CloudZero’s Guide To Cost-Efficient Cloud Spending

The cloud revolutionized human life. Yet, there’s an enormous gulf between how much we use the cloud and how much we understand about the cloud.

The resources below will explain where the cloud came from, detail how the cloud works, and introduce basic concepts around cloud architecture and management.

Start here: The Cloud Atlas Podcast: How The Cloud Reshaped Human Life

The evolution of the cloud

Cloud architecture and scalability

General cloud monitoring and management

Migrating to the cloud

Ensuring a successful cloud migration

A disconnect between the people who buy cloud resources (engineers) and the people who pay for cloud resources (finance professionals) led to an abundance of wasteful spending in the cloud — and, in turn, the advent of cloud cost optimization strategies and techniques.

Reducing how much you spend in the cloud is more than just buying better — it’s also about building better. This section will cover the basics of cloud cost optimization, how it’s evolving, and why a traditional cost optimization approach isn’t enough for modern companies operating in the cloud.

Start here: The Modern Guide To Managing Cloud Costs

The basics of cloud cost optimization

Ways to immediately reduce your cloud spend

Developing a cloud cost strategy

Monitoring and tracking cloud spend

Improving efficiency in the cloud

Traditional cost optimization/rate optimization/ Committed-use

Specialized cost optimization

If you’re at all familiar with cloud cost challenges, you might have heard of FinOps — short for “Financial Operations,” and concerned with helping companies maximize the return on investment of every cloud dollar they spend.

How can you get started creating an effective FinOps program? The resources below will help you better understand the evolution of FinOps — and how you can implement and improve your own FinOps practice.

Start here: FinOps 101: An Intro To The Basics Of FinOps

The basics of FinOps

Implementing and improving your own FinOps practice

Staying up-to-date on the latest FinOps developments

Measuring FinOps success

Every engineering decision is a buying decision. Yet, engineers often lack the cost visibility needed to understand exactly how their architectural decisions impact their organization’s spending in the cloud. 

Traditional cost optimization focuses on buying better (i.e., maximizing discounts, utilizing Savings Plans, buying Reserved Instances, etc.). But this approach isn’t enough. You also need to build better. By giving engineers better cost visibility and fostering an engineering culture that considers costs, you can build more cost-efficiently (i.e., profitably) in the cloud. 

CloudZero calls this “Engineering-Led Optimization.” This section covers all the finer points of Engineering-Led Optimization — and how you can foster a cost-conscious engineering culture.

Start here: Building Better In The Cloud: Getting Serious About Optimizing Cloud Spend

Engineering-led optimization

Cost metrics engineering should monitor

Habits for a cost-aware culture

The first stage for SaaS startups isn’t always a metrical one. Early in the life of a startup, the most important thing is finding product-market fit — developing a product that people love, and getting it in front of as many people as possible.

But often, companies make dire cost sacrifices in search of product-market fit. Eventually, all SaaS companies need to start prioritizing key metrics, like cost of goods sold (COGS), the Rule of 40, gross margin, and more, to ensure healthy and sustainable scaling.

Here, read about all these and more — and put yourself on a track to scalable, sustainable innovation.

Start here: 5 Myths About Cloud Cost Optimization Every SaaS Company Should Know

Understanding COGS for SaaS

Improving SaaS profit margins

Surviving tech slowdowns

Cloud costs for FP&A

Cloud costs for CFOs

For SaaS and tech companies, the cloud plays a significant role in product creation and delivery.

Yet, this can create a scenario ripe for conflict: Engineers make important decisions about features and functionality without knowing how those decisions will impact spending — and finance continuously gets surprised by seemingly exorbitant cloud bills.

Setting a cloud budget is the obvious solution, but oftentimes budgeting is perceived as restrictive, or a drag on production.

This section will cover budgeting and forecasting in the cloud, how you can set budgets without stifling innovation, and how you can accurately forecast cloud spend.

Budgeting

Forecasting

When companies fail to effectively manage their cloud costs, it’s usually not for a lack of trying. Really, they run into a common issue: Different organizations speak different languages, and much is lost in translation.

A cloud engineer has vastly different expertise than a CFO. So, when a CFO comes calling with a huge AWS invoice, asking engineers to cut their cloud spend by 20%, it’s rarely a productive discussion.

FinOps is all about getting different stakeholders on the same page. Here, read everything about this crucial layer of FinOps — and get all your cloud stakeholders speaking the same language.

Engineering and finance alignment

Engineering and product alignment

Engineering and finance alignment

Cloud cost allocation involves identifying, aggregating, and allocating cloud spend among specific use cases within a company. 

Most companies use tagging to allocate their spend. Yet, challenges like misspelled and mislabelled tags, shared resources, and untaggable spend make allocating costs this way nearly impossible.

This section will cover tagging in more detail, including the challenges tagging presents and ways to overcome them using more modern cost allocation methods. 

Start here: 

Tagging basics

Best practices for tagging success

Overcoming tagging challenges

Start here: Overcome Endless Tagging: Cloud Cost Allocation Without The Effort (Video)

Code-driven cost allocation

Shared cost allocation

Viewing all your spend through a “single pane of glass”

The term “unit economics” refers to the revenue and cost of a business measured on a per-unit basis. Often, they describe how a specific unit impacts a company’s costs, revenues, and other essential financial metrics.

For many tech and SaaS companies, this unit cost is cost per customer. But, unit cost can be any metric that matters to your business. This includes cost per feature, per product, per team, per cloud environment, or even specific units of value like cost per stream, per ride, per purchase, etc.

This section will cover unit costs in more detail, including why measuring unit costs are important and how you can use unit cost to reduce spending, build more efficiently, and become more profitable in the cloud.

Start here:  The Ultimate SaaS Unit Economics Guide: Calculating Your Unit Costs

The basics

Measuring cost per customer

Using unit cost to reduce cloud spending

Understanding all of the different cloud services available today is a daunting task. AWS alone has more than 200 services, and then there’s Azure and GCP, as well as more specialized services like Snowflake, MongoDB, Databricks, and others. 

Choosing the right ones and understanding how those choices will affect your costs is crucial to laying a foundation for long-term cloud cost efficiency.

That’s why we created the guides below to help break down each service and cloud provider, give you a better understanding of how each service works (in layman’s terms), and highlight pricing in a simple and easy-to-understand way.

If you’re evaluating different AWS resources and pricing, try CloudZero Advisor, a free tool to compare the finer points of AWS services like EC2, RDS, ElastiCache, and more.

Evaluating the top cloud providers

Evaluating AWS services

Evaluating Azure services

Evaluating GCP services

Evaluating specialized software services

For cloud engineers, Kubernetes is a tool as powerful as it is difficult to understand — much less to optimize. Kubernetes offers unparalleled compute flexibility, spinning resources up and down on an as-needed basis, but migrating to Kubernetes causes most organizations to lose total cost visibility.

In this section, we offer a variety of Kubernetes resources. Check out the blogs, books, and guides below for everything from Kubernetes basics to the finer points of Kubernetes visibility and optimization. 

Understanding the basics of Kubernetes

Improving your Kubernetes practices

Kubernetes vs. other containerization platforms

Getting better Kubernetes cost visibility

Start here: The Ultimate Kubernetes Cost Monitoring And Management Guide

Evaluating Kubernetes cost solutions

Most companies’ first foray into cloud cost management comes via their cloud provider’s native tool (e.g., AWS Cost Explorer, Microsoft Cost Management, GCP Cost Management). But there comes a point where these tools don’t provide the visibility or features you need to allocate 100% of your cloud spend or to understand exactly what’s driving your cloud costs.

The resources below will introduce you to more powerful solutions — and what to consider when evaluating different cloud cost platforms.

Start here: What To Look For In A Cloud Cost Tool: Must-Haves And Red Flags

Building vs. buying a cloud cost solution

The best solutions available today

Guides to help you compare solutions

Comparing native cloud provider tools

CloudHealth versus other solutions

Comparing other cost tools available today