Optimising Cloud Costs to Enhance Business Value

For over 30 years, CPT Global has been recognised as the authority in cost optimisation and efficiency, delivering over $1 billion USD in IT infrastructure savings. Today, as IT increasingly transitions to cloud-based and "Pay as You Go" models, our optimisation and efficiency strategies are more relevant than ever.

Cloud computing is now indispensable for businesses seeking agility, scalability, and innovation. However, as organisations depend on cloud services more and more to drive their operations, managing cloud costs is becoming a major headache for IT leaders.

From our observations with clients, cloud spending can quickly spiral out of control, impacting your bottom line and stalling business growth. In this article, we share our insights on effectively managing and reducing OPEX expenditure.

Step 1: Understanding Cost Drivers

Before exploring cost reduction strategies, understanding what is driving cloud expenses should come first. From a technology consumption perspective, these might include:

• Compute Resources: Expenses related to virtual machines (VMs), containers, and other compute instances used to run applications and workloads.
• Storage: Costs for data storage in the cloud, encompassing object storage, block storage, and archival storage.
• Network Usage: Expenses associated with data transfer between cloud services, regions, and external networks.
• Additional Services: Costs linked to supplementary cloud services, such as databases, AI/ML tools, monitoring, and security services.

Now it's time to consider the (good and bad) reasons for the increased costs and how they are being managed. Common factors include:

• Organic Growth: Positive signs of a growing business, increasing volumes of transactions driving growth in the consumption of resources (as per the above).
• Business Initiatives: This could vary from a new marketing initiative driving new business lines and volumes or it could be a merger or acquisition.
• Seasonal Fluctuations: Special events e.g. Christmas, Black Friday, Boxing Day that drive excessive volumes of business transactions and increased cloud costs.
• Transformation Programs: Strategic initiatives to modernise or migrate applications to the cloud.
• Non-Production Infrastructure: Let’s not ignore the allocation of non-production environments supporting application development and testing activities.

All of these are legitimate drivers of increased resource consumption. However, too often CPT sees that these are not managed efficiently or effectively, contributing to the overspending.

Next, let’s consider some the technology and optimisation/efficiency approaches to reining in the expenditure.

Step 2: Efficient Strategies for Reducing Cloud Costs

Right-Sizing Resources

To effectively reduce cloud expenses, right-sizing resources to align with actual usage is important. This involves selecting VM instance types, storage options, and other resources based on workload characteristics, performance needs, and anticipated demand.

By eliminating over-provisioning and tailoring resources to specific requirements, your organisation can avoid unnecessary costs and enhance resource utilisation.

Leveraging Reserved Instances and Savings Plans

Cloud providers offer substantial discounts for long-term commitments through Reserved Instances (RIs) and Savings Plans. By purchasing RIs or committing to a certain usage level with Savings Plans, you can reduce your costs significantly compared to on-demand pricing.

For this approach to work, it's essential to analyze usage patterns and choose the appropriate reservations or plans to maximise savings while maintaining flexibility.

Implementing Auto Scaling and Resource Optimisation

Utilising auto-scaling capabilities and resource optimisation tools helps your organisation dynamically adjust resources based on workload demands. Automatically scaling up or down according to traffic patterns ensures optimal performance while minimising idle resources and the associated costs.

Additionally, adopting best practices for resource optimisation, such as tagging resources for cost allocation, enhances visibility and enables improved cost management.

Optimising Storage and Data Management

Effective data storage is a critical step to reducing cloud costs. Your business can optimise storage expenses by tiering data based on access frequency, automating data archival and deletion with lifecycle policies, and using compression and deduplication techniques to minimise storage footprint.

Exploring alternative storage options like object storage versus block storage can further optimise costs based on specific use cases and performance requirements.

Adopting Serverless and Containerization

Embracing serverless computing and containerization can yield substantial cost savings by abstracting infrastructure management and charging only for resources consumed during execution. Serverless services such as AWS Lambda and Azure Functions eliminate the need for server provisioning and management, while containerisation platforms like Kubernetes facilitate efficient resource utilisation and scalability.

Adopting these technologies can streamline development, reduce operational overhead, and optimise costs.

Step 3: Optimisation and Process Efficiency Strategies

Effectively managing and reducing cloud expenses requires an uplift of your optimisation and process efficiency strategies, which also enables your business to enhance operational efficiency and align resource utilisation with business needs. Here are some techniques and approaches we use with our clients.

Observability, Monitoring, and Cost Visibility

Establishing robust observability, monitoring, and cost visibility practices is essential for effective cloud cost management. Leveraging cloud-native monitoring tools and third-party solutions, your business gets insights into:

• Resource utilisation
• Cost trends
• Opportunities for optimisation

Whereas continuous monitoring helps your organisation:

• Identify cost anomalies
• Track spending against budgets
• Implement proactive measures to control costs effectively

However, monitoring spending is only half the solution. Understanding the processes and practices that drive costs is key to effective cost control.

Consider these questions:

• Have you implemented a consistent asset identification (tagging) approach to allow granular and easy identification of which applications, activities, or teams are responsible for cost increases?
• Are permissions for allocating cloud resources set at the right level to balance business agility and cost control?
• Too often, the focus on cost control slips into the background, turning it from a key operational focus into a mere accounting activity.

Many organisations struggle with the concept of “chargeback” to help identify and control consumption. In the absence of “chargeback,” "showback" can be a good place to start on a cost efficiency journey.

Optimisation & Designing for Performance

Optimisation is another lever to pull to help rein in costs. CPT has delivered over $1 billion USD in savings to our clients since we’ve offered optimisation and cost reduction services to the market. Optimisation can solve many problems and reduce costs.

Key points to consider:

• Cost reduction programs should align with the cost model and use optimisation and performance design as key drivers to throttle and then reduce costs.
• Optimisation and designing for performance should be part of your pedigree and not seen as “fire extinguishers” to help get things back under control.

As CPT has witnessed many times, retrofitting good design into poorly designed solutions can be very expensive and inefficient, as opposed to doing it right the first time.

Efficiency Strategies

Another angle to cost reduction is understanding what is being used and its purpose. Is it being used efficiently and effectively? Consider non-production infrastructure as an example.

If it is being used for testing:

• How is the testing being conducted?
• Could it be done more efficiently with fewer assets?
• Are the volumes of test data and the numbers of test cases fit for purpose?
• Could automation help reduce test infrastructure requirements and speed up testing activities?

Approaching this with an efficiency perspective challenges the current methods to explore if they can be improved, thereby reducing costs and expediting release timeframes.

Key considerations:

• Are the Test environments “Fit for Purpose”?
• Do you have enough of them, or are there too many?
• Are you optimising environment availability (“Up time”) to support testing while reducing costs?
• Are you using automation to reduce build times and the duration of testing?

Conclusion

At CPT, we believe that proactive cost reduction strategies encompassing multiple approaches are the proven path to maximising cloud costs. Our guiding principles include:

• Technology Efficiencies
• Optimisation/Cost Reduction
• Process Efficiencies

Our experience shows that customers who adopt a holistic approach to cost reduction develop a sustainable cost reduction capability, rather than relying on unsustainable, reactive measures.

To maximise efficiency in the cloud and ensure long-term cost optimisation in the digital era, focus on:

• Continuous monitoring
• Ongoing optimisation
• Regular adaptation

By embracing a culture of cost consciousness and leveraging the latest cloud cost management tools, techniques, and specialist expertise, organisations can unlock the full potential of the cloud while controlling costs and driving business success.