There has been a seismic shift in the tech sector over the last few years, as more businesses have had to take steps to cut costs and increase free cash flow.
The first place that businesses have looked is personnel, where more than a quarter-million workers in the tech sector have been laid off since 2022. Following that, the second most common cost center has been IT infrastructure. Cloud computing has ushered in an era of unprecedented versatility and scalability, but it's come at a sometimes significant cost.
One of the most notable examples of this is 37signals, the parent company of the task management software Basecamp. Even factoring in the expense and effort of migration, they found that leaving the cloud entirely could save them $7 million over five years.
Of course, leaving the cloud entirely is a drastic step. Instead, most businesses have adopted a few cost optimization best practices, from analyzing storage and egress costs to leveraging low-code platforms like 8base. In this post, we’ll share six cloud cost optimization strategies.
Cloud cost optimization is the process of reducing your overall cloud spending by identifying mismanaged resources, eliminating waste and right-sizing computing services to scale. If your business manages resources in the cloud, it's important to understand where your expenses come from, so you can keep them predictable.
Cloud cost optimization is about striking the perfect balance between performance and cost, ensuring that cloud computing remains a boon for your business, not a financial burden.
The first and most important best practice for optimizing your cloud footprint is effective monitoring and real-time analytics. After all, you can't improve what you don't measure.
Setting up a comprehensive monitoring system is the first step. This system should track resource usage, application performance and network traffic. Cloud providers typically offer a range of monitoring tools that can be customized to meet specific needs.
Next, real-time analytics tools analyze large volumes of data to provide immediate insights into the cloud environment. These tools can detect anomalies, predict trends and suggest optimizations, often in real-time. This instant feedback is invaluable for promptly addressing issues that could lead to increased costs, such as underutilized resources or performance bottlenecks.
Setting up alerts and notifications based on specific criteria can help in proactively managing costs. These alerts can notify teams of significant changes or potential issues, such as spikes in usage or nearing budget limits, allowing for immediate corrective action.
By leveraging monitoring and real-time analytics, businesses can gain a clearer understanding of their cloud usage and expenditures. This visibility is key to identifying cost-saving opportunities and ensuring that cloud investments are aligned efficiently with business objectives.
With measurement in place, the next component of cloud cost optimization is analyzing and managing storage and data egress costs, as these can significantly contribute to overall cloud expenses.
Cloud storage costs are primarily based on the amount of data stored and the storage class used. Different types of data may require different storage solutions, such as high-performance storage for frequently accessed data or more cost-effective archival storage for rarely accessed data. Regularly reviewing and categorizing stored data can help in optimizing storage costs by ensuring that each type of data is stored in the most cost-effective manner.
Egress fees, or the costs associated with transferring data out of the cloud to the internet or other locations, can be substantial. It's crucial to understand the pricing models of your cloud provider for data egress and to design your architecture in a way that minimizes unnecessary data transfers. Where possible, leveraging content delivery networks (CDNs) or optimizing data flows can help in reducing these costs.
Finally, implement data lifecycle policies that make sense with your business. Implementing data lifecycle policies can automate the process of moving data to more cost-effective storage classes or deleting stale data that is no longer needed. For example, data that is not accessed frequently can be automatically transferred to cheaper, long-term storage solutions.
Autoscaling and effective resource management can ensure that cloud resources align closely with actual demand, avoiding both underutilization and overutilization.
Autoscaling is the process of automatically adjusting the amount of computational resources based on the current demand. This means scaling up resources during peak usage times and scaling down during low-usage periods. This dynamic approach prevents paying for unused capacity while ensuring that performance is not compromised during high demand.
Resource allocation involves analyzing the usage patterns and scaling resources accordingly. For instance, if certain services are only used during business hours, those can be scaled down during off-hours, leading to significant cost savings.
Many cloud providers, such as 8base, offer tools and services for autoscaling and resource management. Selecting the right tools that align with your specific needs and integrating them into your cloud architecture is crucial for effective resource management.
Reserved instances and spot instances are options offered by cloud providers can lead to substantial savings compared to using standard on-demand instances, especially for predictable and flexible workloads.
Reserved instances allow you to commit to using a specific amount of resources for a predetermined period, typically one to three years, in exchange for a significantly reduced rate. This is ideal for workloads with predictable usage patterns. By committing to a long-term contract, you can save up to 75% over equivalent on-demand capacity. Of course, it’s crucial to carefully analyze your long-term usage trends before purchasing reserved instances to ensure that you’re committing to the right type and amount of resources.
Some cloud providers offer flexibility in their reserved instance offerings, allowing you to change families, operating systems or tenancies within the reserved model, which can be useful if your needs change over the commitment period.
Spot instances, on the other had, are available at a reduced price compared to on-demand instances and are ideal for flexible, non-urgent and fault-tolerant workloads. These instances use the cloud provider's excess capacity and are available for as long as no one else is willing to pay more. The pricing for spot instances can be significantly lower, sometimes up to 90% cheaper than on-demand prices.
While spot instances offer significant savings, they are less reliable because they can be terminated by the provider if the demand for capacity increases. As a result, they are best used for tasks that can be interrupted or for supplementary, non-critical components of your workload.
Adopting a multi-cloud strategy involves using services from multiple cloud providers. This approach can optimize costs, enhance performance and increase flexibility, but it also requires careful evaluation and strategic planning.
One of the primary advantages of a multi-cloud strategy is cost savings. Different cloud providers offer varying pricing models, and by leveraging the strengths of each, businesses can optimize for cost. For instance, one provider might offer more economical solutions for storage, while another might have better pricing for computational services.
Using multiple cloud providers reduces dependence on a single vendor, mitigating risks associated with vendor lock-in. This flexibility allows businesses to switch services or providers more easily in response to changes in pricing, service offerings or business needs.
However, while a multi-cloud strategy has many benefits, it also introduces complexity. Managing multiple relationships, contracts and interfaces can be challenging. Additionally, ensuring security and compliance across different platforms requires careful management and oversight.
This requires expertise in various cloud platforms and sophisticated management tools. These tools should provide a unified view of resources and services across different clouds, helping manage usage, performance, and costs effectively.
One of the major challenges small businesses face in cloud computing is the complexity of managing diverse workloads. Low-code platforms abstract much of this complexity, offering a more user-friendly interface with drag-and-drop features and pre-built templates. This simplicity allows businesses to develop and deploy applications faster and with less technical expertise.
Traditionally, developing and maintaining cloud-based applications requires a team of skilled developers, which can be a significant cost for small businesses. Low-code platforms require less specialized knowledge, which means that businesses can achieve their development goals with smaller teams or enable existing staff to contribute to application development without extensive programming knowledge.
Businesses can bring applications to market faster and respond more swiftly to market changes or customer needs. This agility is a competitive advantage, especially for smaller businesses looking to carve out a space in the market.
The ease and speed of development with low-code platforms mean that small businesses can be more agile in their operations. They can quickly adapt to new opportunities or shifts in the business environment, which is often more challenging with traditional development methods.
Finally, as the business grows, its applications and workflows need to scale as well. Low-code platforms typically offer scalable solutions, meaning that as your business expands, your applications can grow with you without the need for extensive reworking or investment.
Cloud cost optimization starts with accurate measurement and analysis of your cloud usage. This crucial first step helps identify underutilized resources, potential for autoscaling and opportunities to shift to more cost-effective computing solutions like reserved or spot instances.
Next, low-code solutions like 8base can offer a streamlined, user-friendly approach to application development, minimizing the need for extensive technical expertise and reducing personnel overhead.
8base's App Builder allows anyone — from seasoned developers to non-technical users — to build visually stunning, responsive web applications. With a drag-and-drop design interface and rich component set, you can build products quicker and for less. Try 8base for free today.
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