Mastering Cloud Cost Optimisation: Six Essential Steps

by James Mercer, Alliance Partner Development Manager APJ, Rackspace Technology

Man working in a computer and a calculator


Organisations are always looking for innovative ways to optimise their cloud use while maximising their business value. Cloud financial management (CFM) plays a pivotal role in this process by helping businesses assess, manage and optimise their cloud expenses.

In this post, we explore the six key steps to mastering cost optimisation and how a CFM assessment, based on four essential pillars, can pave the way to success. These six practical steps can help you identify cost optimisation and resource redirection in your organisation.

Step 1: Assessing your cloud environment for costs

A successful cost optimisation journey starts with understanding your current cloud environment. The key is implementing a comprehensive CFM assessment that examines an organisation's cloud maturity, identifies cost drivers and uncovers potential areas of improvement.

To identify actionable cost trend information within the larger set of cost data, you need more than a monthly invoice. You need a dashboard that isolates costs into meaningful subcategories, so you can establish baseline costs as well as track variations and trends. Your dashboard provides visibility into month-to-month, day-to-day and even hour-to-hour trends.

By breaking out costs in a dashboard, you gain insight into the cost for specific components of your architecture, which you can then weigh against the value or budget for that architecture. Further, a dashboard gives you better visibility into cost changes, so that you can proactively address new or changing costs.

Step 2: Monitor cost trends

Through working with hundreds of organizations around the world to optimise their cloud spend, we've identified a few common trends. They are indicators of certain patterns in cloud architecture that can lead to cost concerns and include the following:

  • The shark’s fin: This trend is the most common when building out new services. Optimisation is enacted initially. However, costs eventually spike. Then optimisation is assessed again to reign costs back in. This pattern continues in an ever-devolving cycle.
  • The climb: This occurs during periods of architectural growth. Costs are expected to increase as use expands. But as both continue to grow, the costs go unchecked, masking any waste or mis-provisioned resources.
  • The science experiment: When new development projects are implemented and costs are unknown, the result is a sudden increase, then a levelling off.
  • The delayed mistake: This occurs when something new is implemented, but its effectiveness is not immediately obvious. In this case, there may be some time before a reaction can occur.

An awareness of these patterns when monitoring an architecture can save significant time in costs optimisation by addressing potential issues before they occur.

Step 3: Showback sand chargebacks

For a more complex and heterogeneous environment (e.g. multiple unique products or applications), organisations may need more data points to effectively track costs and the ability to isolate costs on a per-application or product basis.

A good allocation strategy provides more meaningful information on the cost of products, which can be used to determine the profitability or value of the products. Allocation strategies are also commonly used to isolate R&D activity. Whichever cost allocation strategies an organization adopts will require some foresight and would ideally be articulated in a clear and consistent organisation-wide policy.

Step 4: Rightsizing to match costs with demand

One of the most common cost management activities relevant to almost all cloud customers is aligning the number and size of provisioned resources to the use needs. In traditional data centre environments, organisations generally account for peak capacity. But in the cloud, it’s better to provision for minimum capacity, with the ability to scale-up resources to meet fluctuations in demand.

Whether you’re undergoing migration or developing a new application, it can be difficult to know what’s crucial for your infrastructure to run efficiently. You may find that you’re overspending on unnecessary resources.

Step 5: Employing financial instruments

Savings plans and reserved instances (RI) are integral to reigning costs in your cloud environment. Discounts may be available on committed use and are an ideal layer to place on top of rightsizing or autoscaling efforts, or to implement on sustained always-on workloads. Financial instruments usually represent an opportunity for cost optimisation because they don’t require any technical implementation.

Step 6: Understanding how the four pillars of CFM can help you

Sound CFM practices can foster a culture focused on saving within your organisation, empowering you to invest in more useful technology consulting and services to drive innovation in your business. 

As a trusted Amazon Web Services (AWS) partner for conducting CFM assessment, Rackspace Technology offers a comprehensive assessment to evaluate your company's CFM maturity across these four vectors:

  1. Cost optimisation
  2. Planning and forecasting
  3. Cloud financial operations
  4. Measurement and accountability

To help identify your opportunities for cost optimisation and resource redirection insights, book your complimentary three-hour workshop*. It includes an analysis and recommendations report and a 30-minute presentation of the findings with benchmark comparative data on your CFM maturity. 

*This offer is for APJ-based customers only.

Identify your cloud cost optimisation and resource redirection opportunities.