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What Is Cloud Cost Optimization, and How to Do It?

Cloud Cost Optimization

Optimizing cloud costs has become a critical focus for organizations as the business landscape shifts towards cloud-based solutions. Trends such as remote work and the need for scalable data management have accelerated this shift. In this evolving environment, professionals who understand and can implement cloud cost optimization strategies are valuable assets for cloud-adopting enterprises of all sizes.

Whether you’re new to cloud computing or seeking to enhance your skills, knowing how to optimize cloud costs effectively can add value to your resume and set you apart in the eyes of top recruiters

This beginner’s guide will explore essential facts about cloud cost optimization, covering key concepts, tools, and best practices. We’ll also discuss the roles and responsibilities of cloud professionals and how an industry-recognized cloud computing bootcamp can equip you with the skills to become one.

What is Cloud Cost Optimization?

Almost every industry, large and small, is vying to adopt and use cloud computing to streamline data storage and usage. While larger enterprises focus on the most appropriate cloud infrastructure capable of handling their massive operations, smaller businesses want a customized framework at affordable prices.

This requires a strategic methodology to plan, control, minimize, and manage spending on cloud services. Such a systematic approach is called cloud cost optimization. It focuses on cost savings and providing the organization with the most suitable and useful cloud computing services.

This process includes evaluating the cloud infrastructure, detecting areas of inefficient usage, and managing those areas by choosing appropriate cloud functions. The ultimate goal is to maximize resource usage with minimum waste.

Also Read: Industry Perspective: Cloud Computing in Healthcare

Why is Optimizing Cloud Cost Important?

Cloud computing is an expensive setup. It comprises infrastructure, applications, coding, tools, and software provisioning to end users. Additionally, businesses may require occasional scaling up of certain features, 24-hour access, extra security measures, and customization. This requires considerable money if you want a streamlined cloud infrastructure.

As a result, large businesses choose everything the cloud provider offers, while the smaller ones may choose only the economic plan. In either case, the result is a massive waste of money.

Bigger businesses often pay for resources they may not use. More than one employee may use some computing resources, and some features may expire before use.

Meanwhile, the economic plan saves money for smaller businesses, but scaling up in the future requires further investment. Additionally, if they need specific features, they may have to pay extra to buy them over and above the economic plan.

Cloud cost optimization can avoid all such instances. It assesses the exact requirement and quantity and helps match the employees’ needs to the correct cloud feature.

As a result, businesses end up paying for only those features and capabilities that will used the most. Thus, cloud cost optimization is critical in providing an optimized cloud infrastructure at an affordable cost.

Is Cloud Cost Optimization the Same as Cloud Cost Management?

While the terms are sometimes used interchangeably, cloud cost optimization and management differ. Let’s go through some of the key differences between them.

  • Cloud cost optimization assesses the existing cloud infrastructure for any opportunities for improvement. Meanwhile, cloud cost management focuses on tracking the existing resource spending, allocation, and usage.
  • Cloud cost optimization plans and implements a modified service based on the optimization findings. Cloud cost management regularly evaluates the cloud services and does not include such implementation.
  • It helps identify the underused or overused resources and provides recommendations to eliminate such wastage. Cloud cost management flags instances of overspending and minimal usage, which can then be investigated further for the causes.
  • Cloud cost optimization aims to obtain the maximum output at minimal cost. On the other hand, cloud cost management evaluates cloud spending and ensures that it stays within the budget.

Also Read: What is Cloud Computing Security?

Most Popular Cloud Cost Optimization Tools

When you choose the correct tool, appropriate cloud cost optimization occurs. Here is a list of the most popular ones.

Apptio Cloudability

Apptio Cloudability, a part of the IBM group, provides recommendations for rightsizing the cloud capabilities for DBs, volumes, and VMs. It helps allocate cloud computing, support, and container costs as part of automatic chargebacks. The financial operations department can track commitment coverage and explore further spending opportunities.


Cloud Zero is an AWS-compatible cloud cost optimization tool. It manages cost data at multiple levels while providing insights into individual usage and spending. It recommends the most optimal options based on crucial metrics such as unit cost, cost per customer, and COGS. You can also use this tool to monitor Kubernetes’s cost.


Densify is a cloud cost optimization tool that uses deep analytics and machine learning capabilities to track oversized and unused resources. It provides options for eliminating or modifying resource allocation and enhancing automatic scaling.

Azure Advisor

Azure Advisor is a free optimization tool that analyzes resource usage and configuration and recommends personalized solutions for Azure deployments. It detects cost inefficiencies and improves the security and performance of your cloud service.


ProsperOps is a tool that helps predict your cloud usage and transform missed savings and overcommitment into reserved instances. It improves commitment coverage and recommends options for blended discounts. Further, it tracks the prepay amortization and provides a dashboard to help with actionable insights.

Google Cloud Billing Reports

Google Cloud Billing Reports is a Google-native tool for tracking cloud costs and usage. It provides a breakdown of cloud usage with respect to the service, area, project, or resource, thus helping identify the exact points of waste. You can assess the cloud usage patterns and reorganize the resources to improve efficiency.

Spot by NetApp

Spot by NetApp provides actionable insights for using spot and reserved instances. It is useful for tracking Kubernetes usage and finding opportunities for cost savings. It uses predictive algorithms and automation to ensure workload continuity.


CAST AI is a tool for tracking Kubernetes usage and spending. It monitors trends and autoscales the nodes as required. It helps with workload rightsizing and provides projected spending. It optimizes the infrastructure using automation and prevents losses due to insufficient manual intervention.

Best Practices in Cost Optimization

Implementing cloud cost optimization is a standard process. However, there are certain best practices you can follow to make the process even better.

Evaluate the Financial Background of the Cloud Services in Use

Gather billing and purchase information for existing cloud services. Review them and identify the features and the validity durations in the invoices and bills.

Identify Unused and Idle Resources

Check that each purchased feature has been installed in the IT systems. Analyze the usage of the features. Identify the capabilities that have not been used for a long time, have been used intermittently, or are used to a very low extent. Also, note the features that are not useful but have been installed as a part of the package.

Talk To Employees

Only the people who use the system know its pitfalls. Hence, you should discuss the staff’s requirements to get to the bottom of the issue.

For example, there could be instances where people separately buy features that could be purchased in bulk. In this way, you can identify areas ripe for optimization.

Establish the Budget

Assess the original budgets allotted to the existing cloud service. Check if there were any opportunities for improvement. Match the features on the invoices to the budgets. Note any miscalculations, overspending, or under-allocation. Form a new budget based on the discussions and analysis.

Reform the Cloud Services

Once the requirements and the budget have been established, you must use an appropriate tool to optimize the cost. Analyze the best solution that provides all the features and eliminates unnecessary capabilities at a suitable price.

Work with the cloud service provider to change the service plan accordingly, especially if they offer a savings plan. Implement the new services and ensure no unused features are left on the systems.

Explore Reserved and Spot Instances

If your plan reveals considerable cloud usage in a certain area during a certain period, you can opt for reserved instances for a set duration. Cloud providers offer huge discounts for such options.

Also, watch for spot instances with one-day discounts. If you know that a certain feature will be required in the future, you can take advantage of these instances whenever they are available.

Eliminate Unnecessary Licensing Costs

Software licensing requires regular renewal and updating. However, multiple licenses may be used across your organization, making tracking and updating each manually impossible.

By using a license tracking tool, you can check and remove unused licenses that keep getting renewed automatically.

Implement Cost Optimization Throughout the SDLC

Adopting cost optimization after the complete SDLC results in missed savings opportunities at the earlier stages. Hence, it is crucial to include cost optimization in every stage.

During the planning stage, use the known usage data to assess its efficiency and recommend changes if necessary. In the deployment, operation, and building stages, track the cloud usage and note the inefficient areas. In the final stages, monitor the modified plans and the resulting savings.

Collaborate with Other Departments for Accurate Analysis

Every department, such as DevOps, engineering, and FinOps, has its view regarding cloud resources. Collaborate with them to understand their point of view and ask them to assess cloud usage and cost patterns. They can provide detailed insights into the best way to optimize the cloud costs.

Track and Reduce Cost Anomalies

Monitor the cost anomalies closely and look for spikes or low usage. Check for patterns with respect to specific times of the year.

Such anomalies may typically be related to the automated renewal of multiple cloud features not included in the base plan offered by the service provider. This will help identify unnecessary expenditures and automatic renewals of unused features.

Identify Unused IP Addresses

Some cloud providers, such as AWS, allow a minimum number of Elastic IP addresses by default. You may not use or need them, but you will pay for them. Hence, track the plans and check such unused IP addresses. Revise the plans to eliminate or better allot such resources.

Use Pause and Resume Features

There may be resources such as AWS RedShift that keep running even when the clusters are idle and the office is closed. As these compute nodes are paid per unit of time, you are wasting money on such resources. Hence, pause the resources when not working and resume their operation during office hours.

Also Read: How to Become a Cloud Engineer in 2024? A Complete Guide

The Role of Cloud Professionals in Cloud Cost Optimization

Cloud cost optimization and management is the combined responsibility of three teams—

  1. Cloud strategy team that establishes the goals and financial outcomes of the cloud adoption exercise.
  2. Cloud governance team that optimizes and manages the financial aspect of the cloud portfolio and monitors the usage and performance.
  3. Cloud adoption (workload) team that implements the recommendations for resource wastage.

Cost optimization is primarily the responsibility of the cloud governance team, which evaluates the cloud infrastructure, identifies improvement opportunities, and formulates a better cloud portfolio.

This team includes roles such as cloud cost optimization expert, project manager, lead, engineer, analyst, and director of cloud financial operations. Let’s break down the main roles.

  • Cloud cost optimization analysts collaborate with finance and IT to devise a cloud usage plan aligned with strategic business goals. They conduct cloud usage and cost analysis, predict future trends, and identify gaps for cost savings. Their responsibilities also involve managing vendor relationships and obtaining cloud resources at the best price.
  • Cloud cost optimization engineers develop and implement data-driven measures for efficient reporting and alerting. They establish metrics and design suitable dashboards, collaborating with engineering teams to assess the implementation of optimization measures. They also explore options to replace or modify existing cloud portfolios and train employees in cloud portfolio usage and best practices.
  • Cloud cost optimization leads head the team that conceives and implements cloud cost optimization exercises. Skilled in tagging and tracking public cloud resources, they develop rightsizing standards and work on optimization models. Selecting the team for optimization efforts and training them as required are also among the tasks they handle.
  • Cloud cost optimization project managers assess the cloud portfolio and manage cloud cost optimization projects. Liaising with departments and vendors for insights and information about multiple resources, they oversee the implementation of recommendations and resolve logistical or technical issues. They also present reports on cloud spending to high-level management and create best practices and policies.

Acquire the Right Skills for a Successful Career in Cloud Computing

Cloud cost optimization is the hallmark of a great cloud computing professional. Your work will play a considerable role in managing the financial output of the cloud service usage. To do this, you must be familiar with every aspect of cloud computing to take the right call.

If you’re interested in this area of cloud computing, joining a job-ready cloud computing program can be an excellent starting point. This comprehensive program is curated by industry leaders who provide an in-depth understanding of Azure and AWS cloud fundamentals, DevOps on AWS, and management of Azure resources. In addition to Cloud cost optimization, you will learn key skills like containerization and orchestration, multi-cloud deployment, monitoring, and diagnostics.

By gaining hands-on training and experience through real-world projects and case studies, you can build an enviable portfolio and a resume to attract and impress potential recruiters.

You might also like to read:

Top Cloud Computing Career Paths to Explore in 2024

Different Types of Cloud Computing: A Comprehensive Guide

What is AWS EC2? A Comprehensive Guide

How to Become an AWS Solutions Architect: A Complete Guide

Top 10 Cloud Computing Characteristics

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