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What Is Cloud Optimization? (And Why Is It Important?)

Cloud optimization is not limited to managing cloud spend alone. Discover how it improves cloud visibility, performance, and aligns costs to value.

Is your current cloud cost tool giving you the cost intelligence you need?  Most tools are manual, clunky, and inexact. Discover how CloudZero takes a new  approach to organizing your cloud spend.Click here to learn more.

Whether you've recently migrated to the cloud, or you've been operating there for awhile now, you've likely realized how challenging it can be to understand exactly where your cloud spend goes and what drives your costs.

Using a cloud service provider can offer many benefits, like the ability to easily scale up and down based on need, but unless you're using the right services and tools, your costs can quickly spiral out of control. 

Instead of seeing cost savings that you might expect by operating in the cloud, you may actually see your costs accelerate up. This can sometimes be a good thing (for example, if your business is growing rapidly), but without the right cost visibility, you won't know why your costs are rising and what you can do to optimize your costs.

If this sounds like a familiar scenario, you're not alone. Some 73% of cloud decision-makers said they were having similar challenges as well. This where cloud optimization can come to the rescue.  

In this in-depth guide, we’ll cover what exactly cloud optimization is, why it’s important to consider, examples, and tools to help you optimize your cloud spend. By the end, you’ll have a clear understanding of the benefits of cloud optimization and how you can get started optimizing costs.

Table Of Contents

What Is Cloud Optimization?

Cloud optimization is the process of eliminating cloud resource waste by selecting, provisioning, and right-sizing the resources you spend on specific cloud features. 

In a DevOps environment, cloud optimization refers to determining the most efficient way to allocate cloud resources among different use cases. The goal is usually to reduce waste while increasing performance in the cloud. 

Different companies may have a different cloud optimization definition, depending on their cloud applications. A good cloud optimization strategy can help you see what you are doing right and where you need to improve to make the most out of your move to the cloud and IT spend.

If you already deployed to the cloud, a phrase you are likely to hear repeatedly is cloud management.    

What is cloud management?

Cloud management involves monitoring your organization’s cloud utilization so you can increase your cloud visibility, discover cloud cost savings opportunities, and trim unnecessary features to boost cloud performance. 

Here is the thing.

Cloud optimization is not a one-time deployment that holds forever. It is a continuous improvement process. The process can be an integral part of Continuous Deployment, where developers continually push code changes to improve specific areas of an application in the cloud. 

But you first need to know what’s working and what’s not working to make improvements. 

Cloud management is the process that DevOps uses to track whether efforts put into the application work as expected against specific KPIs. Whether you use Azure, Google Cloud, or AWS, practicing proper cloud management will be a big part of optimizing your cloud utilization.  

What Are Some Examples Of Cloud Optimization? 

While cloud cost optimization is a major component of any solid cloud optimization strategy, it is not the sole focus. Cloud optimization also focuses on improving organization-wide collaboration, software quality, cloud application performance, and continuous improvement strategies.  

We have covered some top ways to optimize cloud operations here, especially if you use Amazon Web Services. But you’ll also see some cloud optimization techniques you can use on other platforms such as Microsoft Azure, Google Cloud, and Digital Ocean.

Other examples include:

  • Choose an instance that fits your basic requirements at the moment or in the foreseeable future
  • Using reserved instances where applicable
  • Use optimization tools to improve cloud transparency
  • Consider using serverless computing and microservices
  • Set up a clear cloud governance structure

But why go through all that trouble? How does cloud optimization benefit you?

Why Is Cloud Optimization Important?

A cloud optimization strategy can help ensure your migration to the cloud pays off almost immediately and in the longer term. 

Cloud optimization is essential for companies that want to see more cloud benefits such as reducing cloud costs, boosting their engineers’ productivity, and moving more operations from on-premises architecture to a cloud environment. 

Here are more cloud optimization benefits to consider.  

1. Practicing cloud optimization boosts visibility 

Peter Drucker, the legendary management consultant, had a quote that resonates with cloud optimization today. He said if you cannot measure it, you cannot improve it. 

Yet you cannot measure cloud performance when you do not know what your cloud architecture is doing behind the scenes. 

Practicing cloud optimization can raise your company’s awareness of how it uses the cloud and the specific tools it employs for it. That can help avoid significant cloud billing surprises, for instance. 

Here is another example.

You may think you use an efficient Pay-as-you-Use model with your cloud services platform. You may think you can auto-scale your cloud needs on-demand without reserving capacity in advance. 

But just because you use one of the popular cloud providers does not mean they automatically enable those capabilities in your account. 

The Pay-as-you-Go billing model does not work as efficiently as in electricity billing, where you pay for the precise amount of power you use. Instead, you may find that you are always over-allocating cloud resources, leading to massive waste on technology


Electricity Usage Vs. Cloud Computing Costs

Credit: Jelastic

Without deep visibility, estimating instances and optimal reserve capacity for your virtual operations becomes a wasteful, recurring problem. The cloud optimization process focuses on discovering underutilized features, over-provisioned resources, or mismanaged tools to find opportunities for improvements.   

2. Cloud optimization helps reduce unnecessary cloud costs

Picture this. At the start of 2020, over 560 out of 750 cloud decision-makers told Flexera they were shifting focus towards increasing cloud cost savings. 

Top Cloud Initiatives

Credit: Flexera, 2020 

That was the fifth year in a row cloud cost optimization would be a top focus. Why?

The report came on the back of news that the average company wastes 35% of its cloud computing budget. In 2017, Flexera showed that percentage translated to $10 billion in wasted public cloud spend. AWS users alone overpaid $6.4 billion in unnecessary cloud costs.

But that is not all.

Most companies also understated how much they wasted by 15%. 

Percent Of Wasted Cloud Spend

The 451 Research findings also discovered that 73% of US and 81% of UK cloud users treated cloud costs as a fixed cost rather than a variable cost. All these cloud cost inefficiencies could be due to one factor that another survey found among 95% of cloud users a few years back. 

The Gartner survey reported cloud service billing heckles most users. Most companies find it tough to query, read, and interpret cloud pricing plans. Cloud service providers do offer somewhat straightforward unit pricing.

AWS Compute Costs

But the sheer number of billing items and raw data tends to be inaccessible to many decision-makers who are not data scientists. So they are unable to offer helpful insights to DevOps to inform optimization decisions in time for curbing spiraling costs.

Using CloudZero, engineering teams can identify specific releases or code  changes that have caused a cost anomaly so they can quickly address the issue  before it costs them thousands of dollars or more.Click here to learn more.

With cloud optimization, teams learn to relate costs to value and price per unit, process, department, customer, segment, or product. That means they can make cost-aware cloud utilization calls in the future based on the insights they gather instead of waiting until the finance department decides.  

For example, using a robust cloud cost optimization tool can help you go beyond improving cloud cost visibility to displaying rich cost insights in a way a specific team won’t struggle to understand.

3. Cloud optimization boosts cloud utilization

Take Amazon Web Services, for example. AWS offers over 200 complete-featured cloud services. AWS also releases over 1,000 cloud platform features in some years, including over 30 new launches in a single keynote event. 

Keeping up with all the new and older features can be overwhelming. Yet if you do not practice optimization best practices, you may miss noticing several unnecessary tools you could be paying for. 

Cloud optimization involves looking out for such opportunities to cut off the dead weight you no longer need. Also, it can help you find the bare minimum cloud services you need to get things done. Or you can discover alternative methods to accomplish similar goals in a cheaper, faster, and leaner way.    

4. A cloud optimization strategy will help improve your engineers' productivity

When engineers do not have to deal with a gazillion features to optimize, they can focus on their primary role; creating new code to solve problems. Employing cloud optimization can help free your DevOps teams from constantly needing to put out fires that end up taking much of their coding time. 

For instance, the thorough analysis a cloud optimization process provides can help reveal which areas your cloud provider handles, such as updating the platform with new capabilities. That way, you can tell what they leave in your care, such as additional cloud security, depending on the pricing plan you bought. 

That means you can spend your teams’ time and skill on the right jobs at the right time to mitigate risks and ensure your applications perform optimally in the cloud.      

5. Optimizing cloud applications fuels innovation and efficiency

When you have your people focussed on the right things for their skills and time, they are likely to discover fresh ways of doing things more efficiently. Alternatively, when you equip different teams with cross-department skills, you can improve decision-making time, effectiveness, and how quickly you can deploy recommendations. 

Take equipping engineers with cloud cost intelligence, for example. It can help prevent overspending before it happens — without suffocating innovation, according to Cloud Economist at 451 Research’s Owen Rodgers. 

The firm found in 2019 that 80% of IT professionals receive overspend alerts before it occurs. Conversely, 68% of people in finance said they received overspend warnings after it already happened, paralyzing their chances of reversing the IT spend in time.    

Unexpected cost fluctuations can cost your company thousands of dollars if  left unchecked or unspotted. To prevent expensive cost overruns, CloudZero uses  machine learning to identify cost anomalies when they happen and immediately  alert the teams who need to know via Slack.Click here to learn more.

Organizations that use cloud optimization are switching to a new cultural paradigm that empowers teams to make effective decisions at their level. The result is an organization that comprises multiple teams that use cloud resources and increase cloud savings optimally.

So, what are some things you can do to boost cloud optimization in your organization?   

What Are Some Cloud Optimization Best Practices And Tips To Implement Today?

Cloud optimization goes beyond optimizing cloud spend. It also highlights the need to share relevant cloud computing goals with specific teams. In return, you can achieve more than just cloud cost savings

It can also make your entire organization aligned with your cloud goals, helping you achieve them faster. To help you do that, here are some best practices for cost optimization you’ll want to implement right away.

1. Get the full picture

Start collecting your cloud usage and cost data in a way that is easy to query and track over time. Cloud platforms offer some help here. For example, if you use AWS, the AWS Cost and Usage Report may be a good place to start.

You’ll want to create hourly AWS Cost and Usage reports (CURs). 

Keep in mind that the cloud platform does not back-populate that data. So it is not only helpful if you’d like to add a dedicated AWS cost optimization tool to your arsenal, but it also does not cost much. 

Here is the thing. If you are not aware of what’s going on in your cloud environment, you may struggle to collect the right cloud intelligence you need to compare costs versus returns. That can lead to rampant overspending. 

See top spending changes and cost anomalies at a glance with CloudZero’s Cloud  Cost Intelligence platform. This view is helpful for engineering and finance  teams alike, to see cost fluctuations at a glance and then drill deeper into  the changes or services that are driving those costs.Click here to learn more.

For example, 80% of participants in a 2019 survey admitted to 451 Research they were poor at managing cloud financials. So, 69% of the respondents regularly overspend over 25% of their cloud budget due to cloud cost blindness. Another 57% said they worried daily about managing cloud costs, with 37% afraid they were already operating in the red. 

2. Gather context

You may have already noticed this frustrating occurrence. Cloud platforms provide usage and cost reports that suit how they work — not how your organization works. 

The reports only show you how much of their cloud platform’s services you used in a specific duration. But they give little insight into the specifics of how your business performed during that period. 

For example, those reports do not show you how much you spent on a specific product, team, or customer. That means they do not answer the cost vs. return question for a specific unit of your business operations. 

So you might not know: 

  • Whether spending more of your cloud budget on a specific product or customer will yield more returns 
  • If raising prices or rates is the way to go 
  • Or removing a costly feature that most people do not use is the smart way to proceed
  • Or to offer the expensive feature in only the paid tiers
  • If switching platforms could help lower costs or performance issues
  • Whether re-factoring your applications can help resolve issues in the cloud

You can use an AWS cloud optimization tool to collect insights that apply to your business. More on tools to help you gain full visibility into your cloud costs later. 

3. Create company-wide what and why standards

When you have a solid idea of how your organization uses the cloud, and what it uses it for, you can focus on removing components that do not align with your quality, performance, or cost goals. For most organizations, this means ensuring cloud spend directly correlates to value, such as revenue per customer. 

But for that to happen, engineers and DevOps teams need to know how their everyday decisions impact cost before they push things out into production. If you are using AWS, a good place to start is decoding your AWS bill

When you create organization-wide standards for what resources are available and when to use them, AWS costs, quality, or performance in the cloud should never be a surprise.

4. Measure performance

Next, see if your cloud deployments live up to your expectations by comparing results with what you expected. Many organizations compare cloud performance with the on-premises performance they experienced before migrating to the cloud. 

Can you do the same? Or did you deploy directly to the cloud when you started the business?

In that case, you can still use a cloud optimization tool to help you see what areas you could improve compared to expectations or specific KPIs. 

What Are The Top Cloud Optimization Tools?

Cloud infrastructure will continue to grow. That may be a good thing, except if you are currently experiencing cloud inefficiencies, the issues will probably balloon — not resolve on their own. 

Instead, you can take matters into your hands and use one of the best cloud optimization solutions here to boost your efficiency levels.   

1. CloudZero


CloudZero is a cloud cost intelligence platform that makes it easy to derive rich insights from complicated AWS billing reports. CloudZero aligns AWS cost data to units, customers, products, and business KPIs so you can see how your business is doing compared to how much you spend on Amazon Web Services. 

High-performing engineering teams use CloudZero to see who spends what, where, and why. With such high visibility, DevOps teams can discover how their everyday decisions affect organization-wide cloud spending goals.  

2. AWS Cost Explorer

AWS Cost Explorer

Amazon Web Services continues to be the dominant cloud platform today. The AWS Cost Explorer is the built-in tool AWS offers for generating AWS usage and cost reports for the last 13 months. The tool is ideal for DevOps and finance teams that need only a high-level perspective into their AWS costs.

If you run a minor operation and do not intend to scale in the future, the tool can translate to removing extra cloud optimization costs for you. But if you need rich insights you can use to inform your cloud spend budget, look elsewhere.     

3. Azure Cost Management + Billing

Microsoft Azure

This is the default cloud cost optimization tool public cloud provider Microsoft Azure offers. Like the AWS Cost Explorer, it provides a high-level perspective into cloud costs. 

You can use it to set budgeting notifications, integrate into AWS and PowerGI (using Cloudyn), and won’t have to invest extra to access the overviews. Still, it doesn’t let you see neglected or idle resource costs to tell how much you are paying without actually using.   

4. Amazon CloudWatch

Amazon CloudWatch

If you want to check your EC2 instances as an AWS customer, CloudWatch may help. The tool will help you set alerts to receive notifications on changes happening in different AWS services. 

For example, you can choose to receive an alert when your EC2 utilization dips below a certain threshold (%). That can help you determine if that instance is underused, unnecessary, or over-provisioned, so you can right-size it accordingly.   

5. BMC Multi-Cloud Management 


If you want to explore a multi-cloud strategy to take advantage of different cloud provider’s best features, this tool can help. 

BMC Multi-Cloud Management is especially ideal for providing multi-cloud visibility, automating dependency mapping, and ensuring tight security over hybrid assets. The goal is to help engineers and DevOps teams maintain seamless operations in a multi-provider environment.  

Optimizing Your Cloud Spend

Not sure where to start when it comes to cloud management and optimization? On the cost front, here are five cloud cost mistakes we often see in AWS environments. You can use this as a checklist to pick off low-hanging fruit and optimize costs right away. This is a great first step on your cloud management and optimization journey. 

If you’re ready to start taking a more forward approach to optimizing cloud costs, measuring unit cost (like cost per customer, feature, and dev team), and shifting cost decisions left, take a look at CloudZero. 

CloudZero is the cloud cost intelligence platform that connects technical decisions to business results. To see how CloudZero can help you optimize your cloud spend, Schedule a demo today.

CloudZero Team

Author: CloudZero Team

This blog post was written and reviewed by the CloudZero team. Combined, our team has more than a quarter century of experience in the cloud cost space. Every blog post is extensively researched and reviewed by several members of our team for accuracy and readability.


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