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What is cloud cost management?

Cloud cost management (also known as cloud cost optimization) is the organizational planning that allows an enterprise to understand and manage the costs and needs associated with its cloud technology. In particular, this means finding cost-effective ways to maximize cloud usage and efficiency.


As cloud infrastructure becomes more complex, cloud costs become more opaque and difficult to track. The “pay for what you use” model used by most public cloud providers adds to the difficulty: If usage is monitored and managed appropriately, this model can result in a significant savings, but it’s also easy for costs to spiral out of control. This is doubly true if decision making is decentralized across an organization, with individuals able to spin up instances (and accrue costs) with little or no accountability. Thus, it’s important for enterprises to employ a cloud cost management strategy to make the most of their infrastructure and keep costs down.


There are many factors that contribute to cloud costs, and not all of them are obvious upfront. Costs can include:

  • Virtual machine instances
  • Memory
  • Storage
  • Network traffic
  • Training and support
  • Web services
  • Software licenses


A strong cloud cost management strategy must take all these factors into account.


Why cloud cost management?

Cloud costs are constantly shifting, and decision-making is often decentralized in large organizations, making visibility into expenses difficult. Rapid scalability is one of cloud computing’s major strengths, but it also makes it easy for IT staff to spin up services without considering the cost. Implementing a cloud cost management strategy can help an organization plan for future costs and consumption. 


For companies that use multi-cloud combinations, it’s also important to practice effective multi-cloud cost management that takes the costs of several different public cloud providers into account. With a better understanding of costs and usage, a business can more effectively enforce accountability across the company and improve the performance and efficiency of its cloud technology.


Is cloud cost management becoming an issue for businesses?

Cloud spending is increasing, and a lack of insight into costs can have considerable financial consequences. The potential results of a lack of proper cloud cost management can include an unexpected spike in costs, overpaying for unused resources, or even inadequate performance.


Cloud cost management strategies

There are a number of strategies businesses can use to manage cloud costs. Some of these include:

  • Right-sizing: Ensure that the public cloud instances you choose are the right fit for your organization’s needs. 
  • Automatic scaling: This allows organizations to scale up resources when needed and scale down the rest of the time, rather than planning for maximum utilization at all times (which can be needlessly expensive).
  • Power scheduling: Not all instances need to be used 24/7. Scheduling non-essential instances to shut down overnight or on weekends is more cost effective than keeping them running constantly.
  • Removing unused instances: If you’re not using an instance, there’s no need to keep it around (or pay for it). Removing unused instances is also important for security, since unused resources can create vulnerabilities.
  • Discount instances: Since discount instances usually do not guarantee availability, they’re not appropriate for business-critical workloads that must run constantly—but for occasional use, they can result in a significant cost savings.
  • Organizational strategies: In addition to the IT strategies outlined above, creating budgets and setting policies around cloud usage is also important to cloud cost management.


Advantages of cloud cost management

  • Decreased costs: This is the most obvious benefit of cloud cost management. Businesses that take a proactive approach to planning for cloud costs can ensure they don’t overspend on unused resources, and they’re able to take advantage of discounts based on volume or advance payment.
  • Predictability: A business that properly forecasts its cloud computing needs won’t be surprised by a sudden increase in costs.
  • Efficient usage: Taking a close look at spending also helps enterprises reduce waste and make the most of the resources they do pay for with techniques like automatic scaling and load balancing.
  • Better performance: An important cloud cost management tactic is right-sizing, or ensuring that the public cloud instances you choose are the right fit for your organization’s needs. Overprovisioning means overpaying; underprovisioning can cause performance to suffer—but with careful planning, businesses can ensure smooth performance without increasing costs.  
  • Visibility: It’s impossible to practice good cloud cost management without detailed visibility into your organization’s usage and cloud architecture. Fortunately, this visibility also serves many other business needs besides cloud cost management, including governance and security. 


The purpose of cloud cost management

Cloud cost management helps businesses control their spending on cloud services while also maximizing their resources. Most cloud providers offer basic cloud cost management tools to help achieve this, and there are also more specialized third-party solutions that provide additional visibility and insight into cloud costs. By making cloud cost management a priority, an enterprise can control its costs and practice good governance while also ensuring that it has the cloud resources it needs to stay competitive.


In addition, cloud cost management best practices also support other business objectives and cloud best practices, such as security, visibility, organization, and accountability. Thus, cloud cost management is important for reasons beyond simple cost control. In particular, good cloud cost management gives businesses the ability to plan for the future, reduce waste, and forecast both their costs and their resource needs.


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