Annual spending on public cloud services will soon reach $679 billion a year. This represents a 20% jump in cloud spending in the last year alone. But when you consider how reliant modern businesses are on creating scalable infrastructure, this growth spike makes perfect sense.
Still, operating at scale in the cloud means businesses always need to have a finger on their financial pulse. Overprovisioning and underutilization are all too familiar when using cloud services and can quickly lead to budget stretching and derailed projects.
According to the State of FinOps 2024 Report, reducing cloud waste emerged as the highest priority for the majority of organizations, reflecting how critical an effective cost optimization strategy is. For most businesses, FinOps has become the logical answer to this problem.
Adopting a FinOps framework and its supporting tools gives companies more automation capabilities and flexibility to optimize their cloud spend with business growth potential. But to get the most value out of FinOps adoption, you need a business-wide cultural shift.
Below, we’ll review 10 tips you can use to maximize your cloud cost savings while applying FinOps best practices.
1. Establish a Finops Culture of Cost Awareness and Accountability
Ultimately, reducing cloud costs isn’t something company executives can do alone. Instead, it requires a company-wide commitment to cost efficiency. This is why the core principle of FinOps : “everyone takes ownership of their cloud usage” is followed.
Establishing a culture of cost awareness and accountability means teaching your team members how to prioritize cost effectiveness when designing new applications, storing data, creating data backup and disaster recovery plans, and more.
To achieve this level of shared accountability, transparency is key. Teams should have visibility into all areas of spend associated with their cloud projects. This empowers stakeholders to make smarter decisions when balancing their cloud architecture needs and budgets. Hold regular cost reviews where teams discuss spending trends and optimization opportunities, and make cost data accessible to all relevant stakeholders. Recognize your employees for cost-saving initiatives or tying cloud efficiency to performance metrics.
FinOps culture is a mindset of continuous improvement. So, you should regularly assess cloud spending practices, identify areas for optimization, and implement changes that promote cost ownership among the teams.
2. Determine Budgets and Forecasts
Forecasting and allocating budgets is rarely a straightforward process when using the cloud. The dynamic nature of cloud computing makes it difficult to know how a project’s requirements will change day-to-day, let alone a year down the road.
Native cloud cost management tools like AWS Budgets, Azure Budgets and Google cloud Budgets can be a great way to automate forecasting and budget alerts. These tools allow organizations to create cost thresholds for different services, projects, or departments and trigger alerts when spending approaches or exceeds predefined limits.
For instance, AWS Budgets lets users set customized alerts based on usage, cost, or even Reserved Instance coverage, giving teams visibility into potential overspending before it occurs. Similarly, Azure Budgets enables users to monitor cloud costs across multiple subscriptions and offers actionable insights to optimize future spending. Google Cloud Budgets, on the other hand, integrates with Google Cloud Billing to provide flexible budget tracking and notifications.
Regardless of the tools used, it’s important for all departments to play an equal share in establishing and maintaining cloud spending budgets. You can achieve this by having:
- Leadership teams regularly evaluate YoY/MoM spend and establish appropriate spending thresholds.
- Finance teams create and monitor cloud budget KPIs and metrics across all departments.
- Product and engineering teams keep their projects in alignment with threshold variances and look for more cost-optimization opportunities.
Budgeting and forecasting should be a fluid and collaborative process. This encourages active discussions regarding smarter cloud spending and adds more accuracy and discipline to resource planning.
3. Proactively Rightsize Your Cloud Resources
Maximizing the value of your cloud spend means following a clear framework for usage optimization. However, it’s essential to recognize the inevitable trade-offs between quality, speed, and cost in every cloud decision. Striking the right balance is key as over-provisioning leads to waste and unnecessary expenses, while under-provisioning can result in performance issues.
The solution lies in resource rightsizing – adjusting your cloud resources to match your workload demands. This process involves identifying and eliminating idle or underutilized resources, scaling down over-provisioned instances, and reallocating resources where necessary. By aligning your cloud resources with actual usage patterns, you can ensure both performance and cost-efficiency without overspending.
4. Monitor and Correct Cost Anomalies
Unexpected cost spikes, or Cost anomalies can have a big impact on your cloud bill if you don’t promptly identify and address them. Poorly optimized workloads, misconfigured services, and provisioning mistakes are just a few examples of things that can lead to cost anomalies. Swiftly detecting these cost anomalies allows you to resolve the issues causing them before they drain your budget.
Automated solutions like AWS Cost Anomaly Detection help mitigate these surprises by:
- Providing detailed root cause analysis for anomalous cloud spending
- Enhancing visibility into cost drivers and seasonal usage trends
- Offering daily or weekly alerts to keep teams informed of unusual spending patterns
- Allows you to define custom spending thresholds and set up anomaly alerts when you cross those parameters
Read on to explore how cost anomaly detection works and how you can get started.
5. Implement Consistent Monitoring and Reporting
Cloud cost visibility is a core element of every stage of FinOps. Without an ongoing view of your cloud investments and associated parameters, inefficiencies creep in, and your ROI suffers. Regularly monitoring your spend can deliver a host of cloud management benefits, allowing you to:
- Track real-time cloud usage patterns
- Identify over-provisioned, underutilized, or idle resources that are contributing to cloud waste
- Find and address impactful cost savings opportunities
- Hold each team or department accountable for its share of cloud expenses,
- Improved forecasting and realistic budgets that align with business objectives
- Access to detailed cost data empowers teams to make more strategic decisions about infrastructure changes, pricing models, and service utilization, all with the goal of optimizing both performance and cost.
Effective cost tracking is dependent on having full access to your cloud data. Timely and accessible reporting is one of six FinOps principles and helps to drive better cloud utilization in all areas.
Many FinOps tools are designed around this principle and focus on adding more visibility and control to your cloud operations. With more transparent cloud cost reporting, your organization’s resource management decisions become data-driven and less subjective.
6. Assess and Improve Software Licensing Spend
The unique licensing terms and usage rights of different SaaS vendors can significantly affect your cloud spending. So it’s essential to understand how you’re using various cloud solutions and quantify their value over time.
Below are steps your teams can take to make sure they’re actively assessing and improving licensing spend:
- Take the time to conduct thorough assessments of all cloud licenses spread across various instances. This allows you to identify inefficiencies, duplicate licenses, and unused software.
- Make sure all licenses still align with your current workload demands to minimize the likelihood of over-provisioning and reduce total spend.
- Compare all your licensing costs against the use of IaaS, PaaS, or SaaS options. This will help you balance short-term costs against long-term savings and evaluate if committed terms are more feasible.
7. Eliminate Unused Resources
By eliminating unused resources using the strategies below, you can directly reduce your cloud bill without impacting performance:
- Monitor storage utilization and reduce excessive free space.
- Release unassociated Elastic IP addresses.
- Use a lifecycle policy to expire non-current versions within Amazon S3 (for buckets with versioning enabled).
- Clean up old EBS volume snapshots.
- Remove unattached EBS volumes.
Be on the lookout for opportunities like these to ensure you are only paying for the resources your company actually needs.
8. Automate Your Cost Optimization Efforts
Engineers have competing priorities, and when they’re burdened with tasks like resource optimization and managing commitment-based discounts, they cannot effectively innovate or build new products. FinOps automation, however, gives engineers more time to focus on meaningful work that drives business. FinOps automation platforms like ProsperOps provide a hands-free cloud cost optimization solution that scales with your business.
To learn more about the different FinOps capabilities, explore our blog on FinOps automation.
9. Consider Usage and Rate Optimization Simultaneously
Businesses often make the mistake of trying to completely optimize cloud usage before moving on to cost optimization. But in reality, both are never-ending processes that should be addressed simultaneously. The FinOps framework is iterative, allowing for continuous evaluation and optimization of rates and usage at the same time.
Optimizing usage involves rightsizing resources, eliminating idle instances, and ensuring services are aligned with actual demand. Meanwhile, rate optimization focuses on selecting the most cost-effective pricing models, such as Reserved Instances, Savings Plans, and Spot Instances, to lower overall cloud costs.
By addressing both usage and rate optimization in parallel, organizations can adapt to changing workloads and maximize savings.
10. Leverage the Right Pricing Model
The pricing model you use in the cloud will have a significant impact on your cost optimization strategy. To maximize the benefits of cloud provider pricing models, you have to accurately assess your current and future cloud usage needs, choose the pricing model/discount instrument that best fits each workload, and continually monitor your discount instruments to ensure maximum cost-effectiveness.
To help you better understand how these discount instruments work, let’s take a look at the various discount instruments offered by AWS, Azure and Google Cloud:
AWS pricing models
AWS makes it easy to scale your cloud usage and manage costs with its pay-as-you-go pricing model. You only pay for what your business uses, eliminating the risk of overprovisioning. But if you can project your long-term needs, you can also take advantage of AWS’ cost-saving commitment models, including:
- Reserved Instances
Reserved Instances (RIs) allow you to purchase specific types of EC2 Instances upfront at a discounted rate. This pricing model is ideal for workloads with predictable usage patterns and offers three payment options: All Upfront, Partial Upfront, and No Upfront. Compared to On-Demand pricing, RIs can save organizations up to 72%.
- Savings Plans
Savings Plans offer greater flexibility compared to RIs, allowing you to achieve savings across a range of Instance families instead of being locked into a specific instance type. This makes Savings Plans a great option for dynamic workloads that require different instance types. Like RIs, Savings Plans can save companies up to 72% compared to On-Demand pricing.
- Spot Instances
For workloads and applications that can tolerate interruptions, Spot Instances can provide substantial savings. Spot Instances allow companies to purchase EC2 capacity at up to a 90% discount compared to On-Demand pricing. However, the catch is that AWS may reclaim the capacity if it is needed elsewhere. This means Spot Instances are a good choice for flexible, fault-tolerant workloads.
- Burstable Instances
Burstable Instances provide a baseline performance with the ability to burst to higher performance levels when needed. Compared to On-Demand pricing, Burstable Instances can save companies up to 15%. Burstable Instances are best suited for workloads with variable, unpredictable resource requirements.
Google Cloud pricing models
Similar to AWS, Google Cloud offers an On-Demand usage pricing model that provides maximum flexibility. But it also provides long-term reservation alternatives and multiple usage tier discounts for increased savings. Google Cloud’s discount offerings include:
- Committed use discounts
Committed use discounts (CUDs) provide upfront savings in exchange for a commitment to using a specific amount of resources over a set period. This is an ideal pricing model for businesses with more predictable resource needs, and you can save up to 55% for most resources and up to 70% for memory-optimized machine types with resource-based CUDs. Read more about the different types of CUDs in our blog: Google Cloud Committed Use Discounts.
- Sustained use discounts
Self-serve billing accounts are eligible for automatic sustained use discounts (SUDs) on any resources used for more than 25% of a billing period. Businesses can save up to 30% of their VM instances automatically for every incremental hour of resource use without making any long-term commitments.
- Spot VMs
Google Cloud provides Spot VMs, similar to AWS Spot Instances, with per-second billing and savings of up to 91% on compute costs. These are a great option for budget-conscious customers with workloads that can tolerate usage disruptions.
Azure pricing models
Microsoft Azure provides a range of services suited for public and hybrid cloud needs, along with on-premise deployments. The platform’s available pricing models mirror those found on AWS and Google Cloud, but include some unique cost optimization features, such as:
- Azure Reserved Instances
Azure’s Reserved VM Instances provide significant cost savings of up to 72% over the pay-as-you-go pricing model. These are suitable solutions for businesses wanting to create and manage more predictable workloads while lowering the initial investments required.
- Azure Savings Plans
The Azure Savings Plan is a flexible pricing model that offers discounted rates of up to 65% on eligible compute services in exchange for making an hourly spend commitment over one or three years. Unlike Azure Reservations, Savings Plans are ideal for dynamic workloads as you’re not tied to specific virtual machine sizes or regions.
- Spot pricing
Spot VMs allow you to buy unused Azure resources at a fraction of the cost, but keep in mind that Azure can evict running workloads when those resources are needed elsewhere. So, while these discounts are only useful for running interruptible workloads, you can save up to 90% on compute capacity when compared to pay-as-you-go models.
- Azure Hybrid Benefit
Azure Hybrid Benefit is a unique offering available to businesses using Windows Server or SQL Server licenses or who have an active Linux subscription. It allows customers to use their on-premise licenses to acquire VMs at lower costs. Businesses can then combine their Azure Hybrid Benefit with other discounts to save up to 85% on their total cost of ownership.
Optimize Your Cloud Costs Effortlessly With ProsperOps
There are plenty of tips and best practices companies can use to reduce their cloud costs. However, using a tool such as ProsperOps to optimize cloud costs automatically is by far the easiest and most effective approach.
ProsperOps automatically blends discount instruments, such as AWS Savings Plans, Google Cloud Committed Use Discounts, and Azure Reservations, to maximize savings and minimize commitment risk. By removing the effort, latency, and risk associated with manually managing rigid, long-term commitments, we simplify cloud financial management for you.
With ProsperOps automation, there is no impact to engineering. Our platform setup is quick, and our systems work behind the scenes to optimize your cloud costs. This allows your teams to concentrate on innovation and growth while we automate rate optimization for you.
To see ProsperOps in action, book a demo today.
