Key facts to consider
- 90% of companies use services from multiple cloud service providers (hybrid cloud / multi-cloud).
- 30% of cloud courses go unused/underutilized.
- By 2025, spending on cloud solutions will exceed 50% of IT expenditure.
The hidden costs of your cloud infrastructure
Cloud providers’ offerings are rich and tempting, and clients’ expectations are high: it will all be innovative, easier, and faster. Gartner forecasts that business IT spending on public cloud computing will hit 50% by 2025. But what about the pitfalls of cloud migration that we would prefer to consider later (or not at all)?
Here are the 5 most common mistakes that generate unforeseen costs that will be painful for your budget:
1. Cloud storage issues
Not properly managing your cloud storage can lead to unnecessary costs related to storing redundant or outdated data. It’s important to regularly review and clean up your storage.
2. Overprovisioning
This is a common problem, especially in new cloud projects. Overestimating your resource needs and purchasing more cloud capacity than necessary will most certainly lead to wasted spending, aka “cloud waste”.
3. Underutilization of resources / Virtual Machines
Running virtual machines that are not fully utilized can lead to wasted resources and increased costs. You must regularly monitor and adjust your VM usage to optimize performance and minimize unnecessary spending.
4. Choosing the wrong location
You should not only think about choosing the right cloud provider, but also about the geographic location of your cloud services. Selecting the wrong location can result in higher data transfer costs and latency issues.
5. Data transfer costs
We have already discussed this aspect in detail. Transferring large amounts of data in and out of the cloud can result in significant costs.
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Enter the digital world taking advantage of our cloud competences! Get started now!The impact of the hidden costs of cloud computing
Now that you know that networking, storage, data transfer, and computing CPU issues are some of the most common factors affecting cloud costs, let’s move on to understanding how optimizing them will help you avoid unpleasant surprises.
Right-sizing your resources, choosing the right regions, identifying idle workloads, and choosing appropriate cloud storage plans are just some of the practices you can apply to use the available resources more wisely without overpaying for them. We discuss them in detail below.
Understanding the true cost of cloud services
The true cost of the cloud does not have to be high. Often, when just starting to move to the cloud, capacities, VMs, services, or applications are selected and then later are not used or underutilized. The most important thing is to locate such waste as early as possible and adjust your usage accordingly. Fortunately, there are proven tools and tactics that identify troublesome areas and provide you with specific recommendations.
Avoiding the hidden costs of cloud computing
With proper cost management, you can reduce your cloud costs by up to 30%. In this chapter, you’ll learn strategies to minimize the risk of unforeseen costs and how to minimize your cloud expenses.
Strategies to mitigate unanticipated expenses in cloud computing
Even if your enterprise has just migrated to the cloud and you are out of your depth when it comes to cost management, you are not at a disadvantage. It’s worth taking an interest in strategies to minimize costs as early as possible so you don’t fall into one of the traps we discussed in the FinOps guide or the Azure Cost Management article.
First of all:
1. Learn about the available billing models and choose the right one
Public cloud vendors offer models based on forward billing (regardless of the resources and capacity used), as well as pay-as-you-go (PAYG) models.
2. Take advantage of autoscaling
This option adjusts the scaling of resources and applications to your actual usage, ensuring adequate performance. Such a dynamic environment is ideal for handling variable traffic, such as those struggling with sales peaks for online stores, for example.
3. Use infrastructure as a code (IaaC)
Instead of manually configuring IT environments, with IaaC you can configure servers in such a way as to use resources only when needed. If you are a software house developing a system in the cloud, you can, for example, disable the development environment on weekends if it is not used then, or configure the service to be active only during deployment.
Considerations while choosing a public cloud provider
Service costs and pricing plans are not everything. It’s worth learning about the provider’s SLAs, its legal policies, and its approach to cyber security to know what measures safeguard your data.
Your choice will also depend on business goals and the way the cloud is used. For example, Azure is considered a top choice in terms of the hybrid cloud (which, by the way, almost 90% of enterprises use, according to Flexera), while Amazon’s cloud is a great solution for AWS integration, and the Google Cloud platform for collaboration.
Optimizing cloud infrastructure to reduce hidden expenses
Many companies can easily optimize their cloud infrastructure by taking advantage of strategies such as scaling and right-sizing resources, using FinOps tools to monitor spending, and setting budget alerts. Financial Operations tools benefit from automation and take cost management to a new level. If you’re curious about the specifics, read our comprehensive cloud guides:
- Azure Cost Management
- Azure Cost Management Tools
- Azure Advisor
- Azure savings plans
- Cloud Native applications
Data egress and other issues. Understanding data transfer costs
When talking about the cost of data transfer in the cloud, you first need to familiarize yourself with the term ‘data egress’. This means data exiting a network and being moved to an external location. The expenses involved are separate from those your company already incurs for storage and computing; hence, they are hard to monitor and keep under control.
What are the sample transfer costs? They largely depend on the region.
For the Azure service, for example, data transfer within the Availability Zone is free, but between individual AZs in the same region, it is already €0.010 per GB. Of course, these costs increase depending on which continents the data is transferred between. Intercontinental data transfer between Europe and other continents, for example, will cost you €0.046 per GB. You can find the full price list on Azure Bandwidth Pricing. These costs may seem small at first glance, but remember: we are talking about huge amounts of data, counted in terabytes, and sums for that can go into the millions.
How to reduce data transfer costs
- Choose the region wisely since data transfer fees differ depending on the continent. For instance, transfer costs from Asia, Oceania, the Middle East, and Africa to other continents are higher (€0.073 per GB).
- Optimize your routing policy with the help of cloud experts.
- Consider building your systems architecture in such a way as to minimize data transfer across cloud regions or availability zones.
Implementing a cost-effective hybrid cloud strategy
The hybrid cloud is a leading trend. In 2022, over 90% of organizations surveyed by CISCO in the Global Trend Report admitted they use more than two public clouds (compared to only 8% who utilize the services of a single provider).
Understanding how to manage a multi-cloud approach is an important factor in reducing unnecessary costs.
Implementing a hybrid cloud strategy means determining which applications and data are allocated to particular parts of your infrastructure. You can achieve this most easily with the help of cloud architects and consultants who have experience with other cloud migration projects.
Best practices for managing cloud costs
Implementing budgeting and monitoring tools for cloud expenditure
FinOps and cloud cost monitoring tools are one of the fastest-growing areas and a key trend in cloud computing. In the recent Flexera State of the Cloud 2023 survey, over 80% of enterprises indicated that the challenge of cloud cost management was their top priority.
Leveraging cloud provider discounts and savings programs
Consider taking advantage of deals and discounts – public cloud providers offer them, e.g., for reserved instances. Check your service provider’s offer to ensure you don’t overpay for on-demand services that may generate unexpected/hidden cloud costs.
For example, with Microsoft Azure you can:
- Get more than 60% off specific computing services when you subscribe to a savings plan. Just select the duration of your plan and the hourly expenditure amount.
- Save about 70% by reserving your resources in advance.
Combating hidden cloud costs – summary
Cloud solutions give you more elasticity and agility than traditional data centers and on-premises solutions. The fight against hidden cloud costs does not have to be an uneven struggle! Remember, a properly implemented and managed cloud will save you money. Still, it takes a well-thought-out strategy rather than individual ad hoc actions. Fortunately, there are proven ways and specific tools that will enable you to use the cloud to its full potential.
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