Why Traditional Cloud Cost Optimization Isn’t Enough

The cloud holds such promise. It’s the promise of near-infinite scalability, power, and growth potential.

Companies switching to the cloud, especially in the early days of the 2010s, were seduced by the possibilities of what could happen if they just spent a little more, raced against their competitors a little faster, or achieved just a bit more product functionality.

Could they be the next Twitter? The next Uber? Or something even bigger and better than what had come before?

That race to the top, in the relatively un-pioneered land of the cloud, meant trading cost efficiency for growth at a rate that boggles the mind for anyone now facing the prospect of scaling that spending back down again.

If cloud spending continues at the same rate, estimates say we will see $1 trillion spent globally on the cloud in 2028, roughly a third of which — or $300 billion — will be utterly wasteful spending.

In the current economy, where investors have suddenly decided to read the writing on the wall and pivot to supporting profitable companies instead of ones that churn out massive growth at all costs, those numbers are more than a little unsettling.

Now, rather than driving toward rapid growth, cloud-based companies must redefine their priorities and make a quick shift toward cloud cost optimization before their budgets become too unwieldy for investors to support. However, this is easier said than done, if you’re coming at it from the traditional angle.

Chances are, your organization has already started looking for ways to cut costs and found the traditional solutions lackluster and underwhelming. Let’s talk about why you might be feeling this way — and what you can do to fix it.

Here’s Why You Need A Fresh Approach To Cloud Cost Optimization

In an effort to pull back the reins on cloud spending, many cloud-based companies have turned to traditional tactics: solutions like commitment-based discounts, private pricing agreements, and other savings plans through their cloud providers.

Commitment-based discounts allow your organization to commit to a certain level of usage in the future. Generally, the farther out you can guarantee you’ll be a valuable customer, the better the deal your cloud provider will be willing to make.

If you can predict with any degree of accuracy how many resources you’ll need in the coming months or years, you can shave a decent percentage off the top of your cloud bill.

Private pricing agreements typically allow high-dollar spenders to negotiate with their providers for a better rate than the one that applies to the general public.

These techniques are useful, certainly, but they simply can’t compete with the alarming, snowballing rate of spending.

And while 20% seems great when you slice it off the top of your cloud bill, it actually does nothing to eliminate your wasted spending or optimize your spending strategies to prevent future waste.

If your company wastes $500,000 per year without anyone realizing where that money is going and why, saving 20% with a provider discount means you’ll still be wasting $400,000 every single year.

Worse, if you haven’t figured out where the waste is going and why it keeps happening, it’s more than likely that your cloud bill will continue to grow above and beyond where it was before. Therefore, traditional cloud cost optimization solutions, like discounts, are not your best option for a true, long-term fix.

The Solution Is To Identify And Manage Your Company’s Unit Costs

What if you could peer inside your cloud spend and get a clear visual on where your money is actually going?

What if you could see how much you’re spending to support each individual customer, what it cost to develop your latest product, and even the costs associated with third-party services such as Kubernetes or Snowflake?

If you could do that, you could take actual control over your spending. You could focus your efforts toward attracting customers that generate more income relative to your expenses, optimize your engineers’ build choices to prioritize long-term cost efficiency, or even shut down an expensive feature that hardly anyone ever uses.

In other words, tracking these granular details — the unit costs for each variable within your business — gives you the ability to eliminate your wasted spending, make smarter build decisions, and completely refresh the way you view your cloud bill.

The tricky part is drilling down into your cloud bill to find those unit costs. Without the right platform, the prospect can be daunting, if not impossible.

That’s why CloudZero developed our platform: to help cloud-based companies take control of their spending for good. With CloudZero, you can view where every dollar goes and use that information to make informed decisions about what to cut. In time, you’ll even see new opportunities for growth becoming apparent in your company’s trends.

to see CloudZero in action.

Author: Cody Slingerland

Cody Slingerland, a FinOps certified practitioner, is an avid content creator with over 10 years of experience creating content for SaaS and technology companies. Cody collaborates with internal team members and subject matter experts to create expert-written content on the CloudZero blog.