Effective cloud cost optimization: 3 essential practices to control expenses

While moving to the cloud is smart, staying there can be expensive. According to the 2024 Flexera cloud report, businesses waste over 27% of their total cloud budgets. If you end up with unused or idle resources, the wrong server size, or a cloud service provider that does not meet your business needs, your cloud infrastructure might become more costly than on-premises.

So, what are the signs that you need cloud cost optimization, how can you achieve it successfully, and what businesses have already benefited from it? Discover in this article.

Signs you need cloud cost optimization

There are substantial cloud cost optimization benefits, but business leaders need to carefully evaluate areas for improvement before launching this process. Cost optimization isn’t about cutting every possible expense. It is about ensuring what you spend directly supports your business goals.

In some cases, reducing costs in the cloud can expose you to risks or create operational challenges. For instance, removing a cloud provider to cut cloud expenses might create vendor lock-in that limits your flexibility later. So, when should you act?

Here are the key signs that your organization needs cloud cost optimization:

1. You are a midsize company or an enterprise

Such businesses typically have complex and long-lasting projects, bigger budgets, and more employees. Thus, it is more challenging for such companies to understand if all their resources are allocated correctly. A large staff also raises the risk of human error, which can lead to extensive cloud expenses. For instance, your employees can forget to shut down the additional cloud resources that they used to complete a task.

2. You have inconsistent traffic patterns

Many businesses have peak periods. For example, Black Friday and holiday seasons are such periods for retail platforms. One way to withstand these high loads is to purchase additional cloud resources and then terminate them. If your usage levels change frequently, you must keep track of which cloud resources are necessary and which are not.

3. You don't have a clear understanding of your cloud spending

If your organization keeps overspending its cloud budget, this is a clear sign that you need cloud cost optimization. You must know what cloud services you use and how your business benefits from them. If you lack this understanding, it is time to find a trusted tech partner that will help you track all your cloud resources and optimize their usage.

4. Your cloud budget can be used more effectively

Even if you understand your spending, you can still use these resources more effectively. In this case, your tech partner can help you find alternative and more innovative approaches to the processes you already have.

If your business case matches at least one of these points, consider cloud cost optimization. But how to do it correctly? To truly capture the benefits of cloud cost optimization, you need a structured approach. Let’s walk through the steps to achieve it.

3 major steps for successful cost optimization in the cloud

1. Audit

Auditing is a critical part of infrastructure optimization, and the cloud is no exception. You should ask, what is cloud cost optimization specifically for your business? During this stage, you need to determine why optimization is required, what impacts it may have, and how your optimized cloud infrastructure may perform in the long run. Understanding what cloud resources you have and what is actually used is vital.

Established cloud consulting companies typically start each project with a thorough audit. At N-iX, for instance, this is called the Product Discovery stage. During this phase, the N-iX team shapes the scope of your solution based on the goals of different stakeholders, the user journey map, and market research. The team considers different perspectives of business analysis, UX, and IT architecture and produces all the deliverables required to kick off the implementation phase efficiently.

Also, remember that you need a strong team of DevOps experts to perform a thorough cloud cost optimization assessment. There are also advantages to implementing cloud FinOps, as it allows for controlling costs, improving financial transparency, and aligning cloud expenses with business goals. Within this stage, it is vital to:

• Find unused or unattached resources

The easiest way to optimize costs in the cloud is to look for unused resources. For example, an employee may purchase a temporary server to perform a particular task and forget to turn it off when the job is done. Or, someone may forget to remove storage attached to terminated instances. Such common mistakes result in charges for resources you are no longer using, and thus, those resources should be optimized.

• Identify and consolidate idle resources

Idle resources can cost your organization thousands of dollars. For example, if you use only 20% of a server instance, the remaining 80% is idle, but you are still charged for 100%. So, ensure your cloud partner identifies the idle resources that can be optimized.

2. Planning

When the audit is done, and you know you can use your cloud more efficiently, it is time for the planning stage. Your team must decide which optimization method fits your business best.

Creating Kubernetes clusters or Docker containers is a tried and trusted N-iX approach to optimizing cloud infrastructure. For example, by doing so, we can create a system of five virtual machines (VMs) and run ten applications on them. With such an approach, our clients can reduce the hosting costs and avoid problems if one of the machines experiences downtime. If a VM happens to fail, the system transfers services hosted on it to other machines automatically. At the same time, if the VM becomes operational again, the services will return to their initial place.

3. Implementation

When a team has a clear understanding and vision of how the cloud optimization process will look, they continue to the cloud implementation stage. With expert cloud cost optimization consulting, you can:

• Reduce infrastructure usage where feasible;
• Automate the CI/CD process and perform provisioning of cloud infrastructure;
• Delete underused instances;
• Right-size your workloads;
• Apply autoscaling when appropriate;
• Move rarely accessed storage to cheaper vendors;
• Set alert notifications for crossing predetermined spend thresholds;
• Implement spot instances for workloads that don't require high availability;
• Save costs with reserved instances;
• Host workloads in a different cloud region;
• Use discounts many cloud vendors offer.

N-iX has been working with the cloud for over a decade now. During this time, we have developed several best practices that help us deliver efficient and high-quality cloud solutions. Let's take a look at these approaches and tips.

Top cloud cost optimization best practices

1. Utilize heat maps

Heat maps are essential for cloud cost optimization as they show peaks and valleys in computing demand. This data is valuable for establishing start and stop times to cut expenses. For instance, heat maps can indicate whether development servers can be safely shut down on weekends.

2. Right-size computing services

One of the cloud cost optimization techniques is aligning your computing resources with your current requirements. Right-sizing will allow you to avoid overpaying for unused capacity and ensure a higher return on investment (ROI). Apart from the server size, you can optimize its memory, database, computing, graphics, storage capacity, throughput, and more.

3. Invest in cost-saving tools offered by cloud vendors

There are many providers offering tools for cloud cost optimization. However, in this article, we will focus on the most significant market players: Microsoft Azure and Amazon Web Services. While a wide variety of tools exists, only a reliable tech partner can help you select the solutions that will bring the most value to your business.

In this section, we provide several examples of tools that can help you optimize cost in the cloud for the listed hyperscalers.

Azure cloud cost optimization

• Azure Advisor: With this tool, you can identify idle virtual machines, ExpressRoute circuits, and other underused resources, as well as get recommendations on which resources to shut down and see how much you would save.
• Microsoft Cost Management: With the Microsoft Cost Management tool, you can track all costs related to your Azure consumption, download billing statements, set budgets, and more.
• Microsoft Azure Well-Architected Review: While this tool doesn't directly assess your Azure resource consumption, it provides recommendations that can enhance the quality of a workload. Apart from cost optimization, this framework relies on the five pillars, including reliability, security, operational excellence, and performance efficiency.

Read more: Azure cost optimization: 9 effective strategies

AWS cloud cost optimization

• AWS Cost Explorer Resource Optimization: This tool will identify Amazon EC2 instances with low utilization, reduce costs by stopping or right-sizing, and get a report of EC2 instances that are either idle or have low utilization.
• AWS Instance Scheduler: This AWS tool allows you to stop instances automatically. You can also use AWS Operations Conductor to automatically resize EC2 instances (based on the recommendations report from AWS Cost Explorer).

Read more: Optimize your cloud spending: best practices for AWS cost reduction

4. Choose wisely between multi-cloud and single-cloud approaches

This is one of the cloud cost optimization strategies for increasing availability and uptime. Some enterprises opt for the multi-cloud approach to avoid vendor lock-in. However, these organizations risk losing potential discounts by using a single cloud vendor.

Suppose you want to perform Google Cloud cost optimization and spend $200K on GCP, $300K on Azure, and $500K on AWS. In this case, you miss out on reaching a $1M tier with either vendor. The value of that $1M tier may be substantial discounts on overall cloud expenses and preferred status with that particular vendor. So, the multi-cloud approach is not one-size-fits-all, and you should keep that in mind.

5. Consider moving to a microservices infrastructure

Many organizations migrate to the cloud from on-premises without modifying their systems, believing it's a quick and cost-saving option. However, this approach can transfer on-premises inefficiencies to the cloud, increasing costs.

Moving from legacy applications to a microservices-based architecture can save significant time and money. Thus, you can selectively move specific components to the cloud and eliminate inefficiencies, reducing potential cloud waste. A microservices architecture improves resource efficiency through independent scaling and deployment of modular services.

Keep reading about managing cloud migration costs

6. Utilize real-time monitoring and analytics

Timely access to critical data enables team members to make informed decisions, increasing profitability and product quality. Early identification of cost savings opportunities is essential to preventing late implementation.

Monitoring expenditure indicators and identifying abnormal patterns helps assess spending levels and reduce potential budget waste risks. Businesses usually track metrics such as CPU utilization, storage usage, network traffic, error rates, etc. Analyzing them allows organizations to make quick cost decisions, adapt to changing demands, and immediately capitalize on opportunities for saving costs in the cloud.

7. Find a reliable technology partner

Partnering with a trusted vendor is a great cloud cost optimization strategy. With a trusted partner, you can avoid the recruitment headache, mitigate significant risks, scale your team quickly, and develop your solution within your required time and cost estimates.

AI cloud cost optimization for proactive expense management

Utilizing AI for cloud cost optimization enables organizations to shift from reactive expense management. Traditional monitoring is often resource-heavy and slow, which makes it difficult to keep pace with fluctuating cloud demands. Artificial Intelligence systems, on the other hand, adapt quickly, provide actionable recommendations, and reduce the operational burden on IT teams.

Our experts highlight the following key capabilities of AI-driven cloud cost optimization tools:

Predictive analytics

AI tools analyze historical usage data, business activity, and market trends to anticipate future demand. This proactive approach helps organizations prepare for load peaks and traffic spikes without excessive overprovisioning. By maintaining the right balance of resources, you can avoid unnecessary costs while ensuring system reliability at all times.

Automated monitoring and anomaly detection

While ongoing monitoring is crucial for cost management, it’s often slow, resource-intensive, and prone to oversight when done manually. This can lead to overlooked irregularities, overspending, and missed opportunities for cost savings.

AI-powered anomaly detection continuously scans usage patterns and flags unusual spending activity before costs escalate. This capability reduces financial risk and ensures you can identify and address budget deviations in real time, keeping cloud spending within acceptable boundaries.

Dynamic resource allocation

Cloud needs are dynamic, which makes constant adjustments essential. Tools that use Machine Learning can automatically allocate or scale down resources as your usage shifts, ensuring you only pay for what you need. The outcome is effective financial control, stable performance, and more time for business leaders to focus on strategic growth.

Intelligent recommendations

Selecting the right pricing models can be complex, especially if you operate in a multi-cloud environment. Artificial Intelligence simplifies this process by analyzing usage patterns and suggesting cost-effective options, such as reserved or spot instances. These recommendations enable business leaders to make informed financial decisions that align with organizational priorities.

Scenario simulation

Solutions that use AI for cloud cost optimization allow organizations to test different scenarios and evaluate their potential financial outcomes. This capability reduces uncertainty, enables more informed planning, and helps design strategies that balance efficiency and performance.

Curious to learn more? Discover top use cases of AI in cloud computing

Cloud cost optimization in action: N-iX success stories

​​1. Reducing infrastructure costs by 30% for a global telecom vendor

Lebara is one of Europe's fastest-growing mobile virtual network operators (MVNO), with millions of active customers and employees across six countries worldwide. The client needed to implement a wide range of solutions. The project consisted of several phases:

1. Replatforming: Our experts worked on cost optimization and lead time decrease by migrating from on-premises to the cloud;
2. Tech stack upgrade: The N-iX team has migrated the solution from on-premises WCF and BizTalk to Azure and from Azure Service Fabric to Azure Kubernetes Services;
3. Enhancing the flexibility and scalability of the solution.

Cloud migration allowed our client to improve scalability. The reduction in new infrastructure costs amounted to around 25-30%. The client also managed to accelerate innovation and improve lead time.

Read the full case: Faster time to market with full-scale digital transformation in telecom

2. Saving costs for a leading technology company through cloud migration

Our client provides stock photography, footage, music, editing tools, and custom content tailored to a brand’s needs. They have an over 300M image library, with 200K more pieces added daily. The client aimed to modernize their CI/CD pipelines and make data storage and processing more cost-effective.

The N-iX team chose Data Build Tool and Snowflake to migrate the client’s data to the cloud. We also migrated their SQL Server Reporting Services (SSRS) reports from on-premises to Google Cloud-based Looker.

By migrating to the cloud, we significantly increased the cost-effectiveness of the client’s data storage. The client also gained advanced report visualization capabilities, accelerated their data processing, and streamlined decision-making.

Read the full case: Optimizing costs with data migration to the cloud for a leading stock photography platform

3. Optimizing cloud maintenance costs for an in-flight Internet provider

Gogo is a leading provider of broadband connectivity for the aviation market, with more than 20 years of experience and over 1,000 employees. The company is growing and needs to support business functions and decisions with analyzed and prepared data. Therefore, Gogo decided to go for tech transformation and chose N-iX as a partner. We have built a team of specialists with vast experience in the cloud and technologies like Hadoop, Apache Spark, Tableau, and so on.

The N-iX team successfully migrated Gogo solutions to the AWS cloud platform and built a unified data platform. We helped the client to:

• Rebuild the solution using open-source technologies, such as Spark;
• Develop a system for predicting failures and replacing devices from scratch;
• Build several highly efficient analytics platforms.

As a result, we have helped the client to cut maintenance costs significantly.

Read the full case: Big Data analytics for improved maintenance and flawless operation of the in-flight Internet

Why entrust your cloud cost optimization to N-iX?

1. Our expertise in the cloud includes on-premises-to-cloud migration, cloud-to-cloud migration, as well as multi-cloud and hybrid cloud management;
2. The N-iX team comprises more than 2,400 specialists, including 400 cloud experts that can help you boost your project delivery or build a solution from scratch;
3. In addition to cloud cost optimization services, we offer expertise in DevOps, cloud adoption (architecture, migration, optimization), security issues detection/prevention (DDOS and intrusion), firewall-as-a-service, and more;
4. N-iX is a certified AWS Premier Tier Services Partner, Microsoft Solutions Partner, and Google Cloud Platform Partner;
5. N-iX complies with PCI DSS, ISO 9001, ISO 27001, and GDPR standards to ensure your cloud environment is secure.