Slash Your AWS/Azure Bill: 7 Steps to Cut Cloud Costs by 20%

In today’s dynamic tech landscape, controlling cloud expenditure is paramount. As organizations increasingly adopt multi-cloud strategies, identifying areas to reduce cloud spend becomes complex. However, with a structured approach, significant savings are achievable. This article provides seven actionable steps to help CTOs, Cloud Architects, and DevOps Leads reduce their AWS or Azure bills by up to 20%. We will explore strategies for eliminating waste, optimizing resources, and implementing sustainable cost governance practices.

The Urgency of Cloud Cost Optimization

Many organizations find themselves grappling with escalating cloud costs. The ease of provisioning resources in AWS and Azure can inadvertently lead to a sprawling pile of digital real estate. This slow, silent creep is one of the most frustrating – and often overlooked – cost drivers. More than 80% of container spend, for instance, can be wasted on idle resources, and the percentage of organizations participating in commitment-based discounts is decreasing according to recent research. Therefore, identifying and implementing ways to optimize cloud costs is more urgent than ever. This isn’t about being cheap; it’s about smart cloud cost optimization. It’s about eliminating cloud waste and ensuring every dollar spent delivers real value.

Understanding Your Cloud Bill’s Components

To effectively reduce your cloud bill, you must first understand its main drivers. Your bill isn’t a single number but a composite of various factors, each with its own optimization levers. Key components include compute, storage, networking, and managed services. Each of these areas presents unique opportunities for savings. For example, storage costs can mysteriously grow overnight, often doubling without immediate explanation.

1. Eliminate Idle and Underutilized Resources

One of the most significant sources of cloud waste stems from idle or underutilized resources. These are assets that are provisioned but not actively contributing to your business objectives. Identifying and terminating these resources can yield immediate savings. For instance, unattached EBS volumes on AWS are a prime example of egregious waste, consuming resources while providing zero value.

Tools and services can help detect these inefficiencies. Datadog’s Cost Recommendations, for example, analyzes your specific environment to highlight idle or underutilized resources. It also detects where you’re using previous-generation technologies, prompting you to modernize and spend less. For instance, it reveals where you’re still using Amazon EBS gp2 volumes, prompting a migration to gp3, which can cost up to 20% less as noted by Datadog.

Specific Actions for Idle Resources:

• AWS: Terminate unnecessary load balancers or AWS CloudTrail trails that are no longer needed.
• Azure: Scale down or terminate idle Virtual Machines (VMs) and delete unattached managed disks. Reduce the replica count in Azure Container Apps if not fully utilized.
• Google Cloud: Resize Compute Engine instances that are consistently underutilized.

2. Optimize Storage Costs

Storage, particularly block storage like Amazon EBS, is a common culprit for spiraling costs. The ease of provisioning and its critical role in applications make it a silent budget killer. Understanding storage volume types and provisioned size is crucial.

General purpose SSDs (gp2/gp3) are workhorses, but gp3 is generally the best choice for most workloads. It offers predictable performance and a lower price point, often up to 20% cheaper than gp2. Provisioned IOPS SSDs (io1/io2/io2 Block Express) are for I/O-intensive workloads but come with a premium for both capacity and IOPS. You pay for every gigabyte provisioned, not necessarily what’s used. A 1 TB volume allocated “just in case” but only using 50 GB represents significant cloud waste.

Strategies for Storage Optimization:

• Migrate from gp2 to gp3: This is a quick win for lowering EBS costs, offering better performance and cost efficiency.
• Delete Unattached Volumes: Regularly identify and delete EBS volumes that are not attached to any instance. These are often created when an EC2 instance is terminated without the “Delete on termination” flag checked.
• Automate Snapshot Cleanup: Implement automated lifecycle policies for snapshots using services like Amazon Data Lifecycle Manager. This prevents snapshot sprawl, which can lead to expensive collections if not managed strictly. Remember, deleting snapshots doesn’t always mean immediate cost savings due to incremental nature and data block dependencies.
• Data Tiering: For less frequently accessed data, consider using lower-cost storage tiers like Amazon S3 Glacier or Azure Archive Storage.

3. Leverage Commitment-Based Discounts

Cloud providers like AWS and Azure offer significant discounts for committing to usage over a period, typically one or three years. These include Reserved Instances (RIs) for AWS and Azure Reserved Instances or Savings Plans. The challenge lies in accurately forecasting usage to avoid over-committing or under-utilizing these commitments.

However, the percentage of organizations participating in commitment-based discounts has been decreasing. This suggests a missed opportunity for substantial savings. Therefore, it’s vital to re-evaluate your commitment strategy. Laddering commitments, where you purchase them at different intervals, can provide flexibility and hedge against rapidly changing needs.

Best Practices for Commitments:

• Accurate Forecasting: Use historical data and projected growth to forecast your resource needs realistically. Tools that provide cloud spend forecast accuracy are invaluable here.
• Utilize Savings Plans: AWS Savings Plans and Azure Savings Plans offer more flexibility than traditional RIs, allowing commitment across instance families, regions, and even compute services.
• Monitor Utilization: Continuously track the utilization of your purchased commitments. If utilization is low, investigate why and consider adjusting your strategy.
• Consider Convertible RIs: For AWS, convertible RIs offer some flexibility to change instance attributes if your needs evolve.

4. Implement Robust Tagging Policies

Effective resource tagging is foundational for cloud cost management and optimization. Tags allow you to categorize and track costs by project, team, application, or business unit. Without a consistent and comprehensive tagging strategy, cost allocation becomes difficult, and identifying cost ownership is nearly impossible.

A reliable tagging strategy ensures that tag compliance is enforced on ingest. Missing critical tags like application, environment, or owner email should be flagged within 24 hours and routed back to the responsible engineering team. This proactive approach fosters accountability and enables granular cost analysis. This is a core component of a structured cloud cost optimization framework.

Key Tagging Strategies:

• Mandatory Tags: Define essential tags that must be applied to all resources (e.g., `application__c`, `env__c`, `owner_email__c`).
• Consistent Naming Conventions: Use clear and consistent naming conventions for tags to avoid ambiguity.
• Automated Enforcement: Implement tools or policies that automatically enforce tagging compliance.
• Regular Audits: Conduct periodic audits of your tagging strategy to ensure its effectiveness and update it as needed.

5. Rightsize Your Compute Resources

Overprovisioning compute resources is a common and costly mistake. Teams often request larger instances than they actually need, “just in case” for future scaling or unexpected spikes. This leads to paying for idle CPU, memory, and network capacity.

Resource utilization rates are a critical Key Performance Indicator (KPI) here. They show how much of your provisioned capacity is actually being used. Identifying low-utilization resources (e.g., CPU consistently below 20%) and mapping instance types to actual workload needs is essential. Tools like OptimoScheduler can help automate this by scheduling resource usage based on working hours, reducing unnecessary runtime.

Steps to Rightsize Compute:

• Monitor Utilization Metrics: Regularly track CPU, memory, and network utilization for your instances.
• Analyze Workload Needs: Understand the peak and average resource requirements of your applications.
• Downsize or Autosize: Based on utilization data, downsize oversized instances or implement auto-scaling groups to adjust capacity dynamically.
• Leverage Cost Recommendations: Use cloud provider tools or third-party solutions that offer rightsizing recommendations.

This aligns with the KPI of rightsizing efficiency, which indicates your optimization maturity. For teams looking to streamline these steps, tools like OptimoScheduler can help schedule resource usage based on working hours using a simple, calendar-style interface, reducing unnecessary runtime without scripting or manual cleanup.

6. Optimize Database and Managed Service Spend

Databases and other managed services can represent a significant portion of your cloud bill. Overprovisioning database instances, not choosing the right database type, or failing to manage their lifecycle can lead to unnecessary costs.

For instance, database instances might be over-provisioned in terms of CPU or memory. Similarly, services like managed Kubernetes clusters or serverless functions might have configurations that lead to higher-than-necessary costs. Regularly reviewing the performance and cost of these services is crucial.

Database and Managed Service Optimization:

• Right-Size Database Instances: Monitor database performance metrics and resize instances to match actual workload demands.
• Choose Appropriate Database Types: Select database engines and configurations that best suit your application’s needs and cost constraints.
• Serverless Optimization: For serverless functions (like AWS Lambda or Azure Functions), optimize memory allocation and execution duration.
• Managed Service Review: Periodically review configurations and usage patterns for managed services to identify cost-saving opportunities. This includes looking at replica counts for services like Azure Container Apps.

7. Implement a FinOps Culture and Cadence

Ultimately, sustainable cloud cost reduction requires a cultural shift. FinOps (Cloud Financial Operations) is a practice that brings together finance, engineering, and business teams to manage cloud spending effectively. It establishes a shared responsibility for cloud costs.

A robust FinOps framework includes defining scope, owners, and review cadences. Every alert, forecast, and rightsizing action starts with understanding these parameters. For example, tag audits might be weekly, while anomaly triage could be daily. Commitment planning might be monthly, and cost forecasts mid-month. This cadence should match spend velocity. Spiky workloads require more frequent reviews. This step wires ownership and accountability into your cloud cost management process before the data even lands.

Key FinOps Practices:

• Establish a FinOps Team or Council: Create a cross-functional group responsible for overseeing cloud cost management.
• Define Roles and Responsibilities: Clearly assign ownership of cloud costs to specific teams or individuals.
• Regular Cost Reviews: Hold recurring meetings to review cloud spend, identify anomalies, and track optimization efforts.
• Automate Reporting and Alerts: Use tools to automate cost reporting and set up alerts for budget deviations or anomalies. This ensures that cost-related issues are addressed promptly.
• Continuous Improvement: FinOps is an ongoing process. Regularly evaluate and refine your strategies to adapt to changing cloud environments and business needs.

Implementing these practices fosters a proactive approach to cost management, moving away from reactive firefighting and towards strategic optimization. For a deeper dive into building such a framework, explore FinOps fundamentals.

Frequently Asked Questions

Conclusion

Reducing your AWS or Azure bill by 20% is an attainable goal with a strategic and disciplined approach. By focusing on eliminating waste, optimizing resource utilization, leveraging commitment-based discounts, implementing robust tagging policies, and fostering a FinOps culture, organizations can achieve significant and sustainable cost savings. These seven actionable steps provide a clear roadmap for CTOs, Cloud Architects, and DevOps Leads to gain control over their cloud expenditure, ensuring that every dollar spent drives maximum business value.