5 ways to achieve cloud cost savings

Many organizations operating in the cloud are focusing heavily on cloud cost savings. Whether it’s due to economic pressures, budget overruns, a leadership mandate, etc., the push to find cloud cost savings is a common theme. 

However, despite these cost-cutting efforts, few organizations see a steady decline in their cloud investment. Often, savings are reinvested into innovative projects, such as AI, rather than decreasing overall spending. As the old saying goes, “Your mileage may vary.” So while there are certainly opportunities for cloud cost savings, the outcomes can differ widely, depending on how organizations operate. In this blog, we’ll dive into key cloud cost savings techniques applicable at any level of FinOps maturity: Crawl, Walk, Run.

Bonus: Avoid unintended costs through anomaly detection

Disclaimer: The methods I discuss below are just a few examples of potential cost saving strategies and are not an exhaustive list. Other approaches, such as bill validation or implementing “lights on, lights off” policies, may also offer significant savings.

1. Negotiate pricing agreements

When procuring cloud services, you’ll find that each cloud provider offers specific licensing agreements, such as Microsoft Enterprise Agreements, Google Cloud Commits, and AWS Enterprise Discount Program (EDP). These agreements are crucial rate optimization techniques outlined in the FinOps Framework by the FinOps Foundation. Often considered to be private pricing arrangements, these deals typically involve nondisclosure agreements (NDAs) and can lead to substantial savings, particularly for larger enterprises with significant cloud footprints.

Although procurement teams typically lead these negotiations, they rely heavily on other teams’ input regarding cloud consumption trends and forecasts. Additionally, securing executive buy-in is often essential, due to the high value of these arrangements. If your organization is making or planning significant cloud investments, it’s advantageous to start these rate optimization negotiations early in your FinOps journey—i.e., during the Crawl stage of maturity.

2. Eliminate zombie infrastructure

Reducing waste and eliminating unused resources is a top priority for FinOps practitioners, as highlighted in the State of FinOps 2024 by the FinOps Foundation. “Zombie” resources—those that are idle or unused but still incurring costs—represent a prime opportunity for immediate cost savings. Eliminating zombie infrastructure is the “low-hanging fruit” of workload optimization. Common examples include deleting unattached storage volumes and outdated snapshots, to reduce waste. Key stakeholders often include the FinOps team and the engineering team, who are directly involved in identifying and managing these resources. Eliminating zombies is a straightforward tactic you can implement in the Crawl stage of workload optimization.

3. Rightsize resources

Rightsizing is a strategic workload optimization technique designed to improve resource utilization. It also has the added benefit of yielding significant cost savings. To effectively implement rightsizing, it’s crucial to anticipate future demand changes, assess key performance metrics (such as CPU and memory usage), and establish thresholds for underutilization tailored to your business needs. Your strategy may involve rightsizing within the same instance family or across different families. It’s essential for Engineering and the FinOps team to collaborate on rightsizing opportunities, as some resources may be restricted from rightsizing due to architectural or regulatory constraints. Typically, the greatest savings potential from rightsizing is realized during the Walk stage of maturity.

4. Purchase AND manage commitment-based discounts

Commitment-based discounts are a key component of rate optimization, similar to negotiating pricing agreements. Each cloud provider offers different types of these discounts. As part of your rate optimization strategy, you can invest in resource-based commitments, such as Reserved Instances (RIs) and Committed Use Discounts. You can also purchase spend-based commitments, like Savings Plans. Your strategy may be to use a combination of both. Such discounts often involve 1- or 3-year terms for using services with specific attributes at a discounted rate—e.g., instance type, availability zone, or offering class (such as standard or convertible). Savings can reach up to 70% compared to on-demand pricing, and most organizations typically have a coverage rate of 60%–70%.

Managing these commitments effectively is a cross-functional effort. For example, if you have underutilized Amazon EC2 Convertible RIs, you might exchange them to enhance coverage and reduce waste. Finance and procurement teams need to understand and influence the rate optimization strategy, collaborating closely with engineering and FinOps teams. Executive buy-in may be necessary, depending on the size of the commitment purchase. As a best practice, we recommend that you rightsize infrastructure before you reserve. Organizations often focus on optimizing their commitment discount strategy during the Crawl stage of their FinOps maturity journey.

5. Rearchitect applications

Architecting for Cloud in the FinOps Framework—more commonly known as architecture modernization—is a powerful method for achieving cloud cost savings. Unlike other strategies, architecture modernization is highly specialized and lacks a one-size-fits-all approach.

Implementing this technique is significantly influenced by how and where your application was built. You’ll need to understand your organization’s migration strategy (e.g., lift and shift, refactor), cloud strategy (e.g., public, hybrid, multi-cloud), and regulatory requirements. By thoroughly analyzing these factors, you can determine the most effective deployment model, such as containerization or serverless technologies, while balancing trade-offs between security, performance, cost, reliability, and sustainability.

Given its potential impact on the business, architecture modernization requires input from all key stakeholders. It’s also crucial to involve cloud or enterprise architects, as this falls within their expertise. If they are not already part of your FinOps team, securing their buy-in for modernization discussions is particularly important. While rearchitecting applications can lead to significant cloud cost savings, it involves a substantial investment and may require pausing other projects. For this reason, it is typically addressed during the Run stage of FinOps maturity.

Bonus: Avoid unintended costs through anomaly detection

While you may not consider anomaly detection a cloud cost savings technique, it’s crucial for proactively controlling costs. Unexpected or unplanned changes in spending, if left unchecked, can lead to significant financial losses. Therefore, identifying anomalies and analyzing their root causes in a timely way are essential in preventing their recurrence and managing potential budget overruns.

You can implement anomaly detection at any stage of your organization’s FinOps maturity. It can range from simple alert systems to more sophisticated automated remediation processes. However, organizations typically see the most significant benefits from effective anomaly detection during the Walk or Run stages of maturity.

Ready to save on cloud costs?

We hope you’ve found these cost savings techniques to be helpful and insightful. To discover how Ternary helps you save on multi-cloud spend, book a demo today.

Note: This content was presented during the FinOps Summit Canada 2024 virtual event. Watch the recording: