8 ways to reduce cloud costs

on March 18, 2023

Organizations need the right strategies in place to avoid cloud cost pitfalls. Stay within your budget with these cost management best practices.

1. Opt for reserved or spot instances

In the cloud, organizations will find cheaper alternatives to on-demand resources if they’re willing to commit to making certain trade-offs. Use these discounted pricing schemes when possible:

Reserved instances. Organizations that make an upfront commitment to use a certain amount of capacity over a one- to three-year period can save on cloud resources with reserved instances. Depending on the platform and other variables, reserved instances can offer savings of up to 80% compared to on-demand instances. Each major cloud provider offers this pricing option with Amazon EC2 Reserved Instances (RIs), Azure Reserved VM Instances, and the Google Cloud Committed Use program. AWS also has a Savings Plans program with similar discounts but more flexibility in usage than its standard EC2 RIs. Reserved instances are best suited for workloads with consistent, predictable capacity.

Spot instances. Developers can access unused capacity for a deeply discounted price with Amazon EC2 Spot Instances, Azure Spot VMs, Google Cloud Preemptible VMs, and Google Spot VMs. Savings with these pricing models depending on what type of resource is purchased and the price at the time of purchase. These instances are subject to abrupt cutoffs, depending on overall capacity demands in a region. They’re best used for stateless workloads, batch jobs, and other tasks that can tolerate disruption.

2. Capacity planning

IT teams need to ensure enough capacity is available to handle unexpected traffic spikes and load fluctuations, part of capacity planning is choosing the right cloud resources for your workload. Compute instances are available in a wide array of configurations to meet the unique processing, memory, storage, and performance needs of each application. With so many options available, it’s easy to oversize an instance, providing far more processors, memory, and storage than the workload actually needs. Those additional resources waste money — every month — unless they’re used. Save money by “right-sizing” cloud instances.

3. Limit data transfer fees

It can be expensive to move data to and from a public cloud. To reduce cloud costs, avoid unnecessary data transfers. Start with an assessment of your cloud provider’s transfer fees. Then, adjust your cloud architecture to reduce the number of necessary data transfers. For example, you could move on-premises applications that frequently access cloud-hosted data into the cloud to eliminate those transfers. Also, evaluate the fees of different transfer methods intended to accelerate and secure the movement of data between the cloud and your private data center

4. Use cost monitoring tools

An effective cost management strategy requires the right tools in place to monitor spending. Various cost monitoring tools analyze your past spending and forecast your cloud expenses for the next three months. Uses custom alerts to notify admins when spending exceeds a certain point. It can also automatically limit resources to reduce cloud costs. Third-party cost monitoring tools help organizations make smart spending decisions.

5. Prevent cloud sprawl

Cloud sprawl is the uncontrolled proliferation of cloud resources and is to blame for many cloud bill spikes. When organizations fail to eliminate cloud services that are no longer part of their overall strategy, they continue to pay for them. For example, storage instances tend to accumulate — especially when they’re used for data protection or are disassociated from compute instances. If a cloud server instance is deleted, its associated storage may become overlooked. Identify unneeded storage instances and consider tactics to delete them in accordance with company data retention policies. To minimize the risk of sprawl, in general, establish proper visibility into your cloud environment with infrastructure and application monitoring and management tools. Set up company policies on how and when to decommission cloud resources that are no longer needed. Use automated provisioning to shut down old workloads. In addition to cloud policies, carefully monitor cloud bills and contracts to identify if your organization is paying for cloud services that are no longer in use.

6. Cache storage strategically

Some public cloud providers offer memory-based caching services. Caching moves important or frequently accessed data in memory and closer to the compute instance, rather than having to retrieve data from storage instances. This can improve the performance of some applications and reduce the expense of higher-tier cloud storage especially when performance-sensitive workloads are run in remote regions or when efficient replication is needed for resilience.

7. Run workloads where the computing is cheaper

Peak times and compute demands affect cloud pricing. Moving workloads to and from certain geographic service areas where demands and prices are lower can reduce cloud costs. If common storage services can support each location, the workload will only see a latency difference between service areas. Security and regulatory compliance requirements, however, may prohibit workloads from running in certain regions. Cost management and control are often a core part of an organization’s multi-cloud strategy as well. In some cases, an organization might deploy some workloads, or perform certain tasks on an entirely different cloud platform when cost benefits dictate.

8. Restrict access to the cloud

A central appeal of the public cloud is its self-service nature. Businesses routinely allow individual users and stakeholders to access the cloud to provision, deploy, monitor, and troubleshoot workloads. Such open access can be convenient, but it can also drive unexpected, unplanned, and, sometimes, unnecessary costs.