Cloud Cost Management: Everything You Need To Know

This content was last reviewed on: November 24th, 2022

What's cloud cost management?

Cloud vendor offerings are growing in complexity with 100s of thousands of SKUs to consider, and for a growing majority of cloud-native companies, cloud spend is second to payroll in terms of overall cost. So, how do we make sense of an increasingly complex and sizable problem? The answer lies in cloud cost management.

Cloud Cost Management helps you achieve three things:

1. Build Efficient Architecture

Get all the context to pinpoint the efficient frontier between cost and service level.

2. Map Costs to Your Business

Map cloud costs to business or deployment activity, so you can understand the "why" behind your cost structure.

3. Optimize Your Cloud Costs

Efficiently purchase discount plans, rightsize your resources, drive accountability across your teams, and fix cost anomalies.

This resource is for busy teams who want recommendations on how to monitor, analyze, and optimize AWS, Azure or GCP costs, and pick the right vendor for cloud cost management and optimization.

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What is a cloud cost management platform?

Cloud Cost Management tools were borne out of cloud management tools, like VMware's CloudHealth, that address a more broad-based use case for enterprise cost management, governance, compliance, and security. The latest generation of tools, however, go deep into the niche of cloud cost management. They offer features like anomaly detection, marginal cost analysis, container cost allocation, and much more. We've also noticed a shift in emphasis from serving the needs of finance and accounting departments to engineering teams — a "shift left" if you will. To be clear, legacy vendors like CloudHealth and Apptio Cloudability have adapted to this evolving market too.

Here's a landscape of the vendors in the space:

Taloflow cloud cost management landscape with cloud management platforms and specialized tooling in separate sections

Compared to legacy approaches, the new wave of cloud cost management tooling generally does a better job at:

  • Striking a balance between the needs of finance and engineering
  • Providing cost insights with minimal tagging required
  • Cloud cost anomaly detection
  • Mapping costs to your business profitability
  • Faster cost allocation (especially with containers)
  • Integrating with alerting and incident tools like PagerDuty and Slack
  • Drill-down to the resource level
  • Less overhead setting budgets and billing alerts
  • Faster insights delivered in the developer workflow
  • Better root cause analysis of spend issues

Cloud Cost Management Vendor Comparisons

Choosing the right cloud cost management provider can save you upwards of 30% of your cloud spend, help you drive more accountability in your engineering organization, and give the finance department the insights they need for better planning.

New offerings like Vantage and CloudZero are challenging incumbents like CloudHealth and Apptio Cloudability, leaving many CFOs and engineering managers wondering which vendor to choose and why.

Many of these vendors — and they are legion! — will do a good job providing cost analytics somewhat better than the native tools offered by cloud providers (e.g., AWS Cost Explorer). However, depending on your use case, some could go well beyond the functionality of native tools by offering marginal cost analysis, predict the cost of deployments, and more. In our comparisons listed below, we cover the pros, the cons, and the gotchas that could impact your decision on the right cloud cost management provider for you.

Here's a sample list of our popular comparison pages:

  1. Kubecost vs. CloudZero
  2. Kubecost vs. CloudHealth
  3. CloudHealth vs. Apptio Cloudability

There are also a handful of open source tools, like Cloud Custodian and OpenCost, that have thriving communities and are well-suited for most kinds of enterprise environments.

Most important cloud cost management features

Depending on how you want to monitor, optimize, plan, and forecast your cloud spend, different vendors offer different features that can be of use to you.

In most cases, you're going to want a vendor that provides some level of:

  1. Discount plan management
  2. Cost anomaly detection
  3. Container cost allocation
  4. Cloud spend forecasting
  5. Dashboards and reports for finance
  6. Alerting in popular tools like Slack
  7. Integration with your observability stack (e.g., Datadog)
  8. Drill-down to resource level cost
  9. Chargeback policies
  10. Budgets and alerts

How to buy Reserved Instances and Savings Plans on AWS

Your Finance department is likely going to ask you to find the perfect blend of reserved, savings plans and on-demand instances on AWS in order to save somewhere between 15-30% on rate card while not overcommitting (i.e., causing future inflexibility).

Here are some high level tips:

  • Calculate and coordinate the types of instances you need to buy with Finance and Engineering involved
  • Monitor your actual historical usage pattern of on-demand resources
  • Monitor the instance marketplace for cheaper instances with potentially shorter commitments
  • Look to go beyond EC2, including RDS, DynamoDB, Redshift, Fargate, and other service type commitments
  • Combine Reserved Instances, Savings Plans, and AWS Spot (spot is nearly always cheaper, but isn't always available) to get the most efficient overall spend

How to use AWS spot

AWS Spot can get you between 40-80% in AWS EC2 cost savings.

If possible, you should use a 3rd party Spot Management solution, like Spot.io or XoSphere, because AWS's native spot tools can fail at a high rate. Why? Well, AWS can reclaim a Spot instance at any time. Without a 3rd party solution for failover, it can be challenging to safely run mission-critical applications on AWS Spot.

Cloud Cost Management for AWS

Some common strategies for optimizing costs on AWS include:

  • Rightsizing instances, storage, and databases
  • Staying updated on the latest generation of resources
  • Implementing proper scaling with tools like Amazon EC2 auto scaling, Fleet management, Elastic load balancing, and AWS Batch.
  • Smartly buying Reserved Instances and Savings Plans
  • Anomaly detection
  • Scheduling services
  • Delete unused resources like EBS, Snapshots, Elastic IP addresses, Elastic Load Balancers, Unattached IP’s

AWS has a series of native tools that can give you insight into and help you optimize your cloud spend. Here's the full list:

However, because AWS Cost Explorer and other tools have limited features — or some suspect may have overzealous recommendations for discount plan commitments, among other things — you may want to consider adding a 3rd party cloud cost management tool to the mix.

Cloud Cost Management for Azure

Azure cost management is a lot better with proper tagging in place, so you may want to consider having your cost tagging enforced by a tool like Cloud Custodian.

Some common strategies for optimizing costs on Azure include:

  • Shut down idle or underutilized resources (Azure Advisor shows you ghost services): Azure VMs, Azure SQL, Azure SQL Data Warehouse, Azure Scale Sets
  • Right-size Azure VMs (e.g., optimize your memory)
  • Using auto-scaling to get closer to 100% VM utilization
  • Use B-series burstable virtual machines for burst CPU usage
  • Leverage Azure blob storage tiering
  • Migrate from VMs to Azure containers
  • Utilize Azure Autoscale
  • Purchase Reserved Instances or leverage Azure Spot VMs
  • Reduce cross-region or cross-zone egress

Cloud Cost Management for Google Cloud Platform (GCP)

Some common strategies for optimizing costs on GCP include:

GCP has a series of native tools that can give you insight into and help you optimize your cloud spend. Here's the full list:

  • Cloud SQL idle instance recommender
  • Cloud SQL overprovisioned instance recommender
  • Committed use discount recommender
  • Idle custom image recommender
  • Idle IP address recommender
  • Idle persistent disk recommender
  • Idle VM recommender
  • Product Suggestion recommender
  • Google Maps Platform project management recommender
  • VM machine type recommender