Well Architected Pillar: Cost Optimization
Cloud transformation is most successful if organizations can stimulate agility, resilience, and innovative prospects while minimizing costs and optimizing business performances. As per Gartner, by 2024, more than 45% of IT spending on infrastructure systems, application software, and business process outsourcing will shift from traditional solutions to the cloud. Cloud infrastructure spending is expected to grow from $63 billion in 2020 to $81 billion by 2022.
The biggest advantage of transitioning to the cloud is to stop making huge data center or infrastructure-related investments. Gartner predicts that today 10% of organizations have shut down their traditional data centers and by 2025, 80% of them will do the same.
It is best to opt for consumption-based models offered by leading cloud providers like AWS, Azure, and GCP. These CSPs offer effective tools and services that provide flexibility in pricing, optimize expenses and take charge of overall spending. The tools help regulate operational processes, scale capacity, and institute automation practices while also initiating a change of perspective towards operative cost control.
However, it is vital to implement such well-defined cloud strategies and cost optimization techniques right at the start of the cloud journey. IDC analyzed and predicted the overall spending on cloud services to reach $500 billion globally by 2023 where up to 58% of organizations said that moving to the cloud has been more expensive than anticipated. Planning, architecting, and migrating workloads, setting up cloud infrastructure, hiring cloud experts, and cloudOps expenses collectively contribute to the soaring initial spend, creating a negative ROI at the beginning.
While the focus is slowly shifting to FinOps and we will definitely talk about that in detail, this article, the last in the 5-part WAF series, intends to provide exhaustive recommendations on how the cost pillar helps build organizational capacity, meet all functional needs, and designs workloads while fully utilizing resources at a lowest possible price point. It also speeds up the time to market, eliminates over-provisioning, which in turn reduces cloud capital expenditure.
Design principles for Cost Optimization
It is important to determine business objectives and return on investments (ROI) to effectively drive workloads on the cloud. To attain financial benefits and augment business values it is essential to adopt the following design principles for cost optimization in the cloud:
- Effective Consumption Model: Devise and implement strategic cloud financial investments to establish an effective consumption model. To build capacity and manage usage as well as costs, take people, process, technology and time into account. Cost capability via established knowledge building programs can yield exceptional savings in the long run.
- Get Rid of Inactive: The consumption model should enable businesses to pay only for resources that are utilized & are actually required. Organizations must halt inactive environments to reduce usage. For example, any unused development or test environments/subscriptions/resources since long must be powered down.
- Track Expenses: Measure cost efficiency by tracking expenses that directly correspond to designing of business workload capacity. Constantly evaluate and understand the benefits derived from increasing output and reducing costs. The more the visibility, the better the decision making.
- Business Focus: Organizations must focus on operations, applications and services and let cloud providers handle all the capital expenses incurred from buying, building, installing and managing the infrastructure setup. It further offloads organizations from costs related to managed services allowing them to cater to new projects and customer needs.
- Showback & Chargeback: Due to the cloud, organizations are better placed to accurately accredit the usage and costs to individual business workloads via tagging. Analyzing and attributing expenses makes ROI calculations easier and assists in optimization of resources while reducing costs.
Best practices for cost optimization
Businesses need to often make decisions regarding investing in new features, optimizing speed-to-market, or provisioning for increased infrastructure and operations, all of which require accurate planning and design tactics along with controlled spending methods. Standardizing cost-optimal deployments in addition to investing adequate efforts in developing a cost optimization strategy is the key to monetary benefits. Below are some consistent best practices to gain maximum cost optimization on the cloud.
1. Exercise Cloud Financial Management
Organizations need to define an agreed set of intelligent financial objectives, design innovative mechanisms to meet them, and align business values with financial success. Conforming to cloud financial management practices builds efficient knowledge-based programs, resources, and processes across the organization. There are tools like AWS Cost Explorer, GCP Cost Management Tools, Azure Advisor, Azure Cost Calculator and Cost Analysis, Azure Monitor that can help showcase complete cost and usage awareness.
The optimal way to build cost optimization within organizations is to gain insights from financial experts and add new improvised features to existing processes, which results in faster business outcomes.
2. Expense and usage awareness
With the onset of automation and increased demand in flexibility and agility on the cloud, organizations need to curate expenditure with respect to business needs and usage. Provisioning infrastructure and hardware, managing price negotiations, and deploying required resources optimally will result in minimizing wastes and allocating effective budgets. Account structure can be created with AWS Organizations, AWS Control Tower, Azure Subscriptions, Azure Security Center andGoogle Cloud Platform Security Overview services. Resource tagging is applied to usage and costs to associate it with relevant businesses to generate billing alerts and applicable reports. AWS Cost Explorer is used for visibility into cost and usage via Amazon Athena and QuickSight’s customized dashboards and analytics whereas Azure Cost Management and AWS Budgets and controls handle costs and usage financials.
3. Cost-effective resources
The objective is to do significant cost savings via the utilization of apt instances and resources for the cloud workload. Well-architected workloads along with effective managed services generate a profitable impact on business. Opting for cloud consumption models and investing in resourceful setups to attain cost-effectiveness, in the long run, are informed decisions organizations need to make.
Large cloud players like AWS, Azure, and GCP offer varied and flexible pricing options, on-demand compute instances, capacity reservations, cost-effective saving plans that best fit business needs.
Opting for economical and pertinent services like AWS CloudFront, Azure, and Google Cloud CDN can further optimize costs and usage, minimize data transfer and utilizing Amazon Aurora on cloud can cut down high-priced database licensing costs.
4. Furnish resources as per demand
Cloud gives the option to pay only for what is needed. Resources can be provisioned to match workload demands at any point in time to do away with over-provisioning. Demands can also be modified or queued as per requirements yielding lower costs.
AWS Auto Scaling, Azure App Service’s built-in auto-scaling feature, and Google’s Compute Engine Auto Scaling automatically assign resources based on workload demands. Amazon API Gateway and Azure API Management are used to implement throttling and Amazon SQS or Google Cloud Pub/Sub for queuing workloads.
While scheming demand and supply, organizations must consider usage patterns, the time needed to bring in new resources, and the demand recurrence style.
5. Optimize over time
With new feature releases, frequently reviewing existing cloud architecture to ensure it remains most cost-effective and aligns with best practices is a must. Implementing new resources and de-activating nonessential resources, services, or systems based on changing requirements can optimize workloads, reduce costs, experience cost competence on a continuous basis, and remain up to date on the technology front. Amazon Aurora, Azure SQL Database and Google Cloud Spanner can reduce costs for relational databases whereas using serverless such as AWS Lambda, Azure or GCP Functions can eliminate operations and management of instances that run code.
Managing and optimizing costs are of utmost priority especially while transitioning to the cloud. The task of catering to infrastructure changes and constructing processes that align with business needs is important in administering a well-established cost optimization pillar. Post execution and derivation of best practices, the cloud governance practices can be automated to encourage innovation and success. This holds good for all the WAF pillars, and as result tools like Cloud Ensure, an autonomous cloud governance platform by LTI have materialized, to administer security and compliance, cost optimization, workflow integration, and well-architected best practices in multi-cloud environments.