Cloud Expense Management: 7 Top Strategies and Tools for Effective Business Budgeting

In the early days of cloud computing, the ability to quickly set up new instances without concern for infrastructure costs was a key selling point. However, the reality of pay-as-you-go pricing is that it doesn’t inherently keep cloud expenses under control. Even the most efficient companies can encounter unexpected costs. For example, Pinterest once faced an additional $20 million expense atop their already significant $170 million AWS reservation. Adobe also experienced a similar issue, with an accidental daily Azure charge of $80,000.

According to the Flexera 2022 State of the Cloud Report, many companies found their cloud expenses exceeding their budgets by 13%, and they anticipate nearly 30% growth in cloud spending in the following year. With uncertain economic conditions, it’s increasingly important to integrate cloud cost management from the outset of your cloud migration strategy.

Global spending on public cloud services is on the rise, predicted by Gartner to reach nearly $495 billion in 2022 and increase to about $600 billion the following year. The pandemic has certainly accelerated cloud adoption, a trend already in motion before its onset. Sid Nag, Research VP at Gartner, emphasizes the cloud’s role in driving digital businesses and suggests that IT leaders should view the cloud as a tool rather than a final goal, integrating it with other emerging technologies for enhanced business performance.

But the challenge remains: how can companies ensure efficient cloud performance without incurring excessive costs? Cloud cost optimization involves reducing expenses by managing resources effectively, eliminating waste, and maintaining optimal capacity at a reasonable price. While this might sound straightforward, it’s often challenging in practice. For instance, calculating the total cost of ownership (TCO) can be complex, especially when quantifying labor costs.

AWS, Azure, and Google Cloud offer automation to reduce the workload on IT teams, improving efficiency and saving engineering hours – a factor that should be considered in cost calculations. Cloud cost optimization should be a fundamental aspect at every stage of cloud migration. Decisions made in the system design phase can affect future performance, resource usage, and costs. Although it might seem daunting, early decisions on cloud cost and efficiency optimization can yield quick results. Seeking cloud strategy advice early in the migration process can prevent future problems and expenses. However, infrastructure cost audits and cloud optimization can be beneficial at any stage.

Here are seven tips and tools for cloud cost optimization:

1. Select the most suitable compute services for your applications and code.
2. Shut down idle virtual machines (VMs) and other unnecessary resources.
3. Rightsize your resources to match your workload requirements at the lowest cost.
4. Consider reserved instances for long-term capacity with substantial discounts.
5. Implement autoscaling to dynamically adjust resources according to your needs.
6. Enhance cost visibility and control with native or external tools for budget management and spend monitoring.
7. Automate spot instance usage to save on on-demand pricing, while managing potential interruptions.

Lastly, all major cloud service providers offer various tools for cost management and optimization:

• AWS features the Cost Explorer for spending patterns and Trusted Advisor for infrastructure recommendations.
• Microsoft Azure’s Cost Management and Billing suite provides reports, monitoring, and optimization insights, along with Azure Advisor for quick optimization tips.
• Google Cloud Platform offers a suite of Cost Management tools, including reports, dashboards, billing controls, alerts, and optimization recommendations.