Understanding the challenge of runaway cloud costs
Cloud adoption continues to surge as organizations seek to boost agility, scalability, and innovation. With this increased adoption comes the challenge of managing unpredictable and often runaway costs. Businesses are turning to public cloud services to support everything from infrastructure to advanced analytics, but the financial benefits can quickly erode without careful cost control.
Gartner’s May 2024 report draws attention this escalating trend, projecting a 20% increase in global end-user spending on public cloud services for 2024—pushing total spending to $675.4 billion, up from $561 billion in 2023.
Two primary drivers of this surge are the rise of generative AI and the ongoing modernization of applications. Gartner anticipates that public cloud spending will exceed $1 trillion before the decade’s end—pointing to the widespread belief in cloud technology’s potential. They also highlight a growing financial burden that organizations must carefully manage to avoid diminishing returns on their cloud investments.
Growing cloud adoption and its impact on costs
Organizations embrace cloud services to improve operational flexibility and accelerate digital transformation. The cloud’s appeal lies in its promise of scalability, reduced capital expenditure, and the capacity to innovate faster.
As cloud use becomes more widespread, many companies encounter unexpected costs that can quickly spiral out of control. Factors such as unoptimized resource allocation, underused services, and a lack of cost management processes can contribute to higher expenses.
For instance, organizations may deploy cloud resources to seize new market opportunities or support short-term projects, often without a long-term plan for managing those resources once the projects conclude. This can then lead to overprovisioning or redundant services that continue to accrue costs even when no longer needed.
If not carefully monitored, these costs can undermine the financial advantages of moving to the cloud.
Gartner’s May 2024 report indicates that spending on public cloud services is driven by new technology demands, such as generative AI and application modernization. Companies that leverage these technologies often require more computing power, data storage, and advanced analytics capabilities, all of which can greatly raise cloud expenditures.
Seven strategies to keep cloud costs under control
Reducing cloud costs demands a strategic initiative combining careful planning, continuous monitoring, and proactive management. The following strategies provide a framework to help organizations gain and maintain control over their cloud expenses:
1. Make sure your cloud services aren’t draining your wallet
Aligning cloud services with current organizational needs is key. Many businesses purchase cloud services to meet specific demands or capitalize on immediate market opportunities. These requirements can change over time, and without regular reviews, companies may end up paying for resources they no longer need.
Regularly assessing cloud service usage makes sure resources are appropriate for current needs, avoiding unnecessary expenses.
For example, Ling began with a basic cloud package and scaled up only when necessary, preventing overspending during its early growth stages. Plitch, a software company, follows a similar practice by continuously reevaluating its cloud spending—matching resources to actual requirements, minimizing waste and reducing costs by rightsizing instances and monitoring resource consumption across different environments.
2. Lock in big savings by using reserved instances wisely
Reserved Instances (RIs) provide substantial cost savings compared to on-demand pricing. Major cloud providers like AWS, Azure, and Google Cloud offer RIs with discounts that can reach up to 72% for AWS EC2 instances.
Organizations can commit to a set capacity for one or three years to secure lower rates and gain more predictable cost structures.
Long-term commitments to reserved instances can translate into substantial savings. Ling, for instance, saved 15% annually by opting for a one-year reserved instance plan for its primary cloud services. Live Proxies, another company, cut cloud spending by up to 40% by choosing one- and three-year RIs for continuous workloads, such as data scraping.
3. Find hidden costs with smart cloud monitoring tools
Monitoring and analytical tools are key for identifying inefficiencies and eliminating waste in cloud environments. Tools in this category typically provide detailed insights into resource usage, helping organizations more accurately pinpoint underused resources and discover hidden costs.
Companies like Live Proxies leverage comprehensive monitoring tools to optimize usage. For example, by scheduling virtual machines (VMs) to shut down outside core business hours, they achieved major cost savings. In a similar initiative, an Excel Champs client reduced cloud spending by 20% by using AWS and Azure tools to detect overprovisioned resources.
4. Pinpoint every penny with resource tagging
Resource tagging involves attaching metadata to cloud resources, making it easier to track and manage costs across departments, projects, and teams—helping organizations allocate expenses more accurately and build up better accountability.
For example, Live Proxies used a strict tagging policy to trace a spike in cloud expenses to a new project that was consuming more resources than anticipated. Through identifying the exact source of the increased spending, the company could promptly address the issue, reallocate resources, and adjust its budget accordingly.
5. Stop wasting money by scrutinizing your cloud bills
Regularly reviewing billing documents from cloud providers can help organizations identify redundant services and eliminate unnecessary costs. Despite its simplicity, this practice is often overlooked.
Martin Gasparian of Maison Law recommends requesting detailed breakdowns from cloud vendors to clarify what services are being charged and identify any redundant expenses. Focusing on priority services and eliminating those that are no longer necessary, companies are then able to greatly reduce their monthly bills.
6. Cut cloud costs in real-time with storage autoscaling
Storage autoscaling dynamically adjusts resources based on actual demand, preventing organizations from overspending on unused capacity. This technique is particularly effective for businesses with fluctuating storage needs.
Ultimate Kilimanjaro, a travel company, uses autoscaling and storage allowances to match their data storage requirements precisely.
This has allowed the company to cut storage expenses by a third while making sure departments with differing storage needs have the resources they require. Plitch also employs autoscaling to handle dynamic workloads, analyzing usage statistics bi-weekly to identify optimization opportunities and reduce costs further.
7. Get your team onboard with cloud cost-consciousness
Building a culture of cost control involves developing awareness of cloud expenses across the entire organization, demanding a mindset shift among all employees.
Brosix, a communications and messaging tools provider, actively promotes a culture where team members understand the financial impact of their cloud usage. Transparent discussions about costs, especially during development processes, make sure all employees, including cloud engineers, make resource-efficient decisions—ultimately leading to a more sustainable approach to managing cloud expenses.
Final thoughts
Are you simply reacting to rising costs, or proactively shaping a cloud environment that fuels growth while protecting your bottom line? The choice between runaway expenses and optimized efficiency depends on the decision made today.
