Cloud computing has revolutionized the way businesses run and manage their operations. It quickly became a critical part of any infrastructure, no matter the business size, making it almost impossible to imagine any modern business model operating efficiently without the power of the cloud.
According to the Flexera 2025 State of the Cloud Report, enterprises with over 1,000 employees now spend between $2.4M and $6M annually on cloud. This makes up 19% of total IT budgets.
A recent Harness study also found that roughly 21% of that spend is wasted due to underused infrastructure - over $44.5 billion globally.
Only a year ago, the CloudZero survey found that 22% of businesses had at least 75% of their cloud costs properly allocated, up from just 13% the year before the survey was conducted.
This meant that 78% of companies still allocate less than 75% of their cloud spend.
This indicates an urgent need for improved cloud cost optimization, as best practices require 100% allocation at all times.
Cloud cost optimization is a strategic process aimed at improving the efficiency of the cloud environment and reducing costs, while ensuring comprehensive operational management and boosting business performance. It implies setting measures to optimize the cloud environment and costs, which involves more than just simple cost-cutting. To do it right, businesses need to subject their strategies and cloud-oriented expenses to rigorous analysis. This includes identifying inefficiencies and eliminating waste to maximize the value of cloud resources.
Unnecessary cloud spending is often linked to purchased but unused resources, separate or inactive resources left running without necessity, too small or too large size of resources, overprovisioning, missconfiguration or uncoordinated committed use discount.
The final goal of a structured optimization is to gain detailed visibility of the cloud environment and ensure that the resources are effectively balanced between performance, security, and availability.
Standard procedures for cloud cost savings focus on understanding billing cycles and involving development teams in defining financial decisions, selecting offers and discounts according to specific project requirements and cloud providers.
Cloud cost allocation means detecting specific cloud resource costs linked to a specific user, department, product or project. The goal is to analyze processes individually and identify their cloud usage.
One of the best practices for organizing cloud expenses is by tagging, but it may come with some imperfections, especially when it comes to organizing spendings across multiple platforms.
Strategic tagging helps in categorizing cost priorities. Recommendable strategies are:
Leaving even one link behind can disrupt the expected smoothness in achieving good results. From the outside, it may seem each team works on its own, but by respecting the unique expertise each brings, they are actually building a mutual and cohesive foundation for sustainable cloud management.
Shifting ownership to the teams can significantly enhance cost management and foster the delivery of expected results. This entails decentralization to those who directly influence both the process and its outcomes. Although this approach has proven to be a beneficial strategic move, few decision-makers in the tech industry choose this path.
Introducing dedicated engineers to real-time cost insights will help them better understand financial processes and spending. Gaining a broader perspective will significantly influence how they write and manage their code, ultimately leading to long-term cost optimization and aligning engineering efforts with overall business goals.
Traditionally, engineers were constantly excluded from the cost optimization, which left their expertise and role within a team behind. The truth is, the best results come from the cohesion of two, as a bigger picture can be seen and a more structured financial decision can be made. Finance sees the numbers, but engineering understands the cost drivers behind those numbers.
This includes the processing power, memory, and short-term storage required to operate applications and services. Cloud providers offer various instance types with specific configurations, such as increased CPU, memory, or network speed. Users are billed based on the number of instances they utilize, the type of instances, and their usage duration, typically charged by the hour.
SOLUTION
Cloud providers often charge based on the amount of data transferred in and out of their services, called ingress (data coming in) and egress (data going out). These charges are measured in gigabytes (GB), terabytes (TB), or even petabytes (PB).
In addition, costs may increase for faster, low-latency, or high-bandwidth connections. Extra fees can also apply for static IP addresses, gateways, and load balancers.
These egress costs include data moving between cloud regions, within the same region, or between the cloud and the public internet. For companies with heavy data transfer needs, these costs can fluctuate from month to month.
SOLUTION
Cloud providers offer different storage types as a service, from file and block storage to object storage. These services are billed based on the amount of data stored, typically charged per gigabyte per month.
When using managed storage services, like managed disks linked to compute instances, charges often apply to the entire storage volume regardless of how much of the space is actually used. This can lead to paying for unused storage capacity, increasing overall costs.
SOLUTION
Cloud storage isn’t one-size-fits-all. Different data types and business needs require different storage solutions. Block storage suits high-performance needs with frequent read/write operations, but costs more. Object storage is cheaper and ideal for large, infrequently accessed data like backups and archives. Choosing the right storage helps optimize costs and performance.
Tips for cloud storage optimization and cost-effective strategies:
FinOps is an operational framework and cultural practice that maximizes the business value of cloud and technology, enables timely data-driven decision making, and creates financial accountability through collaboration between engineering, finance, and business teams.
Featured photo by Kindel Media
