The Growing Challenge of Cloud Cost Overruns
Imagine this: Your cloud bill arrives, and once again, it’s higher than expected. You start digging through the details – unused instances, oversized resources, surprise data transfer fees. Meanwhile, finance is demanding cost cuts, engineering aims for smooth operations, and you’re left balancing it all. It’s a challenge that’s becoming increasingly common.
According to an independent study commissioned by Boomi, 72% of companies exceeded their cloud budgets last year. The primary reasons? Lack of cost visibility, suboptimal resource allocation, and inefficient scaling strategies.
This is where FinOps comes in. No more surprises, no more inefficiencies—just smart, data-driven decisions that maximize every dollar spent in the cloud.
What is FinOps ?
FinOps (short for Financial Operations) is a framework and cultural practice that brings financial accountability to cloud spending, enabling organizations to maximize the value of their cloud investments.
AWS cost optimization integrates financial management, engineering, and operations to assist businesses in tracking, analyzing, and optimizing cloud expenses in real time.
Real World Example
Recently, a client approached us, struggling with soaring cloud costs. After a thorough analysis, we uncovered the root cause: their Kubernetes architecture, designed for large-scale operations, was powering a system used by just five managers.
While scalable and robust, it was like using a rocket to deliver a pizza.
By implementing FinOps practices, we made the following optimizations:
- Shut down unused instances
- Optimized data transfer costs
- Right-sized over-provisioned resources
As a result, the client saw a 65% reduction in cloud costs, saving saving $322/month, which amounts to $3,864/year and $19,320 over the course of five years.
But what if these issues could have been avoided from the start?
Let’s dive into some of the core principles that can help any organization achieve the same level of control and efficiency.
Removing excess and right-sizing resources
Total annual cloud savings for our clients
Continuous analysis for maximum savings
Top FinOps Best Practices to Maximize Cloud ROI
Achieve Cloud Cost Visibility
The first step in managing cloud costs is gaining visibility into expenses, as a lack of clear insights makes it difficult to optimize spending and forecast costs accurately.
- Granular Cost Insights: Use AWS Cost Explorer to track hourly, daily, or monthly cost trends, and third-party tools like CloudHealth and Apptio for deeper insights and multi-cloud environments.
- Implement a tagging strategy: Tag cloud resources with AWS Resource Groups & Tag Editor or use third-party tools like CloudCheckr for enhanced visibility and automation.
- Alerts and Notifications: Set custom cost and usage budgets with AWS Budgets or choose Spot to receive alerts via Slack, email, or custom workflows.
Optimize AWS Cloud Commitments
By strategically selecting commitment options, businesses can significantly reduce their cloud spend without sacrificing flexibility. Balance your commitments carefully: too many results in wasted capacity, too little means high costs.
AWS offers a range of pricing models, and choosing the right commitment strategy is key to managing costs effectively:
On-Demand: Flexible but expensive. Aim to minimize On-Demand usage to reduce costs.
Best for: Running a temporary application or proof of concept (PoC) for 1-2 months without predictable resource demand.
Reserved Instances (RI): Offers discounts (up to 75% off On-Demand) for long-term commitments to specific instance types. Use for predictable workloads.
Best for: Hosting a database or critical business applications that run 24/7 with predictable demand for resources.
Savings Plans (SP): Ideal for more flexible, long-term savings across various resources. Discounts up to 72% off On-Demand.
Best for: Applications with scaling needs, like microservices, that require flexibility in instance type and region but still have consistent base-level resource demand.
Spot Instances: Best for non-critical, interruptible workloads where cost reduction is a priority.
Best for: Running large data processing jobs, batch computing, or machine learning training tasks that can tolerate interruptions.
Continuous Rightsizing
One of the most effective ways to reduce cloud expenses is through rightsizing—ensuring that your cloud resources are properly aligned with actual usage. Rightsizing these instances involves:
- Monitoring Usage Patterns: Utilize cloud monitoring tools like AWS Compute Optimizer to gather real-time data on CPU, memory, and network usage.
- Comparing Instance Performance: AWS recommends evaluating current usage against two benchmarks: the existing instance type and the next smaller instance.
- Downsizing Based on Utilization: If an instance consistently operates below 40% of its capacity or is within 80% of a smaller instance’s capability, switching to a smaller, more cost-effective instance can lead to savings.
Rightsizing for EC2 Instances Example
One of our clients was running multiple EC2 instances to support its growing workload, but after a deep dive into usage patterns using AWS Compute Optimizer, we discovered that they were over-provisioned.
The analysis revealed that their t3.large instances were more powerful than needed for their actual demands. By right-sizing to t3.medium instances, they were able to reduce unnecessary capacity while maintaining performance.
This AWS cost optimization led to an impressive $3,000 savings on their cloud bill over the course of a year, helping the company reallocate resources more efficiently without impacting productivity.
Managing Non-Production Environments
Non-production environments (Dev, Test, QA) don’t need to run 24/7. Use AWS Instance Scheduler or CloudHealth to shut down these environments outside of business hours, you can reduce costs by 60-70%, ensuring resources are only active when needed.
Regular Well-Architected Reviewing
The AWS Well-Architected Review (WAR) is a comprehensive evaluation of your cloud infrastructure to ensure that you are following the best practices outlined in the AWS Well-Architected Framework.
By reviewing your architecture against this framework, you can identify areas for improvement and optimize performance, security, and cost-efficiency.
Focus on Five Pillars:
- Operational Excellence: Focuses on running and monitoring systems to foster continuous improvement and deliver business value.
- Security: Ensures the protection of cloud systems and the confidentiality of your data.
- Reliability: Looks at minimizing disruptions that could impact on your services and ensuring they are resilient.
- Performance Efficiency: Aims to use computing resources efficiently to meet demand, maximizing performance.
- Cost Optimization: Focuses on meeting your IT needs while minimizing unnecessary expenses.
Cloud cost management doesn’t have to be an overwhelming challenge.
Implementing these AWS cost optimization strategies can help companies to stay ahead of the latest tech trends and to take control of their cloud expenses, ensuring they scale efficiently without overspending.
As an AWS Certified Partner, Trident Software helps a multitude of clients overcome complex cloud challenges, enabling them to use computing resources efficiently while minimizing unnecessary expenses.
Contact us today for a free consultation to learn how we can help you implement FinOps best practices and optimize your cloud costs effectively.
