By Rahul S Kurkure
Cloud has ceased to be just a technological trend today, but has become a key enabler of agility, innovation, and business growth. It is an indispensable tool for organizations of all sizes across sectors, ensuring businesses stay competitive and sustainable. However, over time, cloud environments can become cluttered with underutilized or unused computing resources, driving up cloud complexity and costs. It’s here, cloud cost optimization enters, making cloud environments less complex and more efficient with lower costs and enhanced performance. According to Flexera’s 2025 State of the Cloud Report, 84% of the respondents believed that managing cloud spend is the top challenge for organizations today. Furthermore, cloud spend is expected to increase by 28% in the coming year. Cloud cost management is today a success factor where the implementation of a well-defined cost optimization strategy becomes key. Cloud cost optimization is about aligning cloud spending with business goals.
Benefits of Cloud Cost Optimization
Hidden costs of cloud services can include inefficient pricing models, underutilized resources, over-provisioning, data transfer costs, vendor lock-ins, security misconfigurations, and issues with cloud storage, among others, impacting the organization’s profitability. On the other hand, with cloud cost optimization, businesses can address these challenges along with several advantages.
- Financial efficiency
An effective cloud cost optimization strategy can help organizations detect idle resources and reduce unnecessary cloud operational expenses, enabling better budget allocation while maintaining scalability and resilience. Cloud cost optimization aids in forecasting future cloud spending, provides insights into resource usage, and also enhances the return on investment.
- Better cloud performance
Optimizing cloud infrastructure maintains performance consistency by limiting unused and idle resources. It provides operational metrics that aid in accurately calculating performance thresholds for each workload, leading to better processing times. Downtime is reduced, leading to operational efficiency. With every resource well utilized, the overall system responsiveness is enhanced.
- Reduction in security risks
Cloud cost optimization can support the cloud security strategy by eliminating the underutilized resources and reducing the attack surface. Monitoring cloud usage to achieve cost optimization can enhance visibility, thereby helping teams detect potential security threats. Cloud cost optimization tools can also support the implementation of security controls.
- Fostering a cost-conscious culture
With the optimization of cloud costs and enhancing performance, organizations can create an environment where financial discipline is given top priority. With teams getting educated on setting budgets, implementing cost tracking, and learning to save costs, a culture of cost-awareness is built.
Embedding cost control into the cloud strategy
Cloud costs are calculated based on the standard rate charged by cloud service providers for on-demand or pay-as-you-go pricing models. Here, payment is made for the compute capacity by the hour or second with no long-term commitment. In the Reserved Instances (RIs) pricing model, the cloud service provider offers a significant discount for the purchase of computing capacity in advance for a long-term commitment of one or three years. The Enterprise Discount Program (EDP) is a strategic pricing model that offers a tailored discount agreement to customers who demonstrate a history of high spending commitment with the cloud service provider.
The best practices to be observed by organizations to control cloud spending are several.
- Comprehensive understanding of the cloud bill
With multiple teams (engineering, product, and executives) accessing the cloud platform, many are not aware of the new cloud billing structure. All teams should have a deep understanding of the different components and the pricing structure in the bill, such as charges for compute storage and other services. Cost management tools provided by cloud service providers can aid teams in identifying trends, anomalies, and other aspects driving costs, before spending exceeds the specified limit.
- Thorough knowledge of cost discount programs
With different types of cloud pricing models and the discount offered, it is important to know how costs relate to business goals, cloud cost per resource, cloud usage patterns, cloud cost per user, and cloud optimization ratio. Check the offers and discounts of different cloud service providers, as in addition to RIs and EDP, there are Spot Instances, which are similar to cloud auctions by cloud service providers to sell unused inventory. These discounts keep changing based on the demand and availability.
- Identify idle resources
Organizations, over time, accumulate unused resources, with cloud administrators choosing more computing power unintentionally, and developers sometimes forgetting to deprovision resources upon completion of a project. However, these unused resources cost money, and unknowingly, businesses continue to pay for them, leading to unnecessary expenses. Cloud management tools can detect unused resources, and along with a regular audit of the cloud environments, the organizations can ensure they pay only for active resources that are actually in use.
- Rightsizing resources
Organizations have to constantly monitor and analyze usage patterns for workloads by leveraging cloud management tools. Rightsizing involves adjusting the compute, storage, and networking resources to align with the actual workload requirements. By doing so, allocating resources, more than what is required, can be ruled out without incurring unnecessary expenditure. Regular reviewing and adjusting of cloud resources can result in significant cost savings for the organization, in addition to ensuring better performance.
With cloud expected to become a business necessity by 2028, according to Gartner, businesses have to explore efficient ways to manage cloud costs. Cloud cost optimization is more of a strategic function rather than a technical one, facilitating better financial performance, operational efficiency, and business innovation, while establishing a culture of accountability.
(The author is Rahul S Kurkure, Founder and Director, Cloud.in, and the views expressed in this article are his own)
