The economic impact of the current pandemic is forcing CFOs around the world to adjust spending within their organizations. Meanwhile, CIOs and IT leaders are turning over every rock to find ways to cut waste without impacting strategic initiatives. One way to get fast cost savings is to eliminate wasted spend on public cloud services.
How much can I save?
Organizations waste an average of about 35 percent of their cloud spend. While you may not be able to recover all of that wasted spend immediately, we’ve found many organizations that implement a focused effort can save as much as 20 to 25 percent on their cloud spend within a few months. Unlike many other IT costs tied to long-term contracts, on-demand cloud spend can provide quick wins in any cost-savings initiative. You’ll start to realize savings within a second of eliminating idle resources or downsizing resources. Getting solid cloud cost savings practices in place will also help ensure ongoing efficiencies as cloud use accelerates even faster in a post-pandemic world.
5 Cloud Cost Savings Strategies
- Tip 1: Start with an assessment before locking in to cloud provider discounts
- Tip 2: Create an optimization plan and start with “quick wins”
- Tip 3: Pay attention to software licenses
- Tip 4: Plan for the right type and level of discounts
- Tip 5: Make optimizing cloud costs a continuous process
Tip 1: Start with an assessment before locking in to cloud provider discounts
Cloud provider sales teams will be swarming their customers, promoting a variety of discounting options that offer significant savings by locking in spending commitments for a period of 1-3 years. These options include enterprise agreements, reserved instances and savings plans. And they’ll be an essential part of how you can save money. But you don’t want to bite too soon on seemingly attractive offers. The cloud provider’s goal is to lock you in to their cloud as much as they can. Your mission is to save money while serving your organization’s long-term goals.
Keep in mind that you can often save more if you optimize first—eliminate idle resources, rightsize and more—and only leverage discounting options, such as reserved instances and savings plans based on that optimized usage. If you start locking in discounts before optimizing, you may eliminate your ability to take advantage of significant savings opportunities.
Start with an assessment that helps you identify all the ways you can optimize and save. Only then should you create a savings plan.
Tip 2: Create an optimization plan and start with quick wins
Your assessment should find all the potential areas for cloud cost savings. This approach will include a variety of opportunities, such as:
- Eliminating zombie or idle resources
- Deprovisioning unused storage
- Rightsizing resources
- Moving to newer instances that cost less
- Scheduling instances to shut down after hours
- Finding waste in PaaS services
You can identify your quick wins once you have a complete assessment. For instance, eliminating idle resources and unused storage can happen quickly but scheduling instances may require more coordination to execute. Create an overall plan where you complete quick wins first and follow up with other savings.
Tip 3: Pay attention to software licenses
The cost of traditional software licenses for some applications may represent a significant portion of cloud costs. Your asset management teams need to track bring-your-own-license situations in the cloud and take advantage of any savings opportunities. For example, if you bring Microsoft Windows or SQL Server licenses to the Azure cloud, you can realize significant savings on your cloud bill through the Azure Hybrid Benefit. Specific software licenses, like Oracle database, can be more expensive to run in some clouds due to the license restrictions. Because of this complexity, it’s vital to evaluate the costs and determine the best options.
Tip 4: Plan for the right type and level of discounts
Once you have an optimization plan, you’ll have a picture of what your cloud costs and usage will look like after you’ve completed those optimizations. Now you can determine the right approach for cloud discounting. For instance, you don’t want to lock in with commitment-based discounts, like reserved instances or savings plans, on your currently unoptimized spend if you know your optimization plan will save 20 percent on your cloud bill. Instead, you can make those commitments based on the level of your optimized spend.
Keep in mind that several types of discounts are available from cloud providers. There are negotiated enterprise discounts, such as your Microsoft EA or AWS EDP program. These enterprise discounts are less flexible because they’re often only worked every three years, and the discount levels are limited. In contrast, cloud providers offer standard discounting options, such as reserved instances or savings plans, which can be purchased at any time and can yield up to 70 percent savings for 3-year commitments. While your negotiated discounts certainly provide savings, these more standard discounting programs will likely drive more substantial savings.
Despite what your cloud providers’ sales reps say, you rarely want to purchase these standard discounts to cover all your cloud spend. Think about a target coverage level based on your strategic plans to increase or decrease usage with that cloud provider as well as how the details of that usage might change over the next few years (different regions or instance types, switching from instances to PaaS services, etc.). For example, reserved instances may have limitations on the types of usage. Once you’ve decided on a strategy and purchased those standard discounts, it’s critical to track and manage your actual usage to ensure you’re fully utilizing those discounts.
Tip 5: Make optimizing cloud costs a continuous process
Cloud environments are changing quickly and constantly, and optimization won’t be a one-time activity. It’s a continuous process that requires automation. For instance, immediately after you eliminate idle or unused resources, new ones will instantly start appearing. Think of it like kids’ toys—you pick them up and five minutes later, toys all over the floor again. You need to leverage automation that will continuously scan your cloud environments to identify waste, alert or notify the appropriate people in your organization and optimize automatically.
Optimizing Cloud Costs is a Digital Imperative
With cloud usage continuing to accelerate, the need to save on cloud costs has become more critical than ever. Now is the time to put in place the tools, processes and people you need to save money now, ensuring efficiency going forward as cloud spend becomes an even larger portion of your IT budget.
Flexera can help with cloud cost management solutions and with our experts in our cost optimization team. Sign up for a free cloud cost assessment and get help optimizing your cloud spend today.