Cloud Cost Management And Optimization Best Practices

Start by examining the company’s data center then look for leaks in cloud service and evaluate what software and licenses are used. The digital transformation has forced IT departments into the spotlight in nearly all industries. Now responsible for being able to respond to 24×7 requests anytime, anywhere from colleagues, customers, and employees, their budgets have increased year over year. However, in 2020, COVID has forced businesses to rethink their IT spend and get creative at ways to cut costs. To help you in your decision-making process, we have provided you with several IT cost-saving strategies for 2020. Many CFOs can credit cloud computing for helping them weather COVD-19 by cutting fixed costs, moving to remote work and adapting to a surge in online demand.

Yotascale helps you automate and proactively update your tags and labels to match the needs of your business. Cost Optimization — Detect orphaned or underutilized/overprovisioned resources. It is not always advisable to trigger stop or terminate actions when spending anomalies are detected because there may be a good reason for the anomalies. Although CloudHealth provides this capability, a more appropriate solution is to use policy-driven automation to alert administrators when spending increases by more than a certain percentage within a specified timeframe.

Finance provides input to the governance discipline for the definition of the policies that relate, for example, to budget approvals and cost allocation. Furthermore, finance consumes cost reports to produce forecasts and implement chargeback and showback models. The logical flow between these five areas should not be interpreted as a mandate to implement them sequentially. Instead, organizations should apply an iterative approach and develop each area as independently as possible. Although there are obvious dependencies between areas, these shouldn’t block the development of subsequent capabilities.

cloud cost management gartner

But this first involves identifying inefficiencies, such as over-provisioned, idle, or unused resources, as well as cost spikes in real-time. Cloud assets are fragmented across multiple teams, cloud vendors, and containerized and non-containerized environments. Cloud spend is vulnerable to large fluctuations, making it difficult to forecast and keep under control. You may not be able to pursue all the identified reduction or optimization opportunities due to the lack of authority to change resource attributes.

Depending on your industry and organizational goals, you must identify which KPIs you can correlate to cloud costs. For example, a KPI could be the number of billable air miles per seat for an airline, the number of monetary transactions for a bank or the number of issued passports for a government agency. Even if you’re adopting cloud to increase your internal efficiency, this efficiency must eventually translate into the growth of business KPIs.

With the right insights, your organization may begin to question whether deployed resources are adding value, and whether or not they are necessary. The cloud spending owners — whether I&O or the individual cloud consumer teams — should ask the finance organization for formal approval of this budget. Learning how to build budgets upfront and allowing the organization to approve spending before it occurs is fundamental for enabling cost governance. Having cloud consumers ask for budget approvals make them more accountable for their spend, as described in “Shift Budget Accountability” in the Evolve component. Some cloud services include software components that are supplied by third parties with a traditional licensing model.

Anodot for Cloud Costs’ powerful algorithms and multi-dimensional filters enable you to deep dive into your performance and identify under-utilization at the node level. Anodot automatically learns each service usage pattern and alerts relevant teams to irregular cloud spend and usage anomalies, providing the full context of what is happening for the fastest time to resolution. The platform leverages proprietary ML-based algorithms to offer deep root-cause analysis and recommended remediation. With continuous monitoring and deep visibility, you gain the power to align FinOps, DevOps, and Finance teams and cut your cloud bill. Ng resource consumption and fairly allocating the resulting costs is a very complex problem.

Although you’re applying this framework in its entirety, you may still experience a certain degree of spending waste and uncontrolled growth. This may be due to the lack of visibility of certain portions of your cloud deployments. Without complete visibility, you may be applying this framework only to part of your cloud spending.

What’s more, companies plan to spend 24 percent more on public cloud in 2019 than in 2018. Moving to the cloud means paying for computing and services very differently. Understanding how you use Microsoft’s public cloud is critical for managing your costs.

Aws Native Tools

In many cases, the center of excellence meets monthly, oversees cross-functional working groups that collaborate in real time, and reports to an executive committee at least quarterly, Armknecht said. Ease of use, while spurring creativity and experimentation across a company, can also blow a hole in a CFO’s budget. Ensure business stakeholders and projects align to clear business outcomes and KPIs.

cloud cost management gartner

For many organizations, there’s been a race to leverage cloud services, with teams seeking to realize advantages in flexibility, agility and efficiency. Within an organization, it’s not only a matter of more workloads running in the cloud, it’s a matter of more distinct deployment models being used, more teams using cloud services and leveraging multiple service providers. The tracking of resource usage and cost should not be limited to applications. It is crucial for an organization to track cloud spend based on projects, especially since they share common cloud resources as suggested in the Guidance Framework. Understanding the cost on a per namespace basis allows users to track the cost and its projection for a specific project. This also provides a way for organizations to quickly implement chargeback and show-back strategies, both at the cluster level and the application level.

You are typically required to sign an on-demand instance for a billing period of one to three years. The price of your hourly usage is greatly discounted in exchange for your long-term payment – as much as 70% less compared to on-demand billing. Gartner does not endorse any vendor, product or service Cloud Cost Management depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact.

Yotascale Named A 2021 Gartner Cool Vendor In Cloud Computing

As a consequence, you must shift budget accountability to cloud consumers to influence their provisioning decisions. An accountable user would be motivated to more precisely size resources or remove those that aren’t necessary. Take advantage of PaaS by modernizing your application to better operate in the context of cloud computing. Analyze your application dependencies and seek opportunities to replace them with PaaS where requirements and constraints allow.

Often, you end up using resources at a much smaller percentage than what they can deliver. In cloud computing, capacity allocations are extremely granular, can be changed frequently and are billed down to one-second increments. Such characteristics of cloud computing makes the disposal of unused resources highly impactful to reduce your monthly bill. Many cost reduction and optimization practices are based on the continuous observation of metrics. Policies and rules govern the decision to, for example, eliminate a resource or change a service allocation size based on a metric value. Sometimes, the effort required to allocate costs for shared resources may outweigh its benefits.


Developing cost-tracking capabilities is foundational to enable cost governance. Having visibility into cloud spending is fundamental to verify the correctness of expectations, detect anomalies, increase accountability and provide observability into the metrics that can drive costs down. Skipping this component of the framework would make the entire cost management initiative fail. Without visibility into each metric and their trends, organizations wouldn’t know if spending is under control and will likely overspend.

  • As organizations continue to invest larger sums in their cloud implementations, the need to establish strong FinOps capabilities will only grow more critical.
  • And, if everyone deploys to the same cluster, you will have trouble finding room for new projects without cutting back on existing ones.
  • However, this may create new management requirements for allowing the nested virtual resources to communicate.
  • The individuals and teams responsible for cloud costs also change as organizations move through different stages of this transformation.
  • If the workload has a high confidentiality target, the architecture should implement encryption and other hardening security services or adopt specific components such as a storage gateway.

When a purchased discount exists but no matching resource is found, that would constitute spending waste. When more resources exist than those covered by purchased discounts, cloud providers bill them using the standard PAYG pricing. Besides the cost of services, organizations must track other related metrics, such as utilization, capacity, availability and performance. For example, to identify spending waste, it is fundamental to look at how much we’re using a resource and compare utilization with its provisioned capacity.

In a whitepaper by IDC, the research firm determined that customers experienced an average total cost of ownership savings of 62% over five years. It’s now possible to “pay as you go” with subscription-based licensing for HCI software, which can run on standardized hardware. In the chart below, you can see the hardest-hit areas—devices and data center systems.

Cost Allocation

In IaaS and PaaS scenarios, it’s important to keep track of how much CPU and memory you’re using. As with a software license, use what you have, and make sure you have it set-up for your business needs. Having too many instances or making them too big can cost you significantly in the long term.

With native tools, organizations may not be able to fully contain spending waste or maximize their savings. A rehost migration strategy does not require changes in the application architecture. Despite being easier to migrate, rehosted resources are typically unable to leverage key characteristics of cloud computing, such as elasticity and on-demand.

cloud cost management gartner

The complexity of scaling resources for a mission-critical application where you can’t afford downtime can require some trade-offs. If you require a tool to enjoy better visibility across your overall infrastructure and simultaneously offer crucial perspectives to engineering teams, a paid solution may be a good idea. We thoroughly analyse your IT environment to optimise workloads from the outset, and proactively monitor expenditure on an ongoing basis to maximise your cost savings. As cloud solutions grow ever more capable and complex, new options, features, apps, and services continue to permeate the business IT landscape. Taos, an IBM Company, helps today’s enterprises and rapidly growing businesses harness the power of the cloud and DevOps with digital transformation and optimization solutions.

Consider Paas, Serverless, Or Storage

Decentralize 100% of your cloud infrastructure by allocating every resource to its respective business unit (such as cost-centers, applications or owners). Avoid switching between 3 different clouds, 30 different services and 300 different resources; instead manage 100% of your resource tags through a single pane of glass. Continuous cloud cost governance-as-code has a never-ending life cycle, just like the team’s software development life cycle. Cost governance code is built, deployed, tested and released, and the process continues as new policies are developed and refined over time. As requirements change, teams need to be able to periodically analyze cost data and update policies as needed.

Software Asset Management Is Central For Cloud Cost Management

Many companies have identified lax budgeting as their No. 1 problem when using the cloud. Before the pandemic, 73% of firms said cost savings was their top cloud initiative, ahead of moving workloads off of in-house computers, according to Flexera. Efficiently provision services by scaling up or down or use auto-scaling services. Because most services offer on-demand scalability with no downtime, overprovisioning to accommodate unexpected spikes in demand or future growth can quickly result in cost overruns. Tools like AWS Auto Scaling can monitor your applications and automatically adjust capacity to maintain steady, predictable performance at the lowest possible cost.

This component of the framework brings to fruition the rest of this cost management framework and evolves the practice to achieve scale. Managing cloud costs is an essential and challenging task for organizations using cloud services to drive their business with greater efficiency. In partnership with SUSE, Prophetstor’s provides an effective cloud cost management solution for customers running applications on SUSE Rancher-managed clusters.’s ML-based cost management implements some of the most valuable recommendations from the Guidance Framework and brings tremendous values to users adopting this framework.

Leveraging autoscaling can optimize your costs because it dynamically aligns your resource footprint to workload demand. Rightsizing is the practice of adjusting a cloud service allocation size to the actual workload demand. Means is described using policies that define rules based on metric values. For example, a compute instance whose CPU has been used, on average, below 1% for at least 24 hours should be considered unused and should be disposed. To increase result accuracy, organizations should be refining this policy by using multiple metrics.

If your organization doesn’t have an EA in place with your cloud provider, ask your procurement and vendor management department to negotiate one. Although EAs are negotiated, cloud providers have a pretty standardized framework for their discount models. Discounts are applied as a percentage of reduction (such as 5% or 20%) and can cover your entire bill or a specific set of services that have a higher volume of utilization. In exchange for a negotiated discount, you will need to commit to a certain minimum spend along the validity of the EA. The unprecedented spending transparency provided by cloud services enables organizations to quickly implement chargeback and showback strategies.

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