Top 10 cloud cost optimization mistakes you should avoid

Imagine cutting 72% off your cloud bill. Sounds like a fantasy? Think again. You can save money and maintain high performance. Why choose when you can have both?

Cloud costs sometimes feel uncontrollable. 

Your bills are racking up and you need to keep your current capacity. 

But what if there’s another way? 

What if you’re miscalculating how much resources you need? 

What if you can make this clearer, simpler, easier? 

Picture your business thriving with its current cloud coverage. You’re saving more money than ever before. You’re reinvesting your savings into a better product. 

Your staff are happy, your customers are happy, and you’re happy.  

In this article, we outline the 10 biggest cloud cost optimization mistakes. 

Read now to avoid these common pitfalls.  

1. Not using reserved instances and savings plans for cloud cost optimization 

Reserved instances and savings plans save you money. And lots of it. 

A reserved instance allows customers to reserve a specific amount of compute capacity for a set period, typically 1–3 years. 

This contrasts with on-demand pricing, where companies are charged for what they use. 

By committing to a specific period with a reserved instance, you receive a healthy discount. Anywhere from 29–72%.

This is because the cloud provider knows you are making a long-term commitment and rewards you accordingly. 

It’s similar if you think of a gym membership – if you pay for each visit, the cost will be much higher than if you paid a set amount each month (if you make sure you go!). 

Through effective cloud cost reduction strategies, Spendbase can save you up to 60% on your cloud spend.

Your company can access reserved instances and saving plans. 

You’ll join our Umbrella organization and receive low rates without an upfront commitment, a team of experts to guide you, and extra cloud credits. You’ll drastically cut your costs and save money.

2. Not using automatic tiering

Automatic tiering migrates your data across different storage tiers based on how often it’s accessed. The goal is to move your data to the most cost-effective storage, without you having to do it manually. 

Data that is frequently accessed is stored in a higher cost/faster access tier. Data that is accessed less is moved to a lower cost/slower access tier. 

Data that hasn’t been accessed in a while can be moved to the archive, the longest-to-access tier. 

Many providers offer this, including: 

• Amazon S3 Intelligent-Tiering 
• Google Cloud AutoClass
• Azure Blob Storage lifecycle management

Shutterstock is one of the many companies that have cut costs by using automatic tiering. 

Chris S. Borys, a Team Manager in the Cloud Storage Services Department at Shutterstock stated that they saved up to 60%.

This allowed them to reinvest that money into their storage infrastructure and experience multiple improvements while increasing their performance.

3. Not setting a budget for your cloud spend

Without budgeting, spending can quickly spiral.

It’s like driving without a speedometer—you have no idea when you’re hurtling too fast and heading straight into trouble.

When it comes to cloud services, there are many bells and whistles you can add. It’s tempting to say yes to everything. “What ifs” and “maybes” start to flood your mind.

By setting a budget you’re giving yourself clear boundaries. It forces you to prioritize and implement strong cloud management practices. 

It’s also smart to regularly review your usage and spending. As your business grows, your requirements will too. Reviewing regularly allows you to calibrate where you’re at, where you need to go, and set a realistic budget.

Providers out there also include budget tracking tools. Make sure to make use of these to help you track your spending and alert you if you’re getting close to your maximum spending. 

One story from Reddit highlights a company that accidentally overspent by $10,000 due to over-provisioned Azure SQL databases. They had set up too many databases that were larger than necessary and failed to add spend alerts. 

Implementing alerts can help businesses catch overspending early and avoid costly mistakes.

4. Poor tagging practices that hinder visibility into cloud usage

Tagging is where you custom label cloud resources, such as virtual machines, storage, or databases. 

A tag is a key-value pair. The key is the category such as “Environment” or “Owner” and the value is the detail related to that category such as “Marketing”. 

By tagging, it gives you clear visibility into what’s what and can allow for more effective cost management.

For example, it allows you to assign cost categories based on projects or departments. With correct tagging to each resource, you can see what is being spent and by whom. 

Cloud resources that are used by the marketing team can be tagged with the value “Marketing”. When you want to see how much marketing is spending you can search that tag and generate a full report. 

This allows you to see how much is being spent and can help you create realistic targets to reduce spending. 

5. Paying for cloud services nobody uses

It’s easy to add an extra cloud service to aid with a task or project, but once you’ve fulfilled the requirement, you may forget to discontinue what you used. 

It can happen with temporary projects, testing, or development environments. 

One common cause of this is ‘Click-ops’—when cloud resources are managed and configured by clicking through options in cloud providers’ websites. It is done manually and is therefore time-consuming and prone to error. 

This allows resources to be deployed that aren’t tracked properly or without automatic shutdown policies. 

As such spending can quickly start to build up and get out of control.

To prevent this, tagging is highly beneficial. You also want to use automation where you can, such as closing down resources after a certain amount of inactivity. 

One Reddit user shared how they spun up a virtual machine that they forgot to configure to shut down. They racked up an extra bill, which at the time was a lot to pay. 

Implementing a SaaS management platform would also help. It helps you track all your subscriptions and ensures you’re only paying for what you use.

Finally, make sure to conduct audits. They allow you to review your resources and see what is no longer in use. 

6. A lack of clear cloud governance hinders workload management

Cloud governance refers to the outlined rules, policies, and controls your organization has concerning your use of cloud services. Without clear governance, spending can escalate, resources mishandled, and security risks heightened.

Think of it like a ship without a captain, you have everything there that can get it moving but no one to steer and direct. This is what your governance needs to do. 

All of this directly impacts your cloud cost optimization. 

For example, without a clear policy, teams can over-provision resources, or forget to discontinue unused ones. This leads to unnecessary spending. 

How do you set up cloud governance? 

• First define clear policies—who can create, access, and manage cloud resources. 
• Next, outline a clear tagging strategy so everything can be tracked and monitored. 
• Make use of cloud governance tools such as AWS Control Tower that can help govern the workload. 
• Finally, utilize automation to reduce manual tasks and avoid human error. 

7. Not understanding cloud pricing 

If you don’t understand your cloud pricing, you can’t make effective decisions on what you do and don’t need. 

Cloud providers offer a variety of services with a multitude of different pricing models. This can range from pay-as-you-go, reserved capacity, or data migration costs. 

It can often feel complex and lead to confusion. 

If you don’t understand how these work you may find yourself with a surprising bill. 

To avoid this mistake, set a dedicated time to understand how something is charged and why. 

Each cloud provider should have pricing documentation. Go through this, ask questions, and be diligent with your comprehension. 

You can also consult with experts on this. Know who in your company understands these structures or possibly look outside your company. 

8. Overprovisioning 

Overprovisioning is when your company allocates more cloud resources than is needed. This can include allocating more instances, storage, or capacity. 

The result? Much higher costs as you’re paying for resources that aren’t being utilized. It’s like renting a large limousine when all you needed was a small car for a quick trip. 

It can occur when teams overestimate how much resources they need with a fear of underperformance. 

When there is a lack of governance and monitoring as well, it’s easy to miss over-sized instances. 40% of instances are at least one size larger than needed, according to Devops. 

The good news is that a 50% reduction in costs can be achieved by simply downsizing an instance by one size.

The solution?

Ensure you have the right size for your instances based on actual usage data. Make use of rightsizing recommendations to guide you on the optimal instance size for you. 

Auto-scaling is another tool you can use that dynamically adjusts resources in real-time. It will increase capacity during peaks, and decrease when demand is lower. 

The company BurdaForward were running at full capacity, even when they didn’t need to. This lead to overprovisioning and wasted resources. By utilizing Amazon EC2 Auto Scaling, they were able to reduce their infrastructure costs by 65% and improve their performance. 

9. Overlooking promotions, discounts, and free credits

Cloud providers often use promotions to sell their services. You might as well use them! 

If not, you’re turning down free money. 

They are especially pushed towards those who are new to cloud services, so if you’re just getting started—make sure you’re using these promotions. 

For example, free credits are often provided for startups. These credits can range from $2,000 to $350,000. 

Maybe you’re concerned you’re missing out on cloud discounts and credits. 

Spendbase can secure these deals for you. The money you can potentially save on the cloud can be more than the savings you can get with SaaS discounts for expensive apps alltogether.

Cloud savings can be as high as 60% without committing to long-term contracts. 

10. Not using spot instances to optimize cloud costs

Spot instances are unused compute resources provided by cloud providers. They are heavily discounted—sometimes by 90%. 

They’re a surefire way to optimize your costs.

However, these instances can be interrupted with just two minutes’ notice. It’s therefore best for certain situations. 

For example, if you have tasks that are flexible and can tolerate interruptions, then you’ll be fine. Such examples include large data processing, batch processing, web crawlers and data scraping, as well as others. 

You can save a huge amount of money if you take advantage of these. 

Like getting a last-minute flight deal. A sweet deal if you’re willing to sacrifice.