Optimizing your cloud spend is a game-changer for small and medium-sized businesses (SMBs) seeking better operational efficiency and cost savings for their new cloud platform.
The challenge, however, is following the right practices to anchor your cloud spending accordingly.
SparkNav has spoken to many SMBs who dive into cloud solutions without a defined strategy, resulting in their overspend, unexpected expenses, and underutilized resources. This financial strain is avoidable with some targeted strategies and re-assessments of your current IT state.
In this blog, we’ll address the most common pain points SMBs face when managing their cloud spend, and actionable tips to help you get the most out of your investment in cloud solutions.
The most common cloud spend pain-points for SMBs
While every SMB’s use cases, cloud requirements and industry focus differs, most of the obstacles or issues that we hear from our customers come down to five common pain-points:
- Over-provisioning resources: SMBs often allocate more resources from their cloud platform than is needed, leading to increased costs. Without proper monitoring of what you are spinning up in the cloud, it’s easy to overestimate requirements and pay for unused capacity.
- Lack of visibility: Many SMBs struggle with visibility into their cloud usage and expenses, despite most public cloud platforms providing in-built, native software tools to help monitor usage. Without such clear insights, it ends up being challenging for these SMBs to identify where money is being wasted, and where optimizations can be made.
- Idle resources: Unused or idle resources, such as virtual machines or storage, can easily accumulate and drive up costs if your team is not proactively monitoring and logging what you spin up. Many SMBs often forget to decommission resources that are no longer needed, which is entirely avoidable.
- Complex pricing models: Some public and hybrid cloud providers have intricate pricing structures that can be difficult to navigate. Some SMBs may find it challenging to predict costs accurately and optimize spending, but this can be avoided with ample pre-planning and assessment of all vendors – a task that many customers we’ve spoken to have skipped over.
- Unplanned data transfer costs: Data transfer fees between different regions or services can quickly add up. If your SMB does not account for these costs, this leads to unexpected and higher bills.
Acknowledging and understanding these common pain-points – and how each of them are entirely avoidable and unnecessary to go through with proper practices in place – is the first step toward more effective cloud spend optimization. In the following sections, we’ll explore specific strategies to address each of these issues and help you streamline your cloud expenses.
Alternatively, if you are still new to cloud computing and want to be better prepared before going into the nitty-gritty details of cloud spend, we recommend you read our free guide, The Ultimate Guide to Cloud (2024).
Tip #1 – Right-size your resources
A 2024 report by Flexera found that organizations waste an average of 32% of their cloud spend due to over-provisioning, with around 33% of SMB respondents indicating they still struggle to optimize such cloud costs post-migration. Right-sizing is one of the best ways to combat this.
Right-sizing involves adjusting your cloud resources to fit your actual usage needs accurately. This process begins with analyzing usage patterns of your public, private or hybrid cloud platform to properly identify over-provisioned or underutilized resources, and act accordingly.
To right-size effectively, we recommend your SMB uses the tools provided by your cloud provider. AWS Trusted Advisor, for example, offers recommendations for underutilized EC2 instances, and the platform provides several real-world case studies to back its tool, with a social media company reducing its EC2 costs to save $200,000 USD monthly using Amazon’s right-sizing recommendations. Similarly, Azure Advisor can suggest resizing or eliminating underused VMs, helping businesses maintain optimal performance without unnecessary costs.
Right-sizing is not a one-time task but a continuous process, however. We recommend regularly reviewing your resource usage, and adjust as necessary. By continuously right-sizing, you ensure your resources match your actual needs, thus optimizing your cloud spend. Furthermore, implementing resource tagging can help track and manage costs more effectively, ensuring that every dollar spent contributes to business value.
Tip #2 – Implement auto-scaling
Auto-scaling is a process that dynamically adjusts your cloud resources based on real-time demand, ensuring you have enough resources during peak times and scale down during low demand. This approach to your deployment helps prevent over-provisioning, and reduces costs. Auto-scaling also helps in business continuity and disaster recovery (BCDR) by automatically scaling your resources in response to unexpected surges, ensuring business continuity.
Most cloud providers, including AWS, Microsoft Azure, and Google Cloud, offer auto-scaling capabilities as part of their broader cloud platform. These services allow you to set thresholds for scaling actions, ensuring your application and infrastructure always runs efficiently. By using auto-scaling, you can maintain performance and reliability without need for manual intervention.
For example, an education technology SMB called Instructure used AWS’s EC2 Auto Scaling feature, which allows you to add or remove compute capacity dynamically to meet changing demand, to reduce their overall costs by up to 20% while also delivering a performance increase of up to 30% for a smoother and faster user experience.
Ultimately, we recommend you regularly test and adjust your auto-scaling policies to align with changing business needs and market conditions. This proactive approach ensures you are not overspending and are always prepared to meet demand spikes efficiently.
Related reading: How to Choose the Right Cloud for Your Business in 5 Steps
Tip #3 – Set up regular cost monitoring and reporting systems
According to McKinsey (via Forbes), more than 30% of cloud spend in 2021 and 2022 was wasted or inefficient, and that’s largely due to a lack of proactive cost monitoring by companies.
Effective cloud cost management requires continuous monitoring and reporting. Establishing a routine for tracking and analyzing your cloud spend helps identify trends, anomalies, and opportunities for optimization, and is an essential practice that cannot be ignored in your plan.
Cloud providers offer tools like AWS Cost Explorer, Azure Cost Management, and Google Cloud’s Cost Management to help you gain insights into your spending, and we highly recommend becoming familiarized with these solutions (based on your chosen cloud platform) to get control over your costs from the start of your migration. These tools provide detailed billing reports, usage patterns, and cost forecasts, helping you make informed decisions, and because they are typically included as part of your cloud deployment, there’s little excuse not to leverage them beyond poor planning or oversight during the formation of your cloud strategy.
Set up alerts within your respective tool for unusual spending patterns to catch cost anomalies early, and regularly review and reconcile your cloud bills to ensure accuracy and prevent overcharges. Implementing cost allocation tags can help categorize and track spending by department, project, or team, providing greater visibility and control over cloud expenses.
By maintaining a proactive approach to cost monitoring, your business can continuously optimize its cloud spend, ensuring resources are used efficiently and costs are kept under control. This ongoing vigilance is crucial for maximizing the value of your cloud investment.
Tips to optimize your cloud spend: Next steps
It’s clear that SMBs must consider and enact several practices upon your cloud deployment to ensure that your investment in your new infrastructure platform is appropriately cost controlled, and that the specific resources you do end up paying for are what you need right now.
By reading our guide, you’ve taken the first important steps to understanding the importance of cloud spend, and what you need to assess and put in practice ahead of time to ensure your expenses aren’t unexpected, but aligned with your overall IT and cloud strategies for the future.
Understandably, as a SMB, you may not currently have the internal IT expertise or resources to be able to help you enact the aforementioned cloud spend practices and tips detailed in this blog. The next recommended step is to partner with a cloud certified managed service provider (MSP) such as SparkNav to help guide your assessment of your cloud budget and spend, and deployment of optimization practices to ensure you don’t overspend. Speak to a member of our team today to learn how SparkNav can help take control of your cloud spend initiatives.
