Cost optimization
2024 cloud cost optimization strategies,
best practices and trends
Cloud use is soaring in 2024. But so are unexpected costs. 69% of companies report going over budget. How do you optimize spending without squashing innovation?
AI and infrastructure modernization are causing cloud spending to surge over $675 billion this year.
Effective cost management has become a critical challenge.
Organizations are grappling with budget overruns. 46% have identified cloud cost management as a major hurdle. 35% have reported spending wasted due to overprovisioning.
To address these issues, businesses are embracing multi-cloud strategies and best practices like FinOps to optimize their cloud investments.
Major cloud providers are enhancing cost management tools, and new methodologies are emerging to offer real-time insights and greater cost transparency, facilitating multi-cloud cost management.
In this article, we’ll delve into the current state of cloud cost management, explore evergreen optimization best practices, and examine emerging techniques and trends shaping the future of cloud cost optimization strategies in 2025.
The current state of cloud cost management 2024
More people than ever are adopting cloud-based technology. Effective cost management has never been more critical in 2024.
Public cloud end-user spending will surpass $675 billion this year, driven by generative AI and infrastructure modernization, forecasts Gartner.
Infrastructure-as-a-Service (IaaS) is expected to see the highest growth at 25.6%. This demonstrates the demand for scalable resources to support AI and machine learning workloads.
Software-as-a-Service (SaaS) remains the largest spending segment, projected to grow 20% to reach $247.2 billion. Organizations are increasingly turning to SaaS management software for help.
Despite increased investment, many organizations face significant challenges in managing cloud costs. To address these issues, organizations are adopting multi-cloud strategies.
By 2025, over 90% of enterprises will use multiple cloud providers like AWS, Azure, and Google Cloud, up from 30% in 2021, predicts Gartner. This enhances flexibility, resilience, and cost optimization.
AI-driven automation is emerging as a key solution.
A McKinsey study estimates that organizations leveraging AI in cloud cost management can reduce expenses by up to 30% by 2025. AI tools enable real-time cost analysis and optimize resource allocation.
Major cloud providers are enhancing their cost management features, surpassing third-party tools in capabilities like serverless and GPU optimization. The adoption of standards like the FinOps Open Cost and Usage Specification (FOCUS) is improving transparency in cloud billing data.
Sustainability is also a growing concern. Data centers consume about 1% of global electricity.
Investments in green technologies, however, are expected to stabilize energy consumption.
Evergreen cloud cost optimization best practices
Cloud cost optimization means increasing the efficiency of your cloud computing services and reducing costs.
It encompasses more than simple saving techniques. It includes identifying inefficiencies, such as overprovisioning, and applying new strategies to get the most value for your money.
FinOps is a broader framework, which includes:
- Cloud cost optimization
- Facilitating data-driven decisions
- Creating financial accountability
This is all done through the collaboration between the finance, business, and engineering teams.
6 FinOps best practices for your cloud cost optimization strategy
These best practices come from FinOps.org, a foundation focused on promoting cloud financial management using the FinOps framework.
They outline 6 principles/best practices to act as your “north star” when looking to practice FinOps and cloud cost optimization.
Your teams need to collaborate
This includes finance, technology, business, product, and any others you think would help.
Each team can bring their expertise to help improve cloud optimization efforts.
For example, the engineering team may track cloud resources, and the finance team may track the costs. They can then discuss options together to bring down expenses while maintaining performance.
Regular meetings with an agenda will keep everyone in the loop and working towards the same goal.
Your decisions prioritize business value over cost savings
The goal isn’t to cut costs by any means possible.
It’s about getting value, by ensuring you can maintain and improve performance in the most efficient way possible.
You want to balance cost, performance, and business goals. Sometimes you’ll have to make informed trade-offs, for example paying for better performance when needed, or cutting back on resources when they don’t bring value.
You also want to use data to drive your decisions because numbers don’t lie.
Ensure everyone is accountable for their cloud usage
Responsibility must be shared.
How?
Empower teams to manage their own cloud usage and decentralize the decision-making process with a given budget.
This means that teams can make their own choices whilst prioritizing cost-efficiency.
Your FinOps data should be prompt and accessible
As soon as you have data, share it.
This allows teams to make timely decisions and improve efficiency. You’ll avoid any unnecessary costs with real-time cost data and fast feedback loops.
You can use real-time dashboards with cloud cost management tools that give live updates on spending and resources being used.
Also, consider providing trend analysis as it helps explain why the cots have changed and influence future decisions.
Create a central team that drives FinOps
They will be responsible for overseeing FinOps best practices and ensuring that everyone stays accountable.
The central team guides the strategy while other teams manage their portion.
You also want to get executive support for FinOps to provide the necessary authority and budget to implement changes.
Utilize the variable cost models of the cloud
Instead of viewing this as a risk, see it as an opportunity.
It allows you to predict and adjust cloud capacity in real-time. It’s about embracing agile planning over long-term plans.
Think about it like constantly adjusting the sails of a boat to stay on course. It focuses on proactive system design, with tweaks and changes in cloud cost optimization, rather than large reactive cleanups every so often.
4 AWS cloud cost optimization best practices
Amazon Web Services (AWS) cloud cost optimization is about increasing the efficiency of AWS usage. AWS is one of the main and most popular cloud platforms out there.
These are some of the best practices specifically for AWS cloud cost optimization.
- Reserved instances and savings plans
Reserved Instances allow you to reserve a specific amount of compute capacity for a set period, typically 1 to 3 years.
Savings plans are similar, however, they offer greater flexibility as you can apply your commitment across different regions.
The types of savings plans AWS provide are:
- Compute
- EC2
- Amazon SageMaker
The types of Reserved Instances AWS provide are:
- Amazon RDS
- Amazon Redshift
- Amazon ElastiCache
- Amazon OpenSerach Service
- Amazon DynamoDB
You can get custom recommendations based on your past usage.
Cut costs even further by using volume pricing tiers, where the costs decreases the more you use it, or bundled discounts where you receive discounted or free usage of a service based on the usage of another service.
You may also consider using a cloud discount marketplace. They allow you to find unique deals to lower costs.
- Pay for what you use
You want to automate as much as you can. When you have to manually adjust and change you’re prone to error and forgetting.
AWS allows you to stop wasting resources during non-operating hours with the Instance Schedule on AWS feature. This starts and stops automatically various AWS services such as EC2 and RDS.
You also want to make use of AWS Auto Scaling, a feature that monitors your applications and automatically adjusts capacity to maintain steady performance and low cost.
- Avoid overprovisioning
Overprovisioning is when you allocate more cloud resources than needed. AWS Compute Optimiser can help prevent this.
The service recommends when to migrate workloads for better price performance.
You can also use Amazon Redshift, a cloud data warehouse that analyzes your data. It adjusts automatically depending on your needs to accommodate your workload.
- Upgrade your cloud infrastructure
Your cloud infrastructure is the design of systems and applications built within your cloud computer service. It includes how different components, such as compute power and storage, and organized.
AWS allows you to modernize your cloud architecture using microservices and serverless technologies to build something flexible and scalable.
Such products from AWS include:
- AWS Lambda
- AWS Gargate
- Amazon Aurora Serverless
These all increase agility and lower costs.
Emerging cloud cost optimization techniques and methodology
Enhanced integration with real-time insights
The need for real-time insights across systems has become essential.
The AWS Cost Optimization Hub, launched November 2023, provides a powerful solution. It integrates tools such as AWS Cost Explorer and AWS Compute Optimizer into one platform.
This integration gives teams real-time visibility into cost-saving opportunities. This includes stopping idle resources or rightsizing instances, across AWS Regions and accounts.
This centralized approach promotes rational decision-making and maximises cost efficiency while ensuring flexibility.
Standardized cost reporting and analysis of cloud spend
Cloud usage is continuing to rise.
Maintaining consistency in cost reporting and analysis has become increasingly challenging.
AWS has responded with the introduction of Data Exports for FOCUS 1.0 (Preview). This tool uses an open-source schema that standardizes cloud billing data, ensuring consistency across different sources, including AWS.
With FOCUS 1.0, organizations can now export cost and usage data in a unified format. This makes it easier to analyze cloud spending and identify optimization opportunities.
This helps reduce the complexity of processing billing data, freeing up FinOps teams to focus on cloud cost optimization.
Intelligent purchase recommendations
Another emerging cost optimization technique involves using intelligent purchase recommendations.
AWS’s Cost Management tool now includes recommendations for Amazon MemoryDB reserved nodes. This helps businesses optimize cloud spend by offering suggestions for long-term commitments.
By committing to MemoryDB reserved nodes for 1-3 years, customers can save up to 55% compared to on-demand prices.
The recommendation tool identifies optimal purchasing options based on historical usage, making it easier to plan cost-saving strategies proactively.
Enhanced cost transparency with visual insights
Transparency in spending is crucial for businesses to manage their cloud costs.
The ability to visually understand cost-saving opportunities helps teams make more data-driven decisions, reducing the need for manual analysis.
AWS addresses this need with their visual Savings Plans recommendations.
These graphs provide an hourly breakdown of on-demand spending alongside suggested Savings Plans commitments. This allows teams to see exactly how much they could save.
This added transparency simplifies cost analysis and helps businesses easily validate their Savings Plans, covering services like Amazon EC2, AWS Lambda, and Amazon SageMaker.
Trends and predictions for cloud cost optimization in 2025
What comes next in the world of cloud cost optimization?
It’s important to keep up with the trends and predictions to manage your costs effectively.
These following resources and influencers and your go-to places to stay at the forefront. They regularly provide insights and predictions and will keep you ahead of the curve.
Gartner
Gartner is a leading global research and advisory firm, known for publishing reports on technology trends, including cloud cost optimization.
They release annual reports, such as the “Cloud Financial Management Magic Quadrant,” that provide insights into the best practices for optimizing cloud costs.
Subscribe to their newsletters or visit their “Insights” section for real-time updates on cloud cost management.
You can also visit Gartner.com for reports and updates.
Forrester
Forrester is a leading global research and advisory firm.
They provide detailed reports and insights on cloud computing trends, including cost optimization strategies. They analyze market trends and predict future developments in technology, helping companies make informed decisions.
Forrester’s latest updates can be found on their official website, and through their published reports, such as the “Forrester Wave” or other cloud computing analyses.
Subscribe to Forrester’s newsletter, follow their blog on Forrester.com, or join webinars that focus on cloud cost optimization and FinOps trends.
FinOps Foundation
FinOps Foundation is a non-profit foundation dedicated to advancing cloud financial management best practices and creating a community around FinOps.
They provide training, reports, and webinars on cloud financial management and cost optimization and regularly publish predictions on cloud cost trends.
Join the FinOps Foundation community, subscribe to their newsletter, and attend their webinars and events for the latest trends as well as visiting their website, FinOps.org.
Corey Quinn
Chief Cloud Economist at Duckbill Group, Corey Quinn is a well-known cloud cost optimization expert and a vocal commentator on AWS services.
Corey provides a satirical yet insightful take on cloud cost management and AWS updates making him a popular influencer in the field.
Follow Corey on Twitter @QuinnyPig or visit his newsletter, “Last Week in AWS.”
Takeaways
Cloud cost optimization in 2024 is a game of balance—controlling expenses without stifling innovation. As businesses continue to expand their cloud presence, ensuring financial efficiency has never been more crucial. Here’s what we learned:
- Over 69% of organizations have exceeded their cloud budget, driven by rapid AI growth and infrastructure demands.
- 35% of cloud spend is wasted due to overprovisioning, a major issue that can be mitigated with careful planning and the right tools.
- AI-driven cloud cost management can cut expenses by up to 30%, unlocking real-time insights and efficient resource allocation.
- FinOps principles emphasize collaboration across finance, business, and engineering teams to make data-driven, accountable cloud decisions.
- Multi-cloud strategies are on the rise, with 90% of enterprises expected to adopt them by 2025, enabling greater flexibility and cost control.
- AWS’s emerging cost tools like the AWS Cost Optimization Hub and intelligent purchase recommendations are leading the way toward enhanced cost transparency and decision-making efficiency.
As we head into 2025, the key to success lies in smarter spending. Leveraging real-time insights, fostering collaboration, and embracing new tools will allow businesses to keep cloud costs in check while driving innovation.
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