How to Reduce Cloud Costs and Improve Efficiency



Cloud computing allows businesses to offload certain tasks to the cloud and free up resources that they can use for more important tasks. For example, a business that uses cloud-based accounting software can free up time and resources that you would otherwise spend on maintaining its accounting system. But this comes with an increasing cost, and several businesses are feeling the pinch. According to a study, many enterprises are overspending on cloud services by 35%. This equates to more than $8.75 million they could have saved annually.

With the average enterprise spending one-third of its IT budget a year on the cost of cloud services, this is a significant amount of money wastage. The good news is that there are various ways to reduce your cloud costs.

For example, you can use reserved instances or Spot instances judiciously and leverage tools like Cloud Custodian to help you keep track of your expenditures. That’s not all, here are some more easy and proven steps to reduce the cost of cloud computing services.

1. Understand your cloud spends

To start saving on your cloud costs, you need to understand where your money is going. That means, taking a closer look at your spending patterns and determining which services cost you the most. Only then can you start making changes that can have a real impact on your bottom line.

According to a study, businesses that do not monitor their cloud spending may waste as much as 30% of their budget on unnecessary or inefficient services. That’s a huge amount of money to throw away when it’s avoidable with little effort.

For example, you can use a cloud ability tool like Amazon AWS Apptio, which gives you visibility into all your cloud expenses in one place. With this tool, you can monitor the spending on each service and how that spending has changed over time. This kind of information is invaluable when making informed decisions about where to cut costs. Similarly, cloud providers have a pricing model that allows companies to pay for the computing capacity rather than the monthly usage. It means you can avoid paying extra and keep costs down.

2. Use object life-cycle management

Object life-cycle management (OLC) helps you control the lifetime of your objects. You control when and where your application persists, the duration of data stored on the cloud, and how much data it stores in its local database versus using an object store.

For example, if you have unusable data stored in the cloud, you can delete it from your cloud storage, and this will free up space for other pertinent data and reduce the amount of data you need to back up.

There are two big players here. The first one is Object Storage Service Providers like AWS or GCP, which offer object storage services and even an object store on top of the infrastructure they provide (i.e., an S3 bucket). The second one – Data centers run instances that store data persistently, without moving them across servers whenever they need to be updated.

3. Use reserved instances

Reserved instances allow you to commit to a certain amount of usage, usually for a one- or three-year period, and receive a discount on your overall usage costs. For example, if you purchase a 1-year reserved instance on Amazon EC2 Reserved Instances, you can save around 60-70% on your cloud infrastructure services cost. Here are some specific ways that reserved instances can help you save money:

  • Reduce Costs for Steady-State or Predicable Workloads: If you have relatively static or predictable workloads, reserved instances can help you lower your cloud costs by guaranteeing the available resources you need. For example, if you know that you will always need two vCPUs and 4 GB of memory for your web servers, then purchasing a reservation for those resources will ensure that you have them available when you need them, at a significantly reduced cost.
  • Lower Costs During Peak Usage Periods: Reserved instances can also help shave costs during spikes in demand by allowing you to pre-purchase capacity ahead of time. This way, you won’t be hit with higher On-Demand rates when traffic increases unexpectedly (due to a sale or marketing campaign). Instead, your increased usage will come out of your existing reserved balance.
  • Several AWS and GCP services can further help reduce cloud costs. Amazon CloudWatch provides detailed monitoring of AWS resources, which can help identify areas where you can achieve savings on your cloud costs. Google Cloud Platform’s Stack driver service offers similar functionality for GCP resources. Both platforms offer discounts for the committed use of certain services, which can further reduce costs. You can use the GCP pricing calculator to get the estimate.

4. Turning off Virtual Machines

While it may seem efficient to have dozens or even hundreds of virtual machines running simultaneously, in reality, this can often lead to resource wastage and higher costs.

Companies are losing a whopping amount of approx. 8.8 billion USD on idle and underutilized VMs in the cloud. That’s a huge amount of money that could be saved simply by turning off unused VMs and ensuring the efficient use of the existing ones.

In addition to scheduled shutdowns, another way to minimize cloud costs is using auto-scaling features offered by many cloud providers. This allows organizations to dynamically increase or decrease the number of active virtual machines based on actual demand.

For example, if traffic spikes during certain periods of the day, additional virtual machines can be spun up automatically to handle the increased load. And then, when traffic decreases outside of those peak times, those extra virtual machines can automatically turn off. This helps organizations avoid paying for unused resources resulting in significant cost savings over time.

5. Negotiate Discounts

Companies have room for negotiation when you’re working with them directly (rather than through a reseller or aggregator), so don’t be afraid to negotiate. Here are three tips on how to do just that:

1) Know your usage patterns: You need to know how much and when you’re using it, and this information will be helpful in two ways.

  • First, it will help you assess whether you’re using all the resources you’re paying for.
  • Second, it will give you leverage when negotiating with your provider since you can show them exactly how much (or how little) you use their services.

2) Understand the providers’ billing structure: Every cloud provider has a different billing structure. Some charge by the hour, others by the month, and others have a pay-as-you-go model. Understanding your provider’s bills will help you negotiate a lower rate to align your usage with their billing cycle. For example, if they bill hourly but you only use resources during off-peak hours, there may be room for negotiation.

3) Shop around: Don’t just go with the first cloud provider you find – shop around and compare pricing before committing to any single plan to achieve maximum savings on your cloud costs. There are several third-party cloud service providers, who deploy customized cloud solutions. It is ideal to check if such third-party providers are partners of AWS/ IBM/ Azure or any other cloud that you choose to deploy.u

Conclusion

As per a report – The cloud computing industry is likely to grow at a compound annual growth rate (CAGR) of 16.3% from 2021 to 2026. This implies, that there is plenty of room for small businesses and startups to get in on the action and take advantage of everything the cloud has to offer. And with the right strategy, you can ensure that your business is getting maximum value when it comes to reducing cloud costs. This is possible if you are aware of your usage patterns, understand the billing structure of your provider, and shop around for the best deals, and your business can save a significant amount of money.

If you are concerned about your cloud spend and want to optimize your cloud costs, please feel free to get in touch with us. Techwave provides customized solutions to ensure a seamless digital transformation for our clients.