance, and speed.
5. Right-sizing resources
Although it’s not the only cause of high costs, over-provisioning — that is, allocating more resources than apps and workloads actually need — can cause cloud budgets to skyrocket. Without close monitoring, companies can end up paying for resources they haven’t ever used.
Right-sizing resources involves scaling back and paying for only what’s needed. It requires having a clear understanding of cloud usage patterns and VM usage, so companies must invest in regular monitoring to avoid over- or under-provisioning.
6. Using reserved and spot instances
Reserved and spot instances are cost-effective ways for some organizations to cut costs in the cloud. Reserved instances allow businesses to commit to using a specific amount of cloud resources for a set period in exchange for a lower hourly rate. Similarly, spot instances allow businesses to bid on unused resources.
Both options are usually much cheaper than on-demand instances, which are billed at a higher hourly rate. The downside is that spot instance prices can be volatile and reserved instances can be inflexible, making it difficult to plan ahead and scale resources.
Cutting cloud costs with ShardSecure
ShardSecure helps companies optimize their cloud investments without the need to rewrite legacy apps or redesign data flows. With our transparent, easy-to-integrate data control platform, companies can leverage cheaper options like AWS S3 object storage and take advantage of multi- and hybrid-cloud architectures. Take a look at our cloud optimization white paper to learn more about how we facilitate cost savings in the cloud.
With strong data security and resilience, ShardSecure also protects against the impact of costly security misconfigurations. Our technology makes data unintelligible to unauthorized users — whether they’re an infrastructure admin, cloud provider employee, or ransomware attacker — and it ensures high availability during outages, attacks, and other disruptions.
To learn more about our benefits for data security, resilience, and cost savings in the cloud, visit our resources page.
Why Your Cloud Expenses Are Rising: Blame Cloud-flation | Transforming Data with Intelligence
Technology Chiefs Seek Help Wrangling Cloud Costs | WSJ
Which Cloud Workloads Are Right for Repatriation? | Technology In The Arts
What Is FinOps | FinOps Foundation
FinOps: A Way to Manage Growing Cloud Costs | CFO.com
Cloud Costs Are Unmanageable: It’s Time We Standardize Billing | VentureBeat
Top 17 Cloud Cost Management Tools | CIO.com
Building Cloud Governance From the Basics |ISACA
Cloud Computing Governance Principles | Open Group
Why Organizations Are Embracing the Multi-Cloud | IEEE
Top 3 Benefits of Multi-Cloud Strategy | Fintech News
Resource Allocation Methods in Cloud Computing | GeeksforGeeks
Best Practices to Effectively Manage and Optimize Cloud Costs | Tech Journal
AWS Reservations, Savings Plans, and Spot Instances | Load Balancer