Before we dive into the details of Cloud Cost Auditing & Efficiency Assessments, let’s debunk a popular myth: “the cloud is always cheaper”. Contrary to popular belief, migrating to the cloud doesn’t magically cut your operational costs or optimize your budget.
That’s why cloud cost auditing and efficiency assessments are more than just buzzwords; they are mission-critical. Forget the ‘set it and forget it’ mentality. The real trick lies in continual monitoring and smart allocation of resources.
- Reality Check: These assessments give you a real-time snapshot of your expenses. Don’t assume savings; confirm them.
- Informed Decisions: With a detailed audit, you steer your FinOps initiatives on facts, not guesses.
- Optimization: Find out where you can actually reduce costs and improve efficiency.
If you’ve wondered why you’re not achieving the cost savings that cloud providers promise, read on. This article lays down the five pivotal steps to reveal the true state of your cloud economics and pave the way for genuine cost optimization and FinOps implementation.
What is a Cloud Cost Audit?
A Cloud Cost Audit is a systematic review of cloud resources to determine how and where an organization is spending its cloud budget. While the primary goal may appear to be identifying where your cloud spending goes, its real value lies in revealing the underlying health of your IT operations.
Cost Breakdown Reports from Economize
In essence, it provides a map, detailing where your expenditures are most concentrated. Such insights are invaluable, especially when you have to make data-backed decisions for cost reduction or resource allocation.
- For example, you may find that a specific microservice, while not business-critical, is consuming a significant portion of your cloud budget.
What is a Cloud Efficiency Assessment?
A Cloud Efficiency Assessment evaluates the overall performance of cloud resources against the money spent on them. Unlike a cost audit, this assessment isn’t exclusively concerned with financials. It looks at performance metrics like speed, availability, and service quality to provide a comprehensive view of your cloud environment’s efficiency.
Consider it the difference between knowing the cost of a gallon of gas and understanding the miles per gallon your car actually delivers. The latter equates to a fuller, more nuanced picture of your real-world operating conditions.
- For instance, an Efficiency Assessment could reveal that your high-speed storage solution, although expensive, drastically improves application performance, justifying its cost.
5 Steps for Cloud Cost Auditing & Efficiency Assessment
Contrary to popular belief, your cloud bill isn’t just a complex, inscrutable mess of numbers and services; it’s a treasure trove of actionable business insights—if you know how to decode it. Navigating through the labyrinth of cloud expenses can indeed be intimidating.
Yet, when approached systematically, a cloud cost audit can transform this puzzle into a strategic roadmap, allowing businesses to understand not just where their dollars are going, but why.
1. Establish the Goal of Your Cloud Cost Audit
Identifying the purpose of your audit will serve as your North Star, guiding each decision you make. Is your primary aim to reduce costs, or are you looking to increase productivity? Perhaps you’re grappling with an inexplicable surge in your cloud bill?
Understanding your overarching goal can help focus your attention on relevant metrics. For instance, if the objective is cost reduction, you might scrutinize metrics related to individual cloud services to pinpoint wasteful expenditures. If boosting productivity is your aim, you’ll possibly assess how cloud costs relate to output.
Asking the right questions is critical. It sets the stage for gathering actionable insights.
You may need to ask:
- How much is the company spending in total on cloud services?
- Are we making a profit or loss on individual services?
- Do costs scale linearly with business growth, or are there breakpoints where profitability changes?
- What’s driving the recent uptick in the bill? Is it a genuine business growth, or is it a sign of inefficiencies?
- Do we need to reallocate budgets between different engineering teams or product lines?
These questions don’t just inform your audit—they shape it. By keeping them at the forefront, you’ll ensure the cloud cost audit is aligned with your organizational objectives and capable of delivering meaningful results.
2. Identify High Expenditure Areas
Understanding where your money is going is essential for any successful cost audit. To do this effectively, you’ll need to utilize a robust set of tools and techniques.
Metrics and KPIs
Start by defining key performance indicators (KPIs) that align with your cloud objectives. FinOps Metrics such as ‘Cost Per Compute Hour’ or ‘Data Transfer Costs’ can give valuable insights into where expenditures are high.
Unit Costs
Breaking down your expenses by unit—be it compute, storage, or data transfer—provides a granular view of spending. This data can illuminate patterns or anomalies that may not be immediately obvious.
Benchmarking
Comparing your costs to industry averages can offer a valuable perspective. Is your spend on certain services disproportionately high? Benchmarking can provide the data you need to answer this question.
Maturity Assessments
Measuring your organization’s cloud maturity can be a revealing exercise. It helps you understand whether you’re making the most of cloud features for optimal cost-effectiveness.
Source: FinOps Foundation
Monitoring Tools
Utilizing the right monitoring tools can give you real-time insights into your cloud spend. Native AWS and GCP tools are particularly robust in this regard.
- AWS Cost & Usage Reports: This AWS feature allows you to dive deep into your cost and usage data, enabling you to visualize trends, pinpoint cost drivers, and detect anomalies. The reports are customizable and can be scheduled to fit your business cycles.
- GCP Billing Console: The Google Cloud Platform provides an intuitive billing console that offers an at-a-glance view of your spending. It breaks down costs by service and even by user, helping you identify where the bulk of your expenses lie.
- FinOps Hub: This is a comprehensive platform, included in GCP, is designed to manage and optimize cloud costs. It integrates cost data and offers actionable insights for achieving optimal cloud financial management.
Native monitoring tools like these are invaluable for identifying high expenditure areas in your cloud environment.
3. Analyze Your Cloud Costs
The pivotal step in the cloud cost auditing process is a comprehensive analysis of your cloud costs. This isn’t merely about cost-cutting; it’s an opportunity to optimize your resources for maximum value. Let’s dive into the essential areas you should focus on.
Services & Usage Consolidation
Start by examining your overall cloud landscape. Review the services you’re using across different environments like production, development, and testing. It’s crucial to align the scale of your services with their actual utilization.
- For example, for business-critical and production environments, analyze whether the service sizes or tiers are proportional to the load and resource utilization.
Tagging & Labeling
Implementing tagging and labeling practices can streamline the analysis. Tags are metadata that you attach to your cloud resources, which are instrumental when generating cost reports. Labels, on the other hand, can help you identify specific functionalities, teams, or projects. This way, you can quickly filter costs and usage data to pinpoint inefficiencies.
Optimal Environments
Analyze your different cloud environments — be it production, development, or testing. Here are some key considerations:
- Scaling: For services that are over-provisioned, consider scaling down or enabling autoscaling based on time or load.
- Inactive Environments: Dev-Test, PoC, and Demo environments often remain inactive during non-working hours. Consider shutting them down during these periods to save costs.
- Orphaned & Unused Resources: Identify and either remove or downsize resources that are no longer in use.
- Technical Architectures: Examine the architectures of your cloud solutions. Are there candidates for re-architecture or reengineering that could provide long-term cost benefits?
Value vs. Cost
Instead of just slashing costs, focus on maximizing the value you get for each dollar spent. Regular monitoring, at least once a month, can help you catch unexpected cost spikes and make timely adjustments.
4. Research Alternatives
After a thorough cloud cost analysis, the next logical step is to explore alternative solutions that can offer either better performance, lower costs, or ideally both. Here are some strategies to consider:
Networking
In the cloud, data transfer costs can quickly escalate. Explore options such as Direct Connect in AWS or Cloud Interconnect in GCP, which offer a more cost-effective, high-capacity alternative to VPN-based solutions for large-scale data transfers.
Storage
Reevaluate your storage needs. If some data is rarely accessed, consider moving it from standard storage classes to more economical options. For instance, AWS storage classes include S3 Infrequent Access or Glacier for archival storage. Similarly, GCP storage classes have options like Coldline Storage, which can be significantly cheaper for rarely accessed data.
Compute
Workloads vary in their need for computational power. Consider utilizing EC2 Spot Instances in AWS for non-critical, fault-tolerant workloads, which can save up to 90% on regular instance prices. In GCP, Spot VMs offer a similar function at a much-reduced cost.
Data Transfer
Evaluate your data egress costs, especially if you are operating in a multi-cloud setup. For instance, AWS provides Data Transfer Out Bundles, a volume discount plan, for lowering data transfer expenses.
Volume-Based Discounts
Both AWS and GCP offer various discount plans based on commitment and volume:
- AWS Savings Plans: These savings plans provide flexibility and can offer up to 72% savings. There are two types: Compute Savings Plans, which offer lower prices on EC2, Fargate, and Lambda; and EC2 Instance Savings Plans, specific to individual instance families.
- GCP’s Committed Use Discounts (CUDs) and Sustained Use Discounts (SUDs): CUDs offer up to 57% in savings when you commit to a one- or three-year term for multiple machine types. SUDs automatically provide up to 30% off the regular price for instances that run for a significant portion of the billing month.
5. Implementation and Monitoring
Once you’ve researched and identified alternative resources and discount plans, the next crucial step is to implement these changes and monitor their impact diligently.
Consolidation for Streamlined Management
Firstly, it’s essential to consolidate different cloud service subscriptions that may exist across various departments or subsidiaries. By uniting these under a single corporate account, an enterprise not only simplifies administration but also gains stronger negotiating power with cloud providers.
Instill a Culture of Transparency
Implementing changes in cloud resource usage isn’t just a technical exercise; it’s a cultural shift. A crucial part of successful cloud cost optimization is fostering a culture of transparency regarding financial and resource usage. Make stakeholders understand the rationale behind these changes; the ‘why’ is just as important as the ‘how.’
Cost Allocation Tagging
Implement a company-wide tagging policy to monitor cloud spending across different teams and departments. The tags help you produce showback or chargeback reports, which can make units more accountable for their cloud resource usage.
Dynamic Monitoring
Adopt a dynamic approach to cloud cost management by setting regular benchmarks. Monitoring should be an ongoing activity; once a month is often sufficient for most businesses. This regular scrutiny enables you to detect unexpected cost spikes and make adjustments before they turn into significant issues.
FAQs and Also Asked
Here we address the most common questions users have about Cloud Cost Auditing and Efficiency Assessments.
How frequently should cloud costs be audited?
Ideally, an audit should occur at least once a month. For businesses with more complex cloud infrastructure, twice a month is advisable to track costs and usage more effectively.
Is it necessary to have a dedicated team for cloud cost management?
While having a dedicated FinOps team is beneficial for larger organizations, smaller teams can also manage cloud costs effectively through shared responsibilities and the use of automated tools.
What are AWS Savings Plans and GCP CUDs?
AWS Savings Plans provide a discount on your AWS compute usage, while Google Cloud’s Committed Use Discounts (CUDs) offer savings in exchange for committing to a specific volume of usage.
Can I change my cloud service or plan midway?
Yes, most cloud providers offer the flexibility to switch between plans or services, but make sure to read the fine print for any early termination fees or other costs.
Conclusion
Navigating the world of cloud costs and optimization is no small feat. It requires meticulous planning, rigorous auditing, and continuous monitoring to ensure that your organization isn’t just spending wisely but is extracting every ounce of value from its cloud investments.
However, conducting a cloud cost audit in-house can be time-consuming and resource-intensive. If you’d rather focus on your core business operations and leave the intricacies of cloud cost optimization to experts, we have a deal that you can’t refuse.
Take the smarter route and sign up with Economize today. You’ll not only save valuable time and resources but also receive your first cloud cost audit for free.
