Cloud Cost Optimization: 10 Best Practices for FinOps

Recorded FinOps Training

Best Practices for Reducing Your Cloud Bills

Controlling cloud spend presents numerous challenges at enterprise scale. Organizations that proactively and holistically manage their cloud environments get the most cloud for each dollar spent, and ensure ongoing, cost-effective cloud operations.

At Densify, we routinely engage with organizations who have ventured into the public cloud, intrigued by the appeals of having virtually unlimited resource capacity on hand, gaining the ability to experiment with the latest technology, and the tactical ability to innovate more quickly.

Too often, enterprises second guess their cloud investments as sizeable, difficult to parse cloud provider bills mount. Many organizations struggling to curb their cloud costs wonder if they made the right decision to move to the cloud in the first place.

But, cloud cost optimization can be achieved—largely by identifying and remediating suboptimal cloud infrastructure provisioning and establishing cloud financial management best practices. It is possible for enterprises to enjoy the benefits of elasticity, high availability, reliability, and agility.

What is Cloud Cost Optimization?

Cloud cost optimization is the net result of successful FinOps—cloud financial management—a set of business practices that link controls over the variable spend model of cloud IaaS to financial accountability.

Successfully optimizing cloud costs requires your enterprise to master two distinct areas:

Intelligent Procurement of Cloud Services
Taking advantage of savings programs like AWS Savings Plans and capacity reservations like Amazon Reserved Instances addresses low hanging savings opportunities
Intelligent Optimization of Cloud Capacity
Intelligently matching your cloud workloads to the optimal instance and resource configuration

Getting Started with Cloud Cost Management

The following fundamental cost optimization strategies—outlined in the recorded training and in the text below, bridge both areas of focus and can help your enterprise start saving today.

These imperative approaches for successful FinOps include:

  • How to reduce your compute costs in AWS by continuously rightsizing and strategically utilizing Reserved Instances and Savings Plans to take advantage of even greater discounts
  • How to identify and resolve hidden line items that may be secretly contributing to your excess cloud spend
  • How to build a culture of cost awareness and increase cloud spend consciousness across departments through tactics like showback/chargeback and automated reporting
  • The recorded training video also includes a recorded Q&A session, answering many common cloud cost management questions

Cloud Cost Optimization Training Recording

Practices that Raise Cloud Spend Awareness & Optimize Costs

Successful enterprises establish good practices when operating in the cloud. At Densify, we allocate a dedicated technical team of Cloud Advisors to help tune cloud operating models and FinOps practices at our clients’ organizations. This team’s mandate is to raise cloud spend awareness and ask tough questions in order to assist our customers with building proper practices to reel in their cloud overspend.

If you have ever attempted to read your AWS cost and usage reports and struggled to make sense of your cloud bill, we understand your pain. Some of the world’s largest organizations use our cloud cost intelligence technology to scan through thousands of line items in their AWS cost and usage reports and interpret them. However, just reading and understanding a cloud bill is ineffective if you do not take actions to mitigate overspend.

The following cost optimization practices are almost universally applied by our Cloud Advisor team when helping enterprise clients improve their FinOps strategies.

1. Rightsize Your Compute Resources Proactively

AWS offers over 300 different instance types—each suited for a variety of workloads. With such a vast selection available, selection of the right instance is overwhelming even for expert cloud architects.

We often see cases where developers and application managers—with only the best intentions in mind—have not only selected the incorrect instance size, but also suboptimal instance families altogether—leading to oversized instances that just do not make sense. In other cases, we see developers spin up compute resources in the cloud, forget about them, and leave them running idle.

It should come as no surprise that one of the best methods to save big on cloud costs is to proactively monitor your compute resource utilization and rightsize your EC2 infrastructure.

2. Monitor & Correct Cost Anomalies

While it is common to see small variations in cloud usage due to seasonality, you should nevertheless keep an eye of out for any sudden unexpected spikes and out of band spend.

Tracking cost anomalies—a task Densify automates—enables you to respond to cost challenges before they reek havoc on your budget.

Infrastructure anomaly graph

3. Choose the Right Storage Type

Amazon S3 is the most commonly-used storage option in the cloud. It was one of the first services offered by AWS, and is easy to see why it is so popular:

  • S3 is easy to use
  • Amazon S3 delivers virtually unlimited storage
  • It is easy to integrate S3 with a wide variety of other AWS and third-party vendor services

But, when it comes to controlling costs on S3, one should be aware of the various storage tiers available from AWS. When using S3, you should always keep an eye out for which of your buckets are frequently and infrequently accessed, and select your storage tier accordingly. If you are unsure, opt for S3-Intelligent Tiering, which automatically tracks your access patterns and selects the optimal storage tier for your bucket.

One of the most popular services from Densify is granular S3 bucket reporting and tailored API calls to help enterprises understand their S3 spend habits.

4. Release Idle Elastic IP Addresses

By default, all AWS accounts are allowed up to five Elastic IP addresses per region so that software and instances will remain available in the case of failure by automatically remapping their IPs to other instances. But, when these Elastic IP addresses are idle or not used, AWS charges you for them. Keep an eye out of unused IP addresses, or leverage Densify’s cloud cost intelligence to automatically detect unused and idle Elastic IP addresses.

5. Automate Infrastructure Rightsizing during Provisioning

Your Cloud Operating Model enables you to rapidly develop, experiment, and build up infrastructure. One of the principles of running intelligently the cloud is to leverage infrastructure as code (IaC) tools such as AWS CloudFormation or HashiCorp Terraform to automate infrastructure provisioning—and avoid manual tasks and errors in the process.

The best way to rightsize your infrastructure is to fully automate the management process and make it a seamless part of your cloud continuous integration and continuous deployment (CI/CD) pipeline. At Densify, we are strong proponents of automation, and we have dedicated significant resources to advancing our APIs and integrating with tools like Terraform CloudFormation to fully automate end-to-end right-size infrastructure provisioning.

6. Identify & Maximize Software Licensing Spend

Across both on-premises infrastructure and in the cloud, software license fees comprise a large part of operating costs. Because managing and tracking these licenses is difficult when done manually, many organizations pay for significant numbers of untracked and unused licenses.

The AWS Marketplace offers a wide range of public and commercial Amazon Machine Instances (AMIs) for use. Until recently, it was not possible to identify your software spend within EC2. Now, Densify can interpret your AWS cost and usage reports to identify your running costs on commercial software and AMIs so that you can keep track of idle and unnecessary software licenses.

7. Pause Your Idle Redshift Clusters when Not in Use

AWS Redshift clusters offer tremendous data warehousing capabilities in the cloud. Redshift enables organizations to sift through massive amounts of data using massively parallel processing (MPP) and integrates well with S3 via RedShift Spectrum. Redshift clusters consist of a mix of compute and storage resources.

When running Redshift clusters on demand, you continue to pay for those compute nodes even when your clusters are idle—for example, on weekends. To minimize Redshift idle spend, ensure your organization is using the pause and resume feature.

8. Delete Unused EBS Snapshots

AWS offers the capability to automatically or manually take snapshots of your EBS volumes. You can store these snapshots in S3 and spin them up on another EBS volume in other regions.

One of the best practices in any solid Cloud Operating Model is to proactively take EBS snapshots as part of disaster recovery planning. However, in doing so, you also need to monitor the accumulation of unused snapshots, which will increase storage costs in S3. Densify enables organizations to proactively delete idle snapshots.

9. Purchase Instances using Savings Plans & Reserved Instances

There are many procurement options for cloud compute, including On Demand, Scheduled, Reserved Instances, Savings Plans, and Spot. For organizations that are looking to reduce their compute spend beyond rightsizing, we recommend looking into Savings Plans and Reserved Instances, which are ideal for long-running and steady state workloads, and offer up to a 70% discount over On Demand pricing.

However, building a smart purchasing strategy is challenging for even the most sophisticated organizations. Large enterprises lack visibility into their coverage and utilization based on ideal state, and thus are unable to maximize the use of Savings Plans and Reserved Instances. Instance-by-instance, it is possible to leverage these discounts and commitments, but, at any kind of scale, automation is required.

Densify has mastered the science of effective cloud purchasing to ensure that customers get the most return out of their investment. Densify automates the highly-complex process of cloud procurement based on ideal usage patterns and considers factors such as term length, payment options, and past usage history.

10. Build a Culture of Cost Awareness

Lastly, no cloud optimization project is effective if you do not have all parties on board. Our most successful customers have built Cloud Centers of Excellence or FinOps practices dedicated to establishing standardized cloud best practices—Cloud Operating Models.

To accelerate these cultural shift in organizations, Densify helps raise cost awareness cross-functionally and across lines of business with highly-differentiated reporting that drives transparency. These reports can help expose hidden waste and dangerous spend patterns. Decision makers can then sponsor enterprise-wide initiatives using tactics like showback or chargeback to make cost optimization a top priority for all stakeholders and reward staff who proactively continue to rightsize.

Next Steps toward Cloud Optimization

Think about how your organization is currently operating in the cloud. Does your enterprise have a well-defined Cloud Operating Model? Have you formalized a FinOps organization or Cloud Center of Excellence?

Cloud cost optimization does not have to be complicated, but it does require a disciplined approach that establishes good rightsizing habits and continuously drive insights and action through analytics to lower your cloud bill. And that’s where Densify excells.

Request a customized demo: one of our Cloud Advisors will review your current cloud optimization strategy, give you additional tips for success, and walk you through our cloud cost management capabilities.