5 reasons why your cloud costs can get out of control

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There are thousands of tips and tricks you can use to keep on top of your cloud costs. However, unless you follow a step-by-step approach, something will creep up on you. 

Even after years of working in the cloud, I still fear receiving emails from AWS with subject lines like: “Your AWS invoice is ready”. The invoice might be ready; I am not. That email will stay in my inbox for days until I gather enough courage to open it. That dynamic of ignoring the email while being afraid is a habit. An unsettling habit that consumes mental energy, almost always for nothing: my AWS invoice is as expected or less.

In this article, I provide an ordered list of five reasons why your cloud costs may be out of control and how to implement new routines to control them.

1. You don’t have visibility of your cloud costs

As any horror movie fan knows, the most basic fear is the fear of the unknown. The same fear you get when data is not accessible—not having access to information while responsible for paying, or even worse, approving the payment is horrible.

The good news is that it’s easy to get regular data but the approach is different depending on how you buy AWS services:

  • If AWS sends you the invoices: use the tools under the ‘Cost Management’ umbrella starting with Cost Explorer.
  • If you work with a reseller: access to the AWS cost management tools should be blocked but your reseller should provide an alternative. 
  • If you buy AWS through Strategic Blue: you have access to a set of dashboards that track costs down to the penny.

To gain complete visibility of your cloud costs, you must ensure your AWS account has the right access and check that the costs displayed in Cost Explorer match the invoices you receive.

2. You don’t understand your cloud costs

Cloud cost varies with consumption: it goes up and down. It can be unsettling to see spikes and dips, especially when what is causing them is unknown. Like me, you may be curious. why you spent 5$/h last week, and are now spending $8/h. You’ll dig deeper by using new tooling, and discover that Sagemaker (or EC2, or Lambda, or S3, or Snowball, etc.) is the reason for the cost increase. There is also a good chance that you don’t know much about the tool that is costing you money.

The best way to understand your costs is to ask the AWS tech team and work together to convert the tech jargon into things that you can understand. Explain to your tech team that instead of saying ‘we’ve set up a new dev environment with replicated data from prod’. You’d prefer, ‘due to a new customer, we set up AWS resources so that the newly-hired developers can work on it.’

3. Your tech team don’t know how to reduce your cloud costs

The basic cost equation of cloud is simple: Cost = Usage * Rate

To reduce cost, there are two levers: usage and rate. Reducing usage is technical. In the cloud, you should always turn things off when they are not in use. For example, turn off non-business critical servers at night or during the weekends. You can also use auto-scaling: an automated way to reduce or increase compute power based on your usage.

Reducing rates is more of a procurement and financial activity, and it’s possible to lower rates in exchange for commitments. There are three types of approaches:

  1. Spot instances. You want to use your spare servers for a 70%+ discount, but those servers can be taken back at any time with a two-minute warning.
  2. Commitments. You guarantee that you will keep a certain type of server in a specific region and running for a certain time (12+ months) in exchange for a 15-30% discount.
  3. Enterprise Agreements. You promise to consume quite a lot of money over the next three years for a discount.

Each option comes with some risks. You are getting the discount because you are removing some risk from the cloud vendor. 

4. You’re unaware of the risks that come with discounted rates

Keeping cloud costs under control is a continuous task, and each discount comes with some risks:

  • Spot instances can be turned off at any point or replaced with a different server type. If your architecture cannot handle it, you will experience operational issues, downtime, and possibly unhappy customers.
  • Commitments can be wasted and are like rent: you pay even if you don’t use the resource. It is essential to pay attention to the commitment utilisation.  
  • Enterprise Agreements are a different type of commitment. When signing one, you agree to consume a certain amount by a certain time. If you didn’t spend as per your contract at the end of the agreed period, you would have to pay the difference without any benefit.  

Making sure those things don’t happen is what we do at Strategic Blue. We pay attention to all of the above regularly. Making sure you can keep cloud costs under control without using your team or the tech team’s precious time. 

5. You require additional support to manage your cloud costs

Do you require more control over your cloud costs? This is my job at Strategic Blue! Our Cloud FinOps Consulting team exists to go beyond the documented way and to create a unique way for you to control your cloud spend. 

We manage the following solutions:

  • Cloud FinOps strategy
  • Cloud FinOps organisation
  • Cloud pricing models
  • Unit economics
  • How to include cloud cost as a performance metric in all IT projects

And so many more. Your organisation is unique, and this is about making use of that uniqueness. Get in touch to see if we can help you!

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