A Guide to Cloud Cost Management

The idea of cloud cost management encompasses the steps and tools that companies implement in order to regulate the cost of their cloud bill. Every year, public cloud customers waste billions of dollars on resources they’re not using, they don’t need, or that are provisioned inefficiently. In 2020, there will be an estimated $17.6 billion in wasted cloud spend. Having a better understanding of where these costs are coming from can help you control them. 

How to Think of Cloud Cost Management

Cloud cost management is actually quite a broad concept. Before you dig into specific tactics to reduce your cloud bill, first take the time to consider why you need it,  who’s responsible and where to start. While application performance, time to market, and other priorities can reign supreme in a development organization, efficiency of resource use is what allows development and IT teams to achieve these goals.

The key to taking action to address wasted spend is to bridge the gap between the people who care about the cloud bill – Finance, IT, etc. –  and the people working in the cloud infrastructure every day – the app owners, the lines of business, developers, engineers, testers, people in QA, DevOps, SREs, etc. 

Cloud Center of Excellence & Cloud Financial Management

One way many organizations are addressing cloud management in general and cost management in particular is through a Cloud Center of Excellence. A Cloud Center of Excellence (CCoE) brings DevOps, CloudOps, Infrastructure and Finance teams together, creating a cross-functional team that manages cloud strategy, governance, and best practices, and serve as cloud leaders for the entire organization. The main goal of a CCoE is to improve cloud operations in the enterprise. 

This team would be the ones responsible to know all the ins and outs of cloud management so they are able to create processes to optimize infrastructure, including provisioning, security, optimizing cloud costs, improving productivity and streamlining cloud operations. That being said, if your organization doesn’t already have a cloud center of excellence, or even an enterprise cloud manager, it may be time to consider whether it makes sense for your organization to implement one. This team would be the ones you turn to as the experts on cloud cost management within your organization. 

Organizations also should incorporate cloud financial management into their operations. Cloud Financial Management is a set of activities that allows Finance and Technology organizations to manage, predict and optimize cloud computing costs as they run workloads in their cloud environment. 

When an organization incorporates Cloud Financial Management into their cost optimization plan it allows them to accelerate business value realization and optimize cost, usage and scale to maximize financial success and manage cloud costs. Cloud Financial Management is something that increases as an organization’s cloud maturity progresses, so it’s important to remember that small changes can have huge impacts and benefits can increase as time goes on.  

The Cloud Optimization Maturity Curve

While “cost optimization” is broadly applicable, the strategies and tactics to get there will vary widely based on your organization and the maturity of your cloud use. 

In order to facilitate a discussion and understand where organizations are in their cloud cost optimization journey, we created a framework called the Cloud Cost Optimization Maturity Curve to identify these common steps.

This is a representation of actions you can take to control cloud spend in order of complexity. For example, Visibility alone does not necessarily save you money but it can help identify prime areas for optimization based on data. Also, taking scaling actions on IaaS may or may not save you money, but may help you improve application performance through better resource allocation, scaling either up or down. Ultimately, there are a number of steps that are common no matter what, but these steps will allow you to identify where you are on the cost optimization maturity curve and help you create a roadmap of what to do next. 

How Big is the Problem of Wasted Spend?


As cloud computing growth continues and cloud users mature we still see the issue of users not optimizing their cloud spend. Between idle and over provisioned resources alone, there will be an estimated $17.6 billion in cloud spend that will be completely wasted this year. If you break it down to even more sources there will be a minimum of about $5 million wasted every day this year. 

Idle resources are instances and VMs that are not being used 24/7 but are being paid for by the second, minute, or hour. Typically, these are non-production resources that are only used during a 40-hour work week and dont need to run 24/7, meaning the other 128 hours of the week, the resources are idle but still being paid for. 

Now for overprovisioned resources/infrastructure. That is, paying for resources in a larger capacity than needed, meaning you’re paying for resource capacity you’re rarely, or never, using. Simply reducing an instance by one size, the cost will reduce by 50% – downsizing by two sizes saves 75%. 

Wasted cloud spend from orphaned volumes and snapshots also contributes to the issue of cloud waste.  A resource becomes “orphaned” when it is detached from the infrastructure it was created to support, such as a volume detached from an instance or a snapshot detached from any volumes. 

A form of orphaned resources comes from storage. When created, volumes or disks such as Amazon EBS are attached to an EC2 instance. If an instance is terminated but volumes attached to it have not, “orphaned volumes” have been created. Snapshots are another form of orphaned resources. A snapshot is a point-in-time image of a volume. As an example, EBS snapshots are incremental, meaning only the blocks on the device that have changed after your most recent snapshot are saved. If the associated instance and volume are deleted, a snapshot could be considered orphaned. 

Cloud bills can be a bit tricky to understand. In order to really have a better understanding of what you’re being charged so you can properly manage your costs, you need to really know the details of your environment. Why are they so complicated? There are a few reasons. The different cloud providers use varying terminology, there’s a multitude of factors that go into the pricing and sizing of instances, it can be hard to see what you’re actually spending (until you get the bill), cloud services pricing can charge on a per-hour, per-minute, or per-second basis, they change the pricing relatively often, and each service is billed in a different way.

Don’t let the complexity of your bill intimidate you – if you’re looking to manage these cloud computing costs, there are a few ways! Some of the best ways are:

    • Get better visibility of your bill with a single view
    • Understand how each of the services you use is billed. 
    • Make sure you’re not running anything you shouldn’t be.
    • Review regularly 
    • Put governance measures in place 

Variety of Resources and Teams

Across the board and within each cloud provider, there is a wide range of different resources. Users need to build capability with different resources to become a cost-efficient organization.

Start Managing Costs

The first step is to examine your cloud environment for sources of wasted spend. Review these things with your team and take control of your cloud environment so you can start managing your cloud costs. 

  • Orphaned resources 
    • Orphaned snapshots, orphaned volumes, unassociated IPs, load balancers, unused machine images and orphaned object storage.
  • Overprovisioned resources
    • Underutilized volumes, underutilized database warehouses, underutilized relational databases, underutilized instances, inefficient containerization, idle hosted caching tools.
  • Idle resources
    • Idle instances, idle load balancers, idle relational databases, idle scale groups, excessive snapshots
  • Legacy resource types
    • Instances running on legacy resource types such as outdated instance family types.
  • Suboptimal pricing options
    • Consistent workloads, dynamic demand, and batch processing. 
  • Suboptimal use of reserved capacity
    • Expiring reservations, unused reservations and savings plans vs reserved instances.
  • Expensive choices
    • More expensive region than needed and a more expensive cloud provider than needed

Next, you can get started managing your costs by setting schedules for your non-production resources to shut down overnight and on weekends when they’re not needed. Another way to control costs is by rightsizing your resources. When you rightsize, you are matching a workload to the best supporting virtual machine size, helping you optimize costs. It’s also important to ensure proper governance is in place so that users have limits on what they can provision – the easiest way to do it is by implementing a cloud management software

Another way to better manage cloud costs is to use a resource tagging strategy. Tags are labels or identifiers that are attached to your instances. This way you can provide custom metadata to accompany the existing metadata, such as instance family and size, region, VPC, IP information, and more. This helps manage cloud costs by sorting, filtering and searching through your cloud environment.

Also, it’s always important to make sure your instance types are up to date. Cloud providers incentivize instance modernization by pricing the newest generations the lowest. Typically, new instance families come out with newer CPU types, but can also refer to networking or memory improvements as well.

Automated Tools/Platforms

One of the easiest ways to get started with cloud cost management is to implement an automated tool/platform. It’s important to know your cloud computing needs so you can find the best cloud management solution for your environment.

Organizations need tools that will need to demonstrate a rapid ROI and be built to be used across engineering and operations (not just in the offices of the CIO/CTO/CFO) to ensure the self-service nature of the cloud is not disrupted. 

Using a third-party tool such as ParkMyCloud takes out the possibility of human error in order for you to optimize your spend and can help you maintain continuous cloud cost management. There are a lot of tools out there that will make recommendations for you but make sure you are implementing a tool that takes that extra step and automates these actions for you. The goal for automation tools is to step up the levels of automated resource configuration and cost control. Through automation, organizations can reduce management time to achieve optimized environments and cut costs.

ParkMyCloud is a SaaS platform that helps enterprises automatically identify and eliminate wasted cloud spend. The platform utilizes machine learning to find oversized and idle resources and makes recommendations to schedule and resize your resources based on data gathered. Optimize your costs with ParkMyCloud’s scheduling feature, SmartParking, to turn off idle resources when they are idle. Also, utilize the ParkMyCloud SmartSizing feature to optimize your resource sizing with rightsizing. Using ParkMyCloud as cloud cost management software, enterprises can easily manage, govern, and optimize their spend across multiple public clouds. Get started saving with ParkMyCloud today by starting a 14-day free trial or setting up a demo with our cloud cost optimization experts.