How to Trim Your Cloud Budget

According to the Flexera 2023 State of the Cloud Report, released in early March, 82% of respondents, encompassing all types of organizations, indicated that keeping costs under control is their leading cloud challenge.

The cloud has changed IT infrastructure budgeting and made cost control dramatically more complex, says Robert Orshaw, managing director and global leader for the cloud operate at business advisory firm Deloitte Consulting. “Organizations have difficulty in managing costs due to a lack of visibility into actual workload requirements and complex billing and pricing models,” he explains. “With cost complexity continuing to increase alongside growing usage … enterprises are finding it difficult to manage their cloud bill.”

IT leaders should develop a strategy outlining specific cloud capabilities they hope to unlock as well as how they will fundamentally re-architect their organization’s operations to accommodate their new approach, says Cenk Ozdemir, cloud and digital leader at business consulting firm PwC. Lacking a detailed game-plan, an organization can’t become a truly cloud-powered company, he explains. It will, instead, end up inefficiently allocating resources.

Cloud Budget Trimming Tactics

An essential first step in cloud budget trimming is to ask the enterprise’s FinOps team to evaluate current usage, Orshaw advises. “You need to have a clear understanding of what you’re using and how much you’re paying,” he says. “Start by looking at your cloud bills and identifying any unused or underutilized resources.”

Optimizing current cloud resources can help bring a soaring budget under control. “This means resizing instances, eliminating instances that are no longer needed, and adopting a more granular approach to resource allocation,” Orshaw says. Automated tools can aid in this process, he adds.

Virtually all cloud service providers offer some form of cost optimization support. “Understanding these tools and techniques … save organizations a lot of money in the long term,” Ozdemir says.

Also consider taking advantage of reserved instances, Orshaw advises. “Reserved instances offer a significant discount over on-demand instances, but require a commitment of at least one year,” he explains. “Reserved instances are best for workloads with predictable usage patterns.”

Spot instances can also help minimize expenses. “They are ideal for workloads that can tolerate interruptions and are not time-sensitive,” Orshaw says. “Spot instances can be up to 90% cheaper than on-demand instances and can provide significant savings.”

Orshaw suggests using cost management tools to monitor cloud spending and identify areas for potential optimization. “Cloud providers offer various tools to help you with this process, and there are also third-party tools available.”

When developing or updating a cloud strategy, always aim for consolidation and simplicity. “Consolidating your cloud providers and reducing the number of applications running in the cloud can help streamline your budget,” Orshaw says.

Consider a Hybrid Cloud Approach

A hybrid cloud model allows adopters to leverage both public and private cloud services. “It can give you the benefits of the cloud while also providing greater control and security,” Orshaw explains. A hybrid cloud model can also reduce costs by allowing adopters to scaling-up private cloud resources during periods of heavy usage, he adds.

At Liberty Mutual Insurance, over 70% of cloud workloads are within a hybrid, multi-provider environment. “What we have found as the key to financial success in the public cloud is to embrace a pay-as-you-go model, taking advantage of all the savings levers available, and educating development teams on a variable expense model,” says AJ Wasserman, product owner, cloud financial operations, Liberty Mutual.

Wasserman says her strategy -- maximizing the budget by leveraging multiple cloud providers while optimizing its existing footprint -- has created significant savings. “Now, more than 10 years into our cloud migration journey, we’ve been able to trim cloud costs by 20%,” she states.

Strong Cloud Governance

Without strong governance, full cloud cost optimization is likely to fail. IT leaders should outline the specific capabilities they hope to unlock with cloud adoption and how they will fundamentally re-architect their organization’s operations, Ozdemir says. “A clear cloud transformation roadmap is especially important given the current, tumultuous business environment,” he adds. “Without this [roadmap], organizations can’t become a cloud-powered company, and will instead wind up inefficiently allocating resources.”

Deploying a strong governance model, one that ties business value to cloud and third-party software spend, is necessary for an efficient cloud budget, says Whit Crump, general manager of Americas business development, worldwide channels and customer programs at AWS Marketplace. He views strong governance as a tool that’s less about trimming costs and more about raising financial accountability and visibility.

Crump says that cloud customers need to ask themselves two questions: “How is the organization estimating the ROI and business value of cloud services and third-party software? Do they have mechanisms in place to track goals and targets?”

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