Last updated on May 17th, 2023 at 1:41pm
To ensure you’re getting the most out of your cloud use and maintaining a high return on your investment, you need to accurately estimate and track your cloud costs and resource consumption. This process is called cloud cost management, and it’s crucial for organizations operating in the cloud — especially those with multiple cloud service providers or many different teams.
This article explores the key concepts of cloud cost management — also known as cloud financial management — and how to organize and manage cloud costs at scale.
What Is Cloud Cost Management?
Cloud cost management is the process of organizing and managing cloud technology costs within an organization. It helps you maximize cloud usage and minimize your costs through the implementation of processes and tools that help you monitor and control cloud spending. This kind of strategizing aligns cloud resources with business needs.
Effectively managing and reviewing cloud costs helps organizations understand their cloud spending, identify opportunities for cost savings, and ultimately reduce cloud expenses. It takes a holistic approach that covers everything from cloud infrastructure design and optimization to ongoing monitoring and governance.
Why Is Cloud Cost Management Important?
Cloud spending can easily exceed budget constraints without proper management — and can impact an organization's profitability. Moreover, cloud billing can be complex and challenging to decipher, making it hard for organizations to assess the true cost of their cloud resources.
Here, the benefits of a granular system for managing cloud costs become clear. A granular system gives detailed insights into the costs of specific applications, projects, teams, and resources, so you can pinpoint areas of high cost and identify opportunities for cost reduction. It enables you to track cloud usage and spending on a per-application basis — making it easier than ever to identify underutilized resources and shut them down, for instance, or to enforce governance policies and ensure efficient resource use.
Why Is It So Difficult to Manage Costs in the Cloud?
Managing costs in the cloud is a challenge for many organizations. The following are some of the key reasons why:
- The traditional pay-as-you-go model: Traditional payment models require a fixed subscription fee or reserve resources for a particular period. In contrast, most cloud instances are charged based on usage, which makes it difficult to predict costs. Unless you invest time and labor in closely monitoring cloud usage, it’s easy to go over budget.
- Ease of spin up: A lack of oversight and verification in account creation and resource allocation also makes it difficult to manage cloud costs. If each team or department can create new instances or increase resources without external verification, the result is often a proliferation of unmonitored spending and one-off accounts. Similarly, as an organization grows, the number of cloud accounts spread across multiple departments increases and it becomes increasingly difficult to keep track of them and the resources they consume.
- The use of multi-cloud: Cloud costs can also balloon when organizations adopt multi-cloud strategies — turning to multiple cloud service providers (such as AWS, Azure, and Google Cloud) to meet their needs. This approach offers greater flexibility, but also creates new challenges for managing cloud costs at scale. Every cloud provider has unique billing and reporting tools that do not communicate with other providers, making it difficult to have a unified view of costs within a multi-cloud setup. As a result, organizations taking a multi-cloud approach often need a third-party tool to unify and monitor cloud cost reporting across multiple providers.
Cloud Cost Optimization and FinOps
The recent emergence of financial operations (FinOps) goes hand-in-hand with cloud cost optimization. FinOps applies financial management practices to the cloud and creates shared responsibility for cloud costs across teams. It also provides key metrics to inform decision-making.
In short, FinOps involves stakeholders from across the organization in the cloud cost management process to create a culture of accountability and cost optimization. It promotes accountability by encouraging teams to take ownership of and think more critically about their cloud usage.
Keys to Planning and Managing Your Cloud Spend
Tagging and tracking your cloud resources helps you gain greater visibility into your cloud spend. With proper management, you can gain quick insights into how and why cloud resources are being used.
Cloud providers often offer tagging functionality to mark cloud resources with metadata, such as the project, team, or application associated with the resource. Tagging resources in this way means organizations can easily relate costs back to specific projects, teams, or applications.
Effectively tagging cloud resources enables organizations to identify underused or unused resources. Understanding which resources are being used most and by whom helps you decide where to allocate resources and where to cut back.
Other optimization techniques can also reduce cloud costs. These include:
- Budget enforcement: Setting and enforcing budgets for individual teams or departments ensures spending remains within acceptable limits. Providing teams with clear spending limits and closely monitoring spending helps avoid cost overruns and keeps cloud spending in check.
- Rightsizing: Rightsizing involves matching cloud resources to actual usage needs. Identifying underutilized or overprovisioned resources and adjusting resource allocation accordingly helps optimize resource usage and reduce unnecessary costs.
- Dynamic scaling: Dynamic scaling involves automatically adjusting resource allocation based on usage patterns. By scaling resources up or down in response to demand, organizations can reduce costs while maintaining service levels and avoid overprovisioning.
Incorporating these optimization techniques into strategies for managing your cloud costs helps reduce cloud costs, optimize resource allocation, and maximize ROI.
What Do Standard Cloud Cost Management Practices Lack?
Manually tracking cloud costs and managing them without the help of a tool can be messy and complicated — especially if you use multiple cloud platforms, each with unique billing and reporting tools.
Manual cloud cost tracking requires collating information from a variety of cloud platforms. Without a central tool to aggregate this information, organizations must manually pull data from each platform and try to reconcile it. This time-consuming and error-prone process often leads to inaccuracies in cost tracking.
Manually assigning tags to track resources is another major challenge. Tags are essential for identifying and tracking cloud resources, but assigning them manually invites human error into the process. The resulting tags are often incomplete or inconsistent, making it difficult to trace costs back to specific projects, teams, or applications.
Budgeting also becomes extremely complex for organizations working with high volumes of information. Without a tool to manage and forecast costs, many organizations struggle to allocate resources effectively and run the risk of overspending.
A Comprehensive Solution for Cloud Cost Management
Kion is a cloud enablement platform that offers a comprehensive solution to the challenges of managing cloud costs. Kion transcends traditional cost management by providing a unified view of all your accounts and cloud spending across AWS, Azure, and Google Cloud.
Kion provides a range of capabilities to help organizations gain control over their cloud costs. Its financial management features make it easy to monitor current spend, identify opportunities for cost optimization, and set and enforce budgets.
Some of Kion’s key features include:
- Resource rightsizing: Kion's built-in checks identify overprovisioned and underutilized resources and recommend the right size for each resource. You save money by only paying for the resources you actually need.
- Reserved Instance (RI) management: Kion's enforcements ensure that you don't miss when RIs are due to expire, so you can renew or exchange them to maximize savings. Enforcements are configurable actions you can set to trigger on a project when an event of interest occurs. For instance, you can monitor RIs and set notifications to alert you with remaining usage or time before the RIs expire.
- Automated actions: Kion provides automation that enables resource owners to take immediate action on identified savings opportunities, such as implementing a spending freeze or downsizing instances.
- Visual indicators: Kion's visual indicators alert users of excess spending, enabling you to quickly identify potential cost overruns and take action to prevent them.
- Project-level allocation: Kion allows you to allocate cloud spend by project or department using unique funding sources mapped to internal/external cost centers, contracts, grants, or budgets. This ensures that you can accurately track and allocate costs, enabling better cost control and budget planning.
Kion's cost optimization features provide a comprehensive set of tools to help organizations gain control over their cloud costs and identify opportunities to save money.
Plan and Manage Cloud Spending as You Scale
As you scale your business in the cloud, effectively managing your cloud costs is crucial — especially if you have multiple cloud service providers and teams. To get a clearer picture of cloud spending, implement a granular system to provide detailed insights into the costs of specific applications, projects, teams, and resources.
Tracking and tagging cloud resources, enforcing budgets, and dynamically scaling resources can reduce organization costs. That said, manually tracking and managing cloud costs can be highly complicated without specialist tools.
Kion addresses these challenges by providing a unified view of all accounts across cloud service providers. With budget enforcements, monitors for current spend, and the ability to identify opportunities for cost optimization, Kion can help organizations gain control over their cloud costs.
With the right strategies and tools, organizations can manage their cloud costs, and achieve better ROI as they scale their cloud adoption. Learn more about Kion’s financial management solution.