Processing...
Many companies pivot to multi-cloud environments as they begin to grow. Collaborating with several providers is key to avoiding vendor lock-in that often traps businesses in contracts they no longer find lucrative. Organizations also gain access to a wider pool of tools and services and protect their data from unexpected outages. But most importantly, companies expand their cloud resource usage to take advantage of the associated savings from multi-cloud cost optimization.
However, simply adopting a multi-cloud strategy won’t automatically deliver any cost savings. Managing a cross-cloud environment is a complex undertaking, requiring specialized tools, in-depth expertise, and a solid financial operations (FinOps) strategy, bringing cost visibility and accountability. In this article, we’ll examine multi-cloud cost optimization, take a look at the main cost drivers and strategies to mitigate them, and explore the FinOps model and its impact.
So, what is multi-cloud cost optimization, and why does it matter? While cloud cost optimization involves strategies and practices designed to minimize cloud expenses in a given period, multi-cloud cost optimization deals with multiple cloud providers. Even though cloud computing is known for delivering cost efficiency, organizations often struggle with ever-increasing monthly bills. A solid multi-cloud cost management plan consists of steps and processes that aid companies in examining their resource portfolio, identifying money-draining services, and gaining more control and transparency.
Comprising techniques and strategies that promote cost reduction without sacrificing performance and scalability, the cost optimization plan includes utilizing discounts, control automation, usage tracking, resource rightsizing, etc. Sounds simple enough, but when applied to multiple providers like Azure, Google Cloud Platform, AWS, and others, management becomes more complex, heightening the importance of FinOps more than ever.
Each cloud vendor comes with their own set of rules, naming systems, pricing structures, analytics layers, Kubernetes abstractions, APIs, observability services, etc., making their management more technically complicated. FinOps is not just a framework that simplifies cost management, it’s an essential part of the strategy that allows teams to discover bottlenecks and streamline processes.
Simply put, FinOps stands for financial operations, tethering finance, development, and operations. This methodology enables the shared responsibility model that cloud relies on, integrates cost metrics into reporting tools, and conducts audits to detect inefficiencies. FinOps is built upon collaboration, facilitating and encouraging open communication and transparency between teams.
The complexity of a multi-cloud setup makes it difficult to account for unused cloud resources scattered across different cloud environments. In this section, we’ll explore the most common factors that drive up the cloud expenses for SaaS companies.
Compute mismanagement is among the biggest cost drivers in multi-cloud environments. It’s hard to establish clear cost visibility when relying on different cloud platforms with their own formats, autoscaling features, pricing models, etc. To manage all these processes, companies often opt for Kubernetes, creating multiple clusters across clouds. In the end, the complexity only grows, and so does the monthly cloud bill.
Nowadays, SaaS companies collect enormous amounts of data, which can quickly escalate cloud costs. On top of that, multi-cloud environments tend to produce redundancy, forcing companies to pay double for cloud usage. Hidden costs, including data retrieval, data transfer, and backup fees, drive up the cloud spending even further.
Networking costs are known as the silent killer in the cloud computing industry. These involve egress, the fees associated with data leaving your provider, which can cost more than expected. While inbound data, or ingress, is usually free, egress can be quite expensive, slowly jacking up your bill. Additionally, if you’re accommodating users from different regions, traffic between those zones will also drive up networking cloud costs. This means that multi-cloud environments imply data moving between platforms, which means higher cloud investments.
Unused or idle resources are extremely wasteful for any multi-cloud cost management approach. They can occur from over-provisioning, human oversight, or running a development environment. Often overlooked in audits, unused resources multiply in a multi-cloud space, delivering zero business value while draining the cloud spend.
Despite the complexity of cloud infrastructure management, there are researched and tested strategies that can help businesses reduce cloud costs, often requiring expert help to cut cloud waste. From unifying tagging formats and eliminating over-provisioning to taking advantage of reserved instances and savings, below are multi-cloud cost optimization best practices.
In multi-cloud environments, cost optimization isn’t just about collecting and measuring data, but also about unifying different formats from multiple vendors. This is why FinOps has become such an integral part of multi-cloud cost optimization strategy, because it offers a framework to create a consistent overview of cloud reporting.
A major element is tagging—a way of monitoring costs, compliance, and ownership, enabling users to look inside their cost reports. Unified tagging aids teams in generating a coherent overview of cloud resources by grouping them based on logic and not vendor.
Allocating too many resources is another common driver of cloud costs that’s easy to miss and hard to mitigate, especially without clear visibility. Although it occurs in single cloud strategies as well, over-provisioning acquires more complexity when a company juggles several cloud providers at the same time.
Companies rely on smart workload placement and automated rightsizing to drive better utilization and mitigate this pitfall. For example, you can analyze your workloads to match requirements with optimal resources, leverage elastic scaling, and hand-pick the best provider for each workload.
Underutilizing commitment portfolios can also lead to an increase in the cloud bill. Careful and calculated use of reserved instances can generate discounts of up to 72% compared to on-demand plans. Some cloud providers are also open to custom agreements with their users, depending on the volume and duration.
Since we’re discussing multi-cloud environments, locking yourself in several contracts could be quite a risk. In this case, it’s critical to scale SaaS using professional consulting services. When working with several cloud providers, commitment plan management becomes significantly more intricate, requiring financial modeling and in-depth cloud expertise.
Even in a single-cloud environment, manual cost control is incredibly ineffective and error-prone, and dealing with several cloud vendors only multiplies the issue. Automated cost and DevOps guardrails guarantee that an instance won’t run past its usage, gradually accumulating expenses. In case it does occur, the system will trigger a set of actions—for instance, shutting the instance down, alerting the IT specialist in charge, or a custom one.
Most modern providers feature auto-scaling functions that match resources to demand without any human intervention. Another practical cost-saving tip is to schedule automatic disabling of non-critical elements during off-hours.
The architecture that you set up will also dictate the cost composition of the multi-cloud environments. The expenditure contingent on the data architecture includes egress and data request fees, deletion costs, data processing expenses, etc. The nature of multi-cloud organizations makes it more difficult to establish an architecture that optimizes cloud costs in and of itself. Despite this, you can design an environment that will foster savings plans.
For example, data consolidation is a great way to minimize cloud spending, as processing and storing less data will also cost you less. Data retention policies are a way to stay within the cloud budget as they ensure your data is deleted in time, without generating additional expenses.
Using multiple cloud providers isn’t a one-fits-all solution that goes hand in hand with any business model or requirement. While multi-cloud cost optimization strategies can sometimes help companies reduce spending, avoid vendor lock-in, and mitigate technical risks, they can also increase operational overhead and complicate managing cloud costs.
For market expansion: If you’re expanding your customer base to a country or region not covered by your current cloud services, you could simply rely on an additional cloud vendor to handle customers from the new territory instead of migrating your entire system to a new provider.
For mergers and acquisitions: Organizations that have acquired a new company or merged with one that operates on different cloud platforms might also hugely benefit from a multi-cloud approach.
To increase development velocity: This criterion is ambivalent. On one hand, organizations that adopt a multi-cloud strategy to avoid vendor lock-in may actually lose some engineering speed. On the other hand, if utilizing additional cloud providers is done to offer your large team access to a wide variety of tools, it may ultimately increase velocity. Instead of training your engineering teams to work with a specific platform, you can allow them to use whichever tool they’re most comfortable with, which will increase their productivity and efficiency.
For short-term spikes: There’s a misconception that you can rely on a private cloud for all your business and temporarily tap into the public cloud whenever a large spike takes place. While this sounds like a logical and sound strategy, most of the time it produces more overhead, data gravity, and complexity. From designing the apps to be congruent with different cloud environments to managing both platforms, all of these require additional technical and operational prowess as well as expenses.
To mitigate cloud outage: Another common reason for running two cloud environments is to ensure the safety of data in case of an outage or breach. In reality, full-scale outages are an extremely rare occurrence that barely justifies the financial, technical, and operational effort of using multiple cloud providers.
To stay cloud-agnostic: Although vendor lock-in can increase cloud costs and exacerbate operational and technical risks, going multi-cloud only to avoid it could be a bad idea. For a complex workload, you’ll have to rely on self-managed services like Kubernetes, which will require additional personnel. It could also stifle innovation, as you won’t have direct access to AWS or Azure cost management features.
FinOps plays a crucial role in helping teams scale SaaS carefully and responsibly while delivering compliance and stable growth. In this part, we’ll dive deeper into the FinOps paradigms and why they matter in the SaaS context.
FinOps is a methodology intended to streamline financial operations alongside business and technology, boosting accountability. Finance operations manage accounts receivable, accounts payable, and compliance regulations, while maintaining SaaS metrics and revenue reporting. FinOps responsibilities include managing accounting processes, identifying inefficiencies, and implementing reporting, all in pursuit of cost optimization.
While in the early stages of business, teams can optimize costs without any additional structure, as the SaaS company grows, so does the complexity, demanding a coherent framework. A specialized FinOps team can standardize accounting processes, execute financial forecasting and planning, and perform a FinOps assessment to guide governance improvements.
In SaaS, unit economics are costs on a per-unit, usually per customer, basis. The core multi-cloud cost optimization metrics include the following:
FinOps teams pay attention to unit economics to identify users and features that don’t generate profit, find a way to scale responsibly, enhance their pricing models, and optimize cloud costs.
Furthermore, finance teams implement consistent tagging and governance practices to ensure traceability of cloud spend. The practice of cost center alignment, or the distribution of expenses to the business units in charge of the specific cloud usage patterns, guarantees accountability and transparency. FinOps is also responsible for establishing compliance and security protocols, requiring privacy and auditability of workloads.
While native tools are essential in managing a single cloud platform, a cross-platform vision requires solid multi-cloud cost optimization tools. In this part, we’ll discuss what native and third-party cloud systems do and what sets them apart.
Native cloud cost optimization tools include solutions embedded in the cloud systems themselves, including AWS Cost Explorer, which helps teams optimize AWS spend, Azure Cost Management, and Google Cloud Billing Reports. Developed by the same operator that stores and runs your infrastructure, these tools offer the highest convenience, consistency, and cost efficiency. For example, AWS’s reserved instances and savings plans allow for a30% cost reduction. Additionally, native tools provide companies with intuitive tagging, enabling fast and accurate cost distribution.
Third-party cloud cost management tools are critical in optimizing costs across several cloud service providers. While native systems excel at offering an in-depth look into a single cloud environment, third-party cloud cost optimization solutions provide cross-platform cost visibility. Tools like Binadox, CloudZero, Flexeram, and Spot are equipped with rightsizing suggestions, AI-powered predictions, and SaaS cloud spending management tools.
Native cloud cost management systems are instrumental in controlling expenses in a single-cloud environment. They’re easy to set up and use, grant access to real-time analytics, and usually come free with the initial pricing. However, once a business shifts to a multi-cloud strategy, their benefits begin to disappear. That’s where third-party cloud cost management features start to shine. They consolidate and unify data and deliver cross-platform insights that native solutions simply cannot produce.
In this part, we’ll offer you some key takeaways that you could implement to see results in just a couple of months. Optimize cloud spend using our swift 90-day plan and don’t hesitate to refer to professionals when support is needed.
Measure and monitor the essential unit metrics that we covered earlier, in conjunction with cloud spend and derived savings. However, it’s not about simply tracking numbers and hoping they’ll go down—cloud cost intelligence prompts you to spend smarter, not less. To derive actual insights, compare cloud spending to revenue growth. If the costs of running your cloud infrastructure increase multiple times faster than revenue, your strategy might require a revision.
Finally, we’ll finish our guide with a brief 90-day plan to gain visibility and establish an effective cloud cost optimization strategy:
#1 Visibility: Collect cost data from different cloud resources into a single point of truth with consistent formatting and tagging.
#2 Remove waste: Without a major in-depth analysis, identify obvious waste and eliminate unnecessary costs to deliver the fastest savings from the get-go.
#3 Build governance: Slowly begin incorporating FinOps practices into your pipelines: drafting simple cost policies, assigning ownership, and implementing automation where possible.
#4 Define goals: Make sure your goals are SMART: specific, measurable, achievable, relevant, and time-bound.
#5 Reassess in 90 days: Three months later, review progress, compare metrics to defined goals, and readjust the plan accordingly.
If the value of cloud cost management sounds important to your bottom line, consider receiving a consultation for multi-cloud cost optimization. A simple conversation with a NIX specialist can help you identify whether your current strategy is working or not, which steps you should take to improve it, and if multi-cloud is for you.
Be the first to get blog updates and NIX news!
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
SHARE THIS ARTICLE:
Schedule Meeting
