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This guide explains the fundamentals of cloud cost management, how it has evolved, and the best tools you can use to manage costs.
Managing cloud costs and knowing exactly where your cloud spend goes — and why — can be a nearly impossible task without the right tools. If you're using cloud-native technologies such as microservices, containers, and Kubernetes, you probably don't have full visibility into your costs.
AWS bills often bury this information behind rows of text.
An ideal platform should let you identify which products and features drive your cloud spend or which customers are causing you to spend more. With this cost intelligence, you can make informed engineering and business decisions, such as how to price a product or design cost-optimized software.
Some of the world's biggest companies, like Netflix and Lyft, already know this — and now you can implement the same best practices and principles for cost management that these top tech brands use.
In this guide, we’ll take a closer look at the practice of cloud cost management, its benefits, and the cloud cost management tools you can use to get started.
Table Of Contents
Cloud cost management, sometimes called cloud cost optimization, is the practice of monitoring, measuring, and controlling cloud spend on providers like AWS, Microsoft Azure, and Google Cloud. The goal is to find ways to optimize costs and maximize your cloud investment.
Traditionally, cloud cost management has focused on waste reduction efforts, such as eliminating under-utilized or forgotten resources and optimizing purchasing decisions (e.g., reserved instances and savings plans).
However, as companies evolve to adopt next-generation cloud services — cloud cost management is increasingly focusing on architectural optimization. Through this lens, applications can be built so that infrastructure is highly elastic — so your company only pays for what you and your customers use.
For example, serverless options, like AWS Lambda, offer an incredibly granular level of on-demand infrastructure — down to the millisecond. With the right architecture, you can build products utilizing these services that tightly align cost and customer utilization.
Beyond optimizing software architecture, organizations should also look to measure unit cost, COGS, and cost per customer as part of their cloud cost management strategy. Increasing cloud costs aren’t always a bad thing. For example, it’s normal for a business to see their AWS bill go up if they are bringing on more and more customers each month.
What’s more important to know is whether your unit economics are increasing, decreasing, or remaining flat while you onboard these new customers.
If, for example, cost per customer is increasing, this may be a sign that one or more of your customers are using your product more than others. Knowing this, you’d want to figure out how those customers are using your product (e.g., if they are using a specific feature a lot) and from there, decide if there are ways to can optimize that part of your product for lowered costs or decide if you need to change up your pricing structure.
Cloud cost management has many important benefits that are interconnected, straightforward, or hidden. These benefits include being able to:
Here are the best cloud cost management tools available today — that will help you reduce, optimize, and understand your costs.
CloudZero is not your typical cloud cost management tool. As opposed to producing rows and columns of absolute cloud costs that provide little or no business insight, CloudZero digs deep and breaks down costs in a way that enables you to see the where, when, and how of your cloud spend — all without endless manual tagging.
This cloud cost intelligence platform helps engineers become more cost-conscious, aligns engineering with finance, and puts cloud costs in the context of your specific business.
With CloudZero, you can:
CloudZero can also help you forecast future costs based on historical usage data to reduce monthly surprises.
CloudWatch is AWS' native tool for managing cloud costs. Because it pulls metrics and logs from over 70 AWS applications, services, and resources in near-real-time, it provides in-depth AWS cost reporting. Then it displays them on a single dashboard for more straightforward computation.
You can also collect custom metrics for your AWS application, set budgets, set cost anomaly alarms, and automate actions on ECS, EKS, and Kubernetes clusters to respond to changes in costs.
AWS Cloud Explorer, AWS Cost and Usage Report, and AWS Budgets are other native AWS cost management tools you can use in combination with Amazon CloudWatch.
Like CloudWatch to AWS, Azure Cost Management + Billing is the cloud cost management tool native to Microsoft’s Azure Cloud Service.
Like other native tools, you get the must-haves, such as monitoring Azure cloud costs, cost analysis, budgeting, exporting cost management data, and seeing cost optimization recommendations based on Azure cost management best practices. The tool also lets you manage billing data from Azure and AWS if you use both in combination.
Densify includes a cloud resource optimization tool in its platform. You can see several cost savings opportunities and methods for lowering your cloud computing charges. Densify can alert you if you are over allocating resources to instances or using an inefficient family of instances in the first place.
Virtana Optimize, formerly Metricly, is a cloud optimization platform with several cloud cost management features. It can help you identify wasted resources, do rightsizing, analyze cost vs. utilization reports, receive Azure VM instances and Amazon EC2 instance optimization recommendations, and even plan the most cost-effective and smooth cloud migrations.
The ParkMyCloud platform offers a valuable tool for organizations using public clouds like AWS, Azure Cloud, Google Cloud Platform, and Alibaba Cloud.
You can control costs by rightsizing and scheduling when your resources run and stop. You can also create reports and share cost insights via Slack and Teams, integrate with enterprise tools like monitoring and CI/CD tools, and even override schedules when needed.
With Harness you can track usage data, including utilized, unallocated, and idle resources by the hour.
Harness does not quite map costs to features or tie costs to specific projects, such as deployments, but it does provide decent context for cost reporting. It also includes cost anomaly detection and alerting to help you respond to potentially expensive activities.
As a financial management tool for monitoring, reporting, and analyzing cloud costs, Apptio’s Cloudability offers budgeting and forecasting, and rightsizing capabilities.
In addition, you can use it to plan reserved instances, manage container costs, find anomalies and set alerts, as well as uncover opportunities for cost savings. Cloudability also integrates and pulls data from cloud monitoring tools like PageDuty and DataDog to provide more in-depth insights on cloud costs.
Team members who want more visibility into multi-cloud environments might find the Flexera cloud cost management tool useful.
This tool includes many of the "standard" features of a cost management tool; cost analysis, reporting, and forecasting. However, it also offers cost allocations by cost center and team, automatic budget alerts, and decent visibility into private and public clouds.
VMware's CloudHealth is their native cloud financial management tool -- although there is a CloudHealth for AWS version.
You can use CloudHealth’s showback and chargeback features to increase cloud cost accountability — so you can see what cost centers are driving up your cloud costs. Then, you can monitor your cloud costs over time and use that data to predict future cloud expenditures. It also empowers you to see wasted spend, rightsizing opportunities, and export cost reports.
If you want to consolidate cloud billing data from both public and private clouds without using error-prone methods such as manual spreadsheets and custom scripts, CloudCheckr can also help.
The CloudCheckr Finance Manager tool is fully automated, so it’ll set your engineers free to innovate and finance teams up for cost insights that improve cloud cost planning and optimization strategies.
Ultimately, your cloud cost management tool should give you complete visibility into your cloud spend — letting you know where your spend goes, how, and why — and enable you to make informed engineering, product, and business decisions with cost in mind.
Some of these tools will allow you to monitor spend or reduce costs — but CloudZero is the only platform that connects costs to the business metrics you care about.
On top of traditional cost optimization and management features, CloudZero also aligns costs with cost per customer, COGS, and unit costs like cost per feature, product, team, environment, and more.
CloudZero enables engineering teams to drill into costs from a high level down to the individual components that drive your cloud spend — and see exactly what AWS services cost you the most and why. Finance can use the platform to better understand what’s driving your AWS bill and distinguish between healthy growth and excess spend.
CloudZero is the only solution that enables you to allocate 100% of your spend in hours — so you can align everyone around cost dimensions that matter to your business.