cloud cost optimization best practices

Cloud computing has revolutionized how organizations manage and deploy applications, offering on-demand scalability and a pay-as-you-go model. However, as companies grow and scale, they often face ballooning cloud costs that eat into their budgets. To stay competitive and profitable, it’s essential to control cloud expenditure proactively.

This article dives into cloud cost optimization best practices, providing comprehensive insights into reducing waste, monitoring resource usage, and adopting governance measures. Whether you’re a seasoned cloud architect or just beginning your journey in cloud infrastructure, these guidelines will help you create a cost-conscious environment without sacrificing speed or reliability.

Understand Your Cloud Cost Drivers

One of the biggest roadblocks in optimizing cloud costs is the lack of visibility into where spending actually occurs. Before implementing any changes, you must understand the specific components, services, and workloads that drive your cloud spending.

1. Break Down Cloud Services
   
   • Identify each service and resource you’re paying for. Common culprits include compute instances, container services, storage (block, file, or object), data transfer, and managed offerings such as databases.
   • Use native tools like AWS Cost Explorer, Azure Cost Management, or Google Cloud’s Billing reports to pinpoint high-cost areas.
2. Tag and Label Resources
   
   • Implement tagging or labeling policies for all resources. Tags (e.g., department, environment, project) help you identify the owners, purpose, or cost center of any given resource.
   • Ensure you have a governance policy for tagging so new resources are automatically labeled to maintain continuous visibility.
3. Regular Cost Audits
   
   • Schedule periodic cost reviews, monthly, quarterly, or after major deployments, to ensure you catch spikes or anomalies early.
   • Cross-reference spending with traffic and usage data to determine whether increases in cost are justified by revenue or user growth.

Key Action: Make cost transparency and accountability a core part of your cloud culture. Without clear visibility, your cost-optimization efforts will remain guesswork.

Right-Size Your Instances and Services

Right-sizing is the process of matching instance types, storage tiers, and other cloud services to the actual needs of your workloads. Oversized instances waste money, while undersized ones can degrade performance.

1. Benchmark Current Utilization
   
   • Gather CPU, memory, and I/O usage metrics from observability tools. Compare these metrics against your provisioned instance specs.
   • Identify instances running at low utilization levels, which is typically below 40% on average CPU or memory usage.
2. Leverage Auto Scaling
   
   • Instead of overprovisioning, use horizontal or vertical scaling to adjust resources automatically as demand fluctuates.
   • Configure auto-scaling groups based on usage thresholds to maintain performance while minimizing idle resources.
3. Optimize Storage Tiers
   
   • Assess if your current storage tiers align with your performance needs.
   • Offload infrequently accessed data to cheaper archival storage (e.g., AWS Glacier or Azure Archive Storage).
4. Containerization and Microservices
   
   • Container platforms (e.g., Kubernetes) allow for more granular resource allocation, reducing the overhead of running entire virtual machines.
   • Consider microservices for complex applications; smaller, function-specific services often scale more efficiently than monolithic architectures.

Key Action: Conduct regular usage assessments and adjust instance sizes and storage tiers accordingly. Right-sizing is not a one-time effort; it should be part of an ongoing optimization routine.

Adopt Effective Governance and Automation

Manual intervention alone can’t sustain long-term cost savings, especially in large-scale or dynamic environments. You need automation, policies, and guardrails to ensure that cost optimization isn’t dependent on ad-hoc efforts.

1. Policy-Driven Cloud Governance
   
   • Establish guidelines for provisioning resources, specifying approved instance types, size limits, or region selections.
   • Implement processes for mandatory reviews or approvals for larger or more expensive resource deployments.
2. Infrastructure as Code (IaC)
   
   • Define your entire cloud infrastructure using IaC tools (e.g., Terraform, OpenTofu, AWS CloudFormation). IaC ensures consistency and allows for version-controlled changes.
   • With IaC, you can automate the creation and teardown of resources for staging and testing environments, preventing expensive idle resources.
3. Automated Shutdown Schedules
   
   • Implement policies or scripts to automatically power down non-production instances (e.g., dev or test environments) during off-hours.
   • Use serverless options for ephemeral workloads to pay only for actual compute time.
4. Continuous Compliance Checks
   
   • Leverage configuration management and security tools to enforce best practices and shut down non-compliant resources.
   • Use tagging policies to identify resources missing cost-center metadata, then automate notifications or remediation steps.

Key Action: Combine governance and automation to remove the guesswork from cost optimization. When processes are baked into your workflows, you’ll reduce the risk of “rogue” spending.

Optimize Purchasing Models and Discounts

Another significant cost-cutting measure involves taking advantage of volume discounts, reserved capacity, or other cost-saving programs offered by cloud providers.

1. Reserved Instances and Savings Plans
   
   • If you have steady-state workloads, consider AWS Reserved Instances (RIs) or Savings Plans. Similar options are available on Azure and Google Cloud.
   • These commitments can offer significant discounts compared to on-demand pricing, but only if you’re confident in a multi-year usage pattern.
2. Spot Instances
   
   • Spot or preemptible instances allow you to use spare capacity at steep discounts, although they can be interrupted with short notice.
   • This model suits fault-tolerant workloads like data processing or batch jobs, where interruption isn’t critical.
3. Committed Use Discounts
   
   • Google Cloud’s Committed Use Discounts or Azure’s equivalent for compute and storage can lead to sizable savings.
   • Assess your baseline usage and lock in discounts for predictable workloads.
4. Negotiate Enterprise Agreements
   
   • At higher spend levels, contact your provider for an Enterprise Agreement.
   • EAs often offer custom pricing, credits, or flexible payment terms that can be more economical than standard on-demand rates.

Key Action: Match your consumption patterns to the right purchasing model. While on-demand remains flexible, reserved and spot options can drastically reduce costs for predictable or fault-tolerant workloads.

Monitor and Evaluate Cost Metrics Continuously

Ongoing monitoring is critical to sustain cloud cost optimization. This requires a combination of tools, processes, and organizational discipline to ensure cost efficiency remains front and center.

1. Set Budget Alerts and Thresholds
   
   • Configure budgets or cost alerts in your cloud provider’s console.
   • Define thresholds (e.g., 80%, 90%, 100% of your monthly budget) to trigger alerts and investigate unusual spikes early.
2. Integrate Cost Data into Observability
   
   • Combine cost metrics with performance and reliability data.
   • Observability dashboards that include cost data next to CPU or memory utilization help teams quickly identify whether performance improvements come at a disproportionate expense.
3. Use Third-Party Cost Management Tools
   
   • Consider specialized tools that offer advanced forecasting, anomaly detection, and cross-cloud visibility.
   • Many solutions provide AI-driven recommendations for instance rightsizing, reserved capacity purchases, or storage tier adjustments.
4. Frequent Reviews and Reporting
   
   • Encourage monthly or quarterly cost reviews with stakeholders.
   • Provide actionable reports to teams, including engineers and finance, so they understand how engineering decisions impact cost.

Key Action: Maintain a transparent cost culture. When everyone sees and understands cost drivers, they can make informed decisions that keep cloud usage efficient.

Remove Orphaned and Unused Resources

Orphaned resources, like unattached volumes, stale IP addresses, or abandoned VMs, often go unnoticed but contribute significantly to wasted cloud spend.

1. Schedule Automatic Cleanups
   
   • Set up scripts or use cloud-native tools that identify and remove unused resources.
   • For example, unutilized Elastic Load Balancers (ELBs) in AWS can accumulate costs if they remain active.
2. Review Snapshots and Backups
   
   • Check for old snapshots or backups that are no longer needed, especially if your retention policies aren’t enforced.
   • Archive or delete outdated data sets; ensure compliance and data retention requirements are still met.
3. Implement Lifecycle Policies
   
   • Configure lifecycle policies for storage buckets and logging data to migrate or delete items after a certain period.
   • Automating data retention is essential for maintaining minimal clutter and cost.
4. Tagging for Cleanup
   
   • Tag short-lived resources differently (e.g., “temp” or “test”) so they can be automatically terminated or reviewed after a set duration.
   • This approach simplifies identifying which resources are safe to remove.

Key Action: Regularly prune orphaned resources. Automated cleanup scripts or lifecycle policies are low-effort yet high-reward steps to reduce wasted spend.

Embrace a Cost-Aware Engineering Culture

Even the most detailed processes or cutting-edge tools can fall short if your teams don’t share a mindset of cost awareness. Cultivate a culture where cost efficiency is a core performance metric, on par with speed and reliability.

1. Educate and Train Teams
   
   • Provide engineers, architects, and product managers with the know-how to design and implement cost-efficient solutions.
   • Share best practices, internal frameworks, and real-time cost data.
2. Incentivize Cost Optimization
   
   • Recognize or reward teams who consistently reduce cloud costs while maintaining performance.
   • Integrate cost metrics into sprint planning or release cycles.
3. Collaborate Across Departments
   
   • Involve finance teams early in architectural decisions.
   • When finance understands how technology choices affect budget, and engineers appreciate the business context, cost control becomes a shared goal.
4. Design for Efficiency from the Start
   
   • Encourage teams to think about cost implications during the design phase rather than waiting until monthly bills arrive.
   • Implement architecture reviews that explicitly factor in cost alongside performance, security, and reliability.

Key Action: Make cost an integral part of your engineering ethos. A well-informed and motivated workforce will identify optimization opportunities that no automated tool could pinpoint on its own.

In Summary

Cloud cost optimization is more than a one-time project, it’s an ongoing effort that requires visibility, automation, governance, and cultural buy-in. By breaking down your spending, right-sizing instances, and automating cleanup tasks, you can keep expenses in check without hindering innovation or scalability. Taking advantage of reserved capacity, spot instances, and regular cost audits further ensures you’re maximizing every dollar you invest in cloud resources.

Harness, as an AI-native software delivery platform, offers specialized insights and automation capabilities to help organizations streamline cloud operations and control infrastructure spend. Whether you’re just starting your optimization journey or looking to refine existing processes, Harness’s expertise in cost management, governance, and automation can accelerate your path to sustainable cloud cost efficiency.

FAQ

What Is Cloud Cost Optimization?

Cloud cost optimization involves strategies and processes to reduce wasted spending in cloud environments without compromising performance or scalability. It typically includes right-sizing resources, removing unused components, and leveraging cost-effective purchasing models.

How Often Should I Review My Cloud Costs?

Regularly reviewing your cloud costs, monthly or quarterly, is recommended. However, you should also conduct immediate reviews when you roll out new infrastructure or notice sudden cost spikes, ensuring any anomalies or inefficiencies are addressed promptly.

Which Cloud Services Are Typically the Most Expensive?

High-compute workloads (such as large VMs or high-performance containers), storage for large data sets, and data transfer fees are frequently the most expensive. Managed services like large database clusters can also contribute significantly to monthly bills.

Are Spot Instances Safe to Use for Production Workloads?

Spot (or preemptible) instances can be used for production workloads that are fault-tolerant or can quickly handle interruptions. However, they are not ideal for critical tasks requiring continuous uptime, as they can be terminated with minimal notice.

How Do I Keep Cloud Costs Transparent Across Teams?

Enforce a strict tagging policy for resources, integrate cost data into observability dashboards, and share periodic cost reports with all relevant stakeholders. This visibility helps teams make more informed decisions about resource allocation.

What’s the Easiest Way to Start Saving on Cloud Costs?

Begin by identifying and removing orphaned or unused resources. This is often the simplest way to see immediate savings, followed by right-sizing instances for ongoing efficiencies.