What is Cloud Cost Management?

Importance of Cloud Cost Management

According to a study by Canalys, the global cloud spend in 2024 was $321.3 billion, marking a 20% increase from the previous year. Cloud costs will continue to rise, with the primary drivers being the widespread adoption of AI models across use cases in customer service, such as chatbots, recommendation engines, and more.

Hence, the importance of cloud cost management is now more than ever. Here are the top reasons why:

1. Accurate Budgeting 

Putting in place cloud cost management mechanisms helps allocate only the required sum for cloud spend, not more, not less. Also, accurate budgeting facilitates resilience and flexibility in case there are surges in cloud spend, thanks to accurate cloud cost forecasting.

2. Improved Cloud Performance 

Spending more on infrastructure does not always translate into better performance. Through cost management, you can allocate more towards underprovisioned resources (e.g., compute instances running business-critical workloads) and shut down overprovisioned ones, thus delivering better ROI from your cloud spend.

3. Better Accountability 

An accurate, standardized tagging strategy helps attribute costs to a particular team, engineering practice, or project, which in turn can help identify further opportunities for cost optimization.

4. Efficient Budget Utilization 

Cloud cost management, facilitated by a combination of tools and practices, helps you pay only for the expensive cloud services your organization truly needs. The trimmed cost and budget then help leave more room for innovation.

5. Enhanced Visibility 

Tools like CloudKeeper Lens provide granular, service-level insights, helping teams control costs while confidently adopting new cloud innovations.

Challenges Businesses Face in Cloud Cost Management 

While the importance of having complete control over cloud spend cannot be overstated, organizations still struggle to do so, despite 33% of enterprises exceed $12M in annual cloud spend (Flexera 2024).

There are quite a few challenges, some a result of a lack of competency, while others stem from organizational culture not being aligned with the cloud cost awareness. Here are some of the most common ones:

1. Multi-Cloud Infrastructure Management

Handling visibility, instance provisioning, billing management, etc., is a complicated practice for a single environment. The problem is compounded when an organization uses infrastructure composed of services from AWS, GCP, Azure, etc., simultaneously. 

As a result, it is often a key driver of a ballooned cloud bill.

2. Difficulty Navigating Billing Models

Cloud providers such as AWS, GCP, and Azure frequently make adjustments to their pricing structures, for example, changes to unit prices of compute, storage, or network services.

Thus, for an engineering team with limited bandwidth, keeping up to speed with changing pricing becomes challenging, often leading to inaccurate billing projections.

3. Inefficient Cloud Architecture

Tackling outdated or poorly architected cloud infrastructure is the first step in cloud cost optimization, since it is a key driver of performance and storage bottlenecks. To counter them, companies overprovision resources and pay more.

If you’re using AWS and want to build a scalable cloud architecture, you need a comprehensive Well-Architected Review based on the AWS WAR framework, which is tailored to the unique requirements of your organization.

4. Missing Cloud Cost Management Culture

Shockingly, in many organizations, cloud cost management is treated as a secondary activity rather than being taken up as a priority task. Also, the leadership does not foster accountability through mandates. As a result, almost always, cloud bills are much higher than anticipated.

5. Lack of Visibility into Cloud Spend

Almost half of businesses that have decently scaled workloads on cloud platforms admit to not having detailed information about service-level consumption of their cloud spend; thus, they are unable to accurately strategize optimization.

Top Cloud Cost Management Practices to Reduce Spend

Now that organizations are being faced with cloud spend running into hundreds of thousands of dollars, the awareness around managing cloud spend has also increased dramatically. Here are the top 5 strategies you can add to your organization’s workflow to trim your next cloud bill:

1. Adoption of FinOps Framework

FinOps is a framework that focuses on maximizing potential out of cloud investment by combining financial management principles with cloud operations. The goal is not to cut down on cloud spend, but to maximize the ROI out of each dollar spent.

2. Automation as a driver of resource provisioning

With the plethora of services and hundreds of instances that run at a single time on a cloud infrastructure, it is next to impossible to monitor them manually. Thus, it is important to leverage tools such as CloudKeeper Auto and CloudKeeper Tuner, which automate RI management and rightsize cloud resources, respectively.

3. Opt for Discount Plans

All three major cloud providers — AWS, GCP, and Azure — offer discount plans driven by volume purchases or usage commitments. In the case of AWS, it offers the AWS EDP (Enterprise Discount Program), where you commit to a certain amount of usage, as well as RI (Reserved Instances) and Savings Plans, both of which offer discounts based on 1- or 3-year commitments.

4. Utilize Spot Instances

Spot Instances offer up to 90% discounts on EC2 compute instances compared to on-demand pricing, with the only drawback being that they can be reclaimed by the provider at any time.

Still, for non-critical workloads, and by also implementing snapshot mechanisms, we recommend using Spot Instances.

5. Setting up Alerting Mechanisms

Alerting mechanism setup is a comprehensive and exhaustive task, requiring pre-analysis of budget thresholds and cost anomaly metrics. With notifications, you can track resource utilization-based alerts, helping you find accurate right-sizing opportunities without impacting performance.

AWS Trusted Advisor, Azure Cost Management + Billing, and GCP Cloud Monitoring are the tools offered by AWS, Azure, and GCP, respectively.

Simplifying Cloud Cost Management with CloudKeeper

From tools that handle end-to-end cloud savings optimization to a team of 100+ certified professionals offering tailored solutions for a leaner cloud, CloudKeeper is the only partner that makes realizing thousands of dollars in cloud savings truly possible.

Our tools, combined with our expertise to form comprehensive solutions, have helped us deliver over $120 million in cloud savings for our clients.

Get in touch today, and you’ll start saving from the day you sign up with us.

Frequently Asked Questions

• Q1: Can complete cloud cost management be automated end-to-end?

  While infrastructure optimization tools are now adept at handling significant tasks such as anomaly detection and automated resource provisioning, without human intervention in key areas such as budgeting decisions, forecasting, strategic planning, and interpreting business context, they cannot be fully effective. Thus, it is not possible to fully automate cloud cost management.

• Q2: What factors should be considered when integrating a cost management tool with your cloud environment?

  For a third-party tool to add value to your cloud infrastructure, factors such as its integration capability with multi-cloud environments, the kind of access it requires to your cloud environment, the use-cases it serves, and, lastly, its pricing must be considered.

• Q3: What are the key drivers behind cloud cost runaway?

  Overprovisioned compute instances, unauthorized provisioning of services, poor visibility into the infrastructure, and frequent data transfers across computing regions or between cloud providers are some of the top drivers of cloud spend for organizations.

• Q4: Why is in-depth, service-level cost analysis necessary for controlling cloud spend?

  Without having in-depth, granular knowledge of cloud spend, it is difficult to understand the key drivers of costs and, as a result, impossible to optimize the budget. It is for this reason that it’s important to conduct a thorough analysis of cloud infrastructure, taking the help of visibility tools for better strategizing and budgeting.

• Q5: What is the importance of cloud cost visibility in cloud cost management?

  The first step in creating an optimization roadmap is to understand which services and computing resources are the significant drivers of cost, which is only made possible by having detailed, service-level insight and visibility into the cloud infrastructure.

• Q6: Apart from CloudKeeper Lens, what other CloudKeeper tools assist in cloud cost management?

  While CloudKeeper Lens is your go-to tool that provides a comprehensive, single unified interface for multi-cloud environments with detailed insights, CloudKeeper Tuner automates right-sizing of AWS resources, and CloudKeeper Auto automates AWS RI provisioning. Our solutions ensure more cloud per dollar spent on the bill.