As a CFO, one of your responsibilities is to manage your organization's overall spend and optimize cloud costs efficiently.
Approximately 30% of this spending, equivalent to $147 billion, is wasted—a record high. To avoid repeating these things this year, CFOs have to take the necessary steps.
How can you achieve this? It's simple.
Optimizing cloud cost efficiency is a collaborative effort and not just the role of finops teams. If you want to understand all these tactics and cost optimization best practices in depth, continue reading this article. These tactics will enable you and your stakeholders to optimize cloud costs without compromising your team’s performance.
What is Cloud Cost Efficiency?
Cloud cost efficiency is all about managing and saving money on cloud services. It involves the management of costs associated with utilizing cloud services, including TCO.
Well-managed cloud costs will help you manage budgets efficiently. It'll also help leaders optimize resource allocation. You can not only save costs but also maintain operational efficiency.
Understanding the Components of Cloud Costs
Cloud costs refer to all the web apps, software, tools, and other cloud computing services (Google cloud). Regularly tracking contracts, renewals, and app license usage is critical to optimizing cloud costs.
Do you have to do it all manually? Not really. Here are strategies and frameworks to manage and control your cloud expenses.
You need to monitor your cloud expenses to optimize them proactively and efficiently. It’s better to be proactive than reactive when dealing with cloud costs. It's also crucial to keep things transparent within the organization to stay aware of the costs and the cost-saving efforts.
Check this table to understand these components at a glance.
What Influences the Increased Cloud Cost?
Before implementing cost optimization tactics, you must identify issues that cause increased costs.
Why Is It Necessary to Optimize Cloud Costs?
Pay what you use: Cloud services usually charge based on usage; costs can add up quickly. However, if you ensure that you pay only for necessary resources, it will significantly reduce the spending.
Budget management: While adapting to demand, cloud scalability can increase costs if not optimized. You must prioritize optimizing cloud costs as it improves budget management. It will help you allocate cloud resources strategically and prevent unexpected overruns.
Workflows: You may encounter issues if you don't have systemic workflows for procuring cloud software. Without optimization, resources may be underused or overused, hindering efficiency. Enabling workflows to identify and rectify inefficiencies ensures the effective utilization of cloud investments.
Spend Insights: Without real-time insights, knowing what's happening with SaaS cloud spending is challenging. Monitoring and reporting tools provide insights for informed resource allocation and spending decisions.
Security: Without well-configured and optimized security standards, you leave loopholes that become potential targets for hackers to exploit. Ensuring that cloud resources meet security standards reduces incident risks within your organization, providing a more secure working environment.
Top 5 Ingenious Tactics to Optimize Cloud Costs
You can simplify and optimize cloud expenses with these five tactics:
Tactic 1: Identify Unused Resources and Rationalize Them
According to reports, over 90% of organizations use the cloud for storing data. Among these, only 3 out of 10 organizations are fully aware of the precise allocation of their cloud spend.
You can optimize your cloud cost strategy by appropriately sizing your resources. It helps you utilize adequate resources by ensuring that your resources are neither over-provisioned nor under-provisioned. This tactic is known as "Right-size Your Resources."
With access to usage data and overall cloud database capacity, you can make decisions to reduce the cost of idle resources or underused capabilities.
You must find effective ways to identify underutilized resources. So what's the best way to do it? It's very simple to keep track of and get usage reports.
Use a SaaS management platform like CloudEagle to optimize complex cloud spend. These platforms analyze your resource usage to find instances that can be scalable or right-sized.
These tools provide weekly, monthly, and yearly cloud resource usage data. This data will help you upgrade or downgrade those resources according to your needs.
Tactic 2: Taste the Waters with Serverless Architecture
Approximately 51% of IT spending on applications is expected to move to the cloud by 2025, according to Gartner research.
So, concerning the increasing adoption of cloud infrastructure, you must ensure your organization's cloud spending is done properly.
Recent studies have indicated that enterprises frequently exceed their initial budget by approximately 20% when spending on public cloud infrastructure. This was disclosed in a study by Andreessen Horowitz.
To cut down your cloud costs, you can use serverless architecture. With serverless computing, you don't have to manage the servers independently.
The best part of opting for such services is that you only pay for code execution rather than maintaining servers running continuously. The cloud provider takes care of that.
To better understand this approach, familiarize yourself with dynamic scaling.
Implement Automated Scaling
Dynamic scaling prevents over-provisioning in low demand and under-provisioning in peak times. It adjusts resource levels based on current needs, ensuring you only pay for necessary resources.
The tactic focuses on saving money by automatically adjusting resources when needed. For example, auto scaling adds more resources if your app suddenly gets many visitors. When the rush is over, it scales down, saving you money.
Tactic 3: Restrict Shadow IT Activities
To optimize cloud costs, prevent or completely eliminate shadow IT. Shadow IT refers to the unauthorized use of cloud services or applications without IT’s knowledge.
You can prevent shadow IT by,
- Establishing clear policies for cloud service adoption.
- Educate employees about risks and provide official channels for cloud resources.
- Restrict unauthorized cloud usage to prevent redundant subscriptions and enhance cost efficiency.
Recent findings show that shadow IT practices lead to a significant $1.7 trillion in annual costs due to data loss and downtime.
The best way to stay safe from unnecessary Shadow IT is to implement the CloudEagle SaaS Management Tool. You can proactively configure Shadow IT alerts to prevent it in its early stages. You’ll receive an alert whenever a duplicate or free app is detected in your system.
It’ll also provide centralized visibility, so any instances of duplicate or free cloud usage can be identified and optimized instantly.
Tactic 4: Optimize Cloud Storage and Data Optimization Costs
Storing data in the cloud costs money; it can lead to unnecessary cost anomalies if not managed well. You must prioritize and select the appropriate storage type based on your data needs and business specifications.
You must only acquire or use cloud storage based on your team's specific needs. Cloud vendors offer various storage options with different costs and performance features.
Consider how you access data and pick the suitable storage class—like standard, cold storage, or infrequent access—to match your workload needs.
Cloud service providers present various pricing models, such as pay-as-you-go, reserved, and spot instances, each with advantages and disadvantages. You can select the most suitable pricing model for your business based on your requirements.
Key metrics to select the best cloud storage:
Moving data between platforms and regions can increase cloud costs due to data transfer fees. To minimize expenses, consider adjusting your cloud architecture and transferring apps from on-premise to the cloud based on data usage.
To optimize and control costs, you must choose the correct transfer method, like physical devices (Microsoft Azure Data Box, AWS Snowball) or dedicated network connections (Azure ExpressRoute, AWS Direct Connect).
Tactic 5: Use Automated Cloud Cost Optimization Tools for Cloud Efficiency
You must implement continuous monitoring for a proactive cost management system. Regular monitoring lets you get real-time insights to align your usage with cloud costs.
You can use a tool to get real-time insights into spending patterns and scrutinize the cloud budget allocated areas. The best tool will provide complete visibility into your cloud stack and their relevant usage and spend.
For instance, CloudEagle, known for its unique SaaS spend optimization, will assist you in keeping track of and monitoring your organization's cloud spending.
The process becomes seamless when you use the tool to optimize spend management and forecast budget. This tool consolidates everything in one place, improving your organization's overall efficiency.
Why CloudEagle for Cloud Cost Optimization?
CloudEagle is an advanced SaaS spend management and procurement platform. This powerful tool helps you optimize cloud costs. The best part is that CloudEagle seamlessly integrates with your organization's internal systems and starts working right on point.
Key Features of CloudEagle
CloudEagle is one of the prominent SaaS management tools that offers comprehensive features to streamline and enhance cloud spending efficiency.
Usage and Spend Visibility
CloudEagle integrates with internal systems and cloud-native solutions. The tool provides complete visibility into usage and spending. Detailed spending information by departments and accurate usage insights for each user help organizations identify overutilization or underutilization.
CloudEagle automatically highlights underutilization or redundancies, allowing organizations to rationalize their cloud effectively. License reclamation workflows enable the automatic deprovisioning of users from cloud applications with low usage.
CloudEagle provides recommendations to optimize cloud licenses. It ensures your cloud resources align with actual needs. The tool prevents unnecessary costs and scales your cloud environment to meet business demands.
You can configure proactive alerts using CloudEagle. Next time the tool detects an unsanctioned SaaS purchase, it'll automatically send you alerts to take the necessary actions. This proactive approach helps prevent budget overruns and identifies duplicate applications automatically.
Real-time Cost Monitoring
The tool continuously tracks cloud spend in real-time and provides cost-saving opportunities. The tool identifies cost optimization areas without disrupting operations.
The tool centralizes purchasing power, negotiates favorable terms with cloud providers, and optimizes the total cost of ownership, too. It secures cost-saving deals through assisted buyers. The tool ensures efficient procurement processes and maximizes your cloud investment value.
You can prevent procurement request updates from getting lost in emails with Slackbot for procurement. You can use Slack to initiate purchase requests to receive updates and establish private channels for collaborative efforts.
- CloudEagle seamlessly connects with Slack to optimize SaaS requests and approvals. This resulted in a twofold increase in daily productivity and a 25% reduction in coordination time for users.
- It facilitates initiating renewal workflows well before contract expiration, establishing exclusive Slack channels for instantaneous communication, document collaboration, and comments.
- On-Demand Assisted Buying: CloudEagle's SaaS buying experts can help you if you have limited negotiation time.
- The proficient team effortlessly ensures thorough vendor coverage, offering expert assistance for pricing uncertainties and negotiating support.
- They leverage price benchmarks and usage insights to secure the best deals for you.
- Vendor Relationship Management: You can secure a cost-effective and suitable license agreement using CloudEagle. With CloudEagle, you can maintain favorable contract terms and conditions with vendors.
Risks of Poor Cloud Cost Optimization Strategy
You should never compromise your organization's cloud cost optimization strategies. If you avoid the necessary cloud cost optimization tips, it can lead to prolonged financial setbacks.
As a result, the following issues can persist in the organization.
Escalated Spending and Budget Overruns: Ineffective cost management exceeds allocated budgets and escalates spending. If you take the necessary actions, cloud costs will remain manageable. However, if you do not, it can impact financial health and limit investments in crucial areas.
Scalability Hassles: Inadequate optimization practices result in scalability challenges. Afterward, you might struggle to manage your organization's ability to adapt to changing workloads. It can lead to under-provisioning or over-provisioning of the cloud resources.
Security and Compliance Risks: Poor cloud cost optimization can compromise security and compliance. When you enable cost-cutting measures without proper mechanisms, it may neglect essential security features or compliance standards. It exposes sensitive data to breaches and regulatory violations.
Missed Savings Opportunities and Negative ROI: Failing to optimize cloud costs may result in missed money-saving opportunities. Inefficient cost practices contribute to a negative ROI. In such a scenario, the cloud costs outweigh the benefits of cloud adoption.
Conclusion - Transform Your Cloud Cost Management Tactics
According to Osterman Research, 97% of enterprise cloud applications are unauthorized. Employees procure new tools independently to enhance their productivity.
This unstructured process leads to inefficiency in cloud cost management. Not only this, but all the risks mentioned in the article contribute to the increased cost of cloud services for organizations.
You can overcome the issue by adopting the innovative tactics mentioned in the article. These tactics will help you optimize your cloud costs as a top executive. You must fully understand what affects these costs and use effective strategies to improve your cloud costs.
These cloud cost management methods will help you optimize costs and enhance efficiency. For improved cloud spending management guidance, schedule a demo with CloudEagle to learn more.