Managing cloud costs is kinda like driving a fast, expensive sports car. You know the type I mean: One with a million complicated gears, levers and gadgets. One with highly sensitive pedals that take you from zero to a hundred in seconds. And one that can easily spin out of control and do a lot of damage, without much warning.
It’s the same as managing cloud costs. As your cloud infrastructure becomes more and more complex, cloud costs become harder and harder to control. So, if you’re not careful, you can do a lot of damage to your business, very very quickly.
But understanding cloud costs is easier said than done. Especially if you’re not on the technical team, but in the finance department, trying to balance the books.
“The cloud offers a high level of control within a dynamic environment – with such variables as architecture, zones, networking, storage, DNS, CPU, memory. This control turns to complication as users are forced to adjust their environments and application configurations to find the right balance between application performance and resource costs.”
- Forbes, Why is Cloud Computing so Complicated?
It’s a well-known fact that the adoption of cloud services has made life easier for organizations: It’s increased their agility, boosted their flexibility, and improved their business performance. But it’s also made it easier for them to overshoot budgets, waste resources, and lose sight of what different teams within the company are spending, on what.
Cloud services can make it impossible for organizations to:
- Stick to budgets
- Create accurate forecasts
- Monitor usage and cost
- Adjust resource allocations
- Control teams across the business to stop them from overspending
So, what’s the solution? Cloud cost management tools. Keep reading to find answers to the following questions:
- What are cloud costs?
- Why are cloud costs so difficult to manage?
- What are cloud cost management tools?
- How do I choose the right cloud cost management tool?
What are cloud costs?
Cloud costs can be divided into three basic groups:
Computing costs: This is where customers are billed for things like CPU resources, memory, software licenses, web services, and specialized virtual hardware.
Network costs: This is where customers are billed for the amount of data they’re transferring into the cloud and the amount they’re transferring out of the cloud.
Storage costs: This is where customers are billed for storing and accessing data, usually on a pay-per-usage pricing model.
Why are cloud costs so difficult to manage?
There are three key reasons why cloud costs are notoriously difficult to manage:
1) Pay-per-usage pricing
On average, an organization will typically blow their cloud budget by around 23%.
This is because cloud pricing uses an on-demand pricing model. This is different from traditional, on-premise solutions where you can deploy something and leave it running 24/7 without it affecting the end-cost. In an on-premise environment, you know exactly what you’re spending on resources and infrastructure because it involves an upfront cost.
In the cloud, however, everything is up in the air (pun intended) because organizations pay for their cloud services by the hour, minute, or second. Even things like which database you use and the country it’s hosted in will affect your monthly bill. So you can see how easy it would be to rack up a high bill if you didn’t carefully track and monitor your usage. Right?
“Cloud pricing is unfamiliar and can be difficult to get to grips with because you’re charged for individual items as you consume them.”
- InfoQ, Taking Control of Confusing Cloud Costs
For instance, say you were running non-production resources, such as a staging or a testing site. These types of environments probably don’t need to run 24/7, do they? Typically, they’ll only be used at points during the working week. But if you’re not tracking usage properly, you could wind up paying money to keep these services running when you’re not actually using them.
If usage is monitored carefully, this pay-per-usage pricing model works and can result in significant cost savings. But if it isn’t, cloud costs can quickly spiral out of control.
2) Decentralized decision-making
Read this and tell me you can’t relate to it in some way:
When a team starts a new project in the cloud, developers and project teams will zone in on creating and delivering an innovative product to hit a specific go-live date. Even if a budget has been set and agreed upon, it’ll usually get bypassed in favour of meeting a tight deadline. The priority for the technical team isn’t trying to understand and track complex cloud pricing and usage, it’s to deliver a working application within a given timeframe.
So, as the project progresses, costs continue to grow, completely unnoticed. That is until the finance team receives the monthly cloud hosting bill.
As they stare in shock at the astronomically high bill, with their budgets and forecasts in tatters around them, they can’t understand what’s happened, or why.
The bill line items don’t make any sense because cloud billing statements reflect only resource and usage quantities, and not business purposes.
So, the people in charge of the purse strings are powerless to make changes to control escalating cloud project costs.
3) Under-utilization of resources
It’s been reported that around 40% of instances are at least one size larger than they need to be, to handle the workload they’re given. Companies are wasting 40% of their cloud budget on over-provisioned and unused resources, which roughly equates to $17 billion.
Why on earth are they doing that?
It seems that many organizations are stuck in a traditional, on-premise mindset. They tend to worry about underperformance, so prefer to provision far more resources and capacity than they need, and effectively pour money down the drain.
If an organization was to reduce an instance by one size, the cost would be halved. If they downsized by two sizes, they would save 75%.
What are cloud cost management tools?
Put simply, cloud cost management tools are tools that help organizations to:
- Manage their spiralling cloud costs
- Understand where overspending is coming from and why
- Monitor usage so they can maximize their cloud resources
In the example above, we saw that decision-making is often decentralized in large organizations, making visibility into expenses difficult. Cloud cost management tools enforce a level of accountability across the company so that the performance and efficiency of their cloud technology is naturally improved.
Cloud cost management tools allow organizations to monitor, understand and manage their cloud technology costs and needs, which then enables them to find cost-effective ways to maximize their cloud usage and efficiency.
As we’ve established, if you’re a developer or on the technical team, your focus is on innovation and moving quickly to meet deadlines. This often results in escalating costs. If you’re in finance or FinOps, you’re on the receiving end of these escalating costs, but with no understanding or context about why they’re so high.
So the answer to this common problem is, quite clearly, to invest in some sort of cloud cost management tool or platform.
But the million-dollar question is…. which one?
How do I choose the right cloud cost management tool?
Run a quick google search on “cloud cost management tools” and you’ll see a plethora of “Top cloud cost management tools” and “The best cloud cost management tools EVER.” results.
But how do you decide which cloud cost management tool is best for your organization and your cloud environment?
4 key features to consider when choosing the right cloud cost management tool
Whether you’re using a single cloud service provider like AWS or Azure, or you’re running a hybrid cloud environment, most cloud cost management tools will support your cloud-based infrastructure.
What you need to find out is how they can support you. So, what are the key things to look for when choosing a cloud cost management tool?
Cross-departmental visibility: A tool that offers role-based access so that employees across the organization can have visibility into performance, usage and costs at a level that makes sense for their department. It enables non-technical staff to understand what the costs are, where they’ve come from, and why they're higher than expected. This will help the whole organization plan, forecast and budget better, and use their cloud services more effectively and efficiently.
Cost-saving recommendations: If you can find a tool that will monitor your cloud accounts and give you suggestions on how to cut costs without affecting performance are well worth it. One that, for instance, will tell you if there’s a redundant server running or if you’re overprovisioning resources, are incredibly useful.
Future trend analysis: To avoid getting a bill filled with nasty surprises and hidden costs,
find a tool that can offer you insight into the future. One that can monitor your cloud accounts and predict what your spend for the day, week or month will be, based on your consumption levels.
Automated warnings: If you leave cloud inefficiencies unattended, costs will quickly escalate. Your cloud cost management tool should have a set of automated warning features that will monitor your usage, keep your costs in constant check, and alert you if there are any problems.
Questions to ask before you choose your cloud cost management tool
Those are four key features that you’ll probably want to have as standard when considering which cloud cost management tool to go for.
But, alongside those key features, it’s also worth considering what the business needs too: What does the organization need from a cloud cost management tool?
Ask yourself questions like:
- Which teams need the information?
- What information do they need?
- To what extent does the company use cloud hosting?
- Do you need to support multiple cloud providers and/or data centres?
- How sophisticated is your business?
- Will you be starting from scratch and need guidance, or are you looking for advanced models and analysis that you can build up with your expertise?
Try a tool like Aimably
Aimably is a cloud cost management tool that’s been designed for AWS-powered businesses that don’t have experience with managing their cloud costs.
If you use a cloud cost management tool like Aimably, you can:
Businesses that take a proactive approach to understanding their cloud costs, and know exactly what they’re spending and why, can ensure they don’t overspend on projects or unused resources.
For example, Aimably Warn will monitor your specific cloud environment and notify you of potential rising cost sources so you can take action before it becomes a problem.
A business that can predict what its cloud hosting bill will be, won’t be surprised by a sudden large credit card charge.
For example, with Aimably Pulse, users will receive daily, weekly, and monthly trend data for each of their AWS accounts leading up to the final bill. So there will be no nasty surprises or hidden costs to worry about.
An important cloud cost management tactic is 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. With careful planning, businesses can ensure smooth performance without increasing costs.
For example, Aimably Reduce provides solutions to cut wasted spending without impacting production.
It’s impossible to practice good cloud cost management without detailed visibility into your organization’s usage and cloud architecture.
For example, with Aimably Insight, users can research, analyze, and track detailed sources of AWS spending, no matter what their role in the company or access level within AWS is.
Even with a tool like Aimably, cloud costs can be overwhelming and tricky to manage. If you’re not sure where to start with managing the complexity of your cloud costs, Aimably Advisor can take this on for you.
As AWS cloud cost management tools go, with Aimably you’ll understand exactly what is being spent and where. You’ll know immediately when costs are starting to spiral out of control. This will allow you to take proactive, corrective action, and remain in tight control over your core uptime and performance responsibilities.
Sign up for a free consultation and demo to see how Aimably could work with your business and cloud infrastructure.