There are many compelling reasons to move a company’s infrastructure to the cloud, including increased security, streamlined upgrades, and the freedom to allow internal teams to focus on other priorities. Cost savings is another benefit, but for far too many companies, cost efficiencies go unrealized.

An article on ZDNet suggests that cloud computing “sticker shock” is on the rise. This shock, frustratingly, comes only after the transition to the cloud is complete. The author says that savings seen when switching from on-prem (CapEx) to the cloud (OpEx) “soon sours as the rising monthly bills come in for services nobody knows where and when they were used.”

The article which draws data from the FinOps Foundation’s State of FinOps Report 2021, says that a lack of automation of cloud cost optimization is at the heart of the problem.

Yet this problem can be solved with an approach that takes long term costs into account during cloud adoption and migration. Data from AWS shows that customers can save between 30% – 50% in the cloud compared to on-premise spend. So how can you ensure your cloud strategy delivers cost savings, and not cost headaches?

Here is everything you need to know about managing, monitoring, and reducing the cost of cloud computing services.

Difference between On-premise and Cloud

Here’s quick look at the differences between on-premise and cloud in terms of budgeting and forecasting:


  • Expense is viewed as CapEx, (aka as an initial upfront investment)
  • Licensing usually works as a permanent license with recurring fees that include support, training, updates, etc.
  • Requires in house hardware and staff
  • It takes time to scale up your infrastructure by adding more servers or scale down by decommissioning some


  • Usually viewed as OpEx (a recurring, but a dynamic payment model)
  • Pay for what you use, or subscription-based billing
  • Requires no capital expenses
  • Scaling up or down of infrastructure can be done almost instantly and automated based on load

The different cloud pricing models

Pricing Strategy How it works
Pay as you go Suitable for workloads that have volatile peaks or have special scalability needs. You will only be paying for the computing resources that are utilized and calculated by the hour.
Save more when you commit Savings plans that offer up to 30% to 50% discounts when instances are paid in advance for 1-3 years.
Pay less by using more This is a tiered pricing model where the more you use the less you pay. The data transfer into the cloud is free of charge and the price reduces following the principle of economies of scale.

How to budget and forecast cloud computing costs

In theory, on-premise budgeting is straightforward; you set the IT spending limit on hardware and software and ensure the team sticks to it.

But cloud spends are more dynamic and need proper governance. The key is to align IT costs and performance while enabling the technology team to move fast. Here are the ways you can take control of your cloud computing costs.

Utilize applications to monitor cloud budget (with real-time alerts)

You cannot just go into a meeting and ask “How much have we spent on the cloud this month?” and be surprised by the answer. Any organization should be in a position to monitor their cloud spending on a continuous basis. The major cloud vendors provide tools that allow you to control this automatically through their platforms.

One such tool is the AWS Budgets, which allows you to set a threshold for any use case, be it simple or complex. You will be alerted if your budget is met or exceeds the threshold via an email or Simple Notification System (SNS).

Another tool you can use is the AWS Cost Explorer, a tool that will allows you to lets you “visualize, understand, and manage your AWS costs and usage over time.” Specifically, it looks at your AWS instant usage costs over the past 12 months, and predicts usage for the next 12 months. It will also provide recommendations for which reserved instances to purchase.

Create a detailed resource and workload plan

It’s one thing to manage IT cost when prices are fixed; it’s a whole other ball game when you pay per-unit usage and have no visibility into how these units are utilized. Here are some considerations that every IT team should have:

  • Every single resource, application and workload should be understood and documented
  • All of the costs should be documented and be broken down into actual vs. forecasted costs
  • Every single line-item cost should be available and visible for evaluation. This is to prevent “unforeseen” costs that could arise while running an application

Best Practices for Managing Your Cloud

Once the resource and workload plan is in place, the following best practices can be implemented to reduce cloud costs:

Rightsizing Instances

Choose the right storage and computing environment for your workload. Continuously monitor to upscale or downscale or move to a different storage class to reduce cost.

Scheduling instances

When not using an instance, it is best to turn them off. You can automate this by scheduling the time to turn it on and off, which will save costs. An example, you can turn on your instances during work hours when testing or developing an application, and turn them off when they’re not used.

Delete Zombie Assets

Zombie assets is a term used to describe resources or instances that are not used. It is at times very difficult to locate these assets. Some of the typical zombie assets are unattached EBS volumes, obsolete snapshots, idle elastic load balancers, etc.

Using Reserved Instances

Reserved instances are ones where your organization agrees to use them for a set period of time (typically one to three years). The benefit is that reserved instances come with discounts, sometimes as much as 50%. Identify which workloads that will suit this commitment, i.e. workloads that will run for a long period of time.

Choose the Right Storage Type

The S3 storage option Amazon is one of the most commonly used in the cloud. It offers many tiers based on usage and activity frequency. Plan your workload and decide on the storage tier that will suit your needs. For example, data that is not required can be moved to Glacier storage class where the price is $0.004 per GB compared to the standard storage class price of $0.023.

Continuous Monitoring and Corrections of Anomalies

It is common to see small variations or spikes in the cost due to seasonality, but in case there is a sudden and tremendous spike in cost then it needs to be investigated and fixed. These anomalies can only be found through continuous monitoring of your cloud spends.

Final Words

Cloud cost optimization is a continuous process. You need to utilize the tools at your disposal to the fullest and monitor the usage and costs diligently. You can also opt to hire a Managed Services Provider (MSP) to manage your cloud. All you need to do is assign a budget for your projects and let the MSP take care of your costs. Ziffity with our certified experts can help you bring down your cloud bill without any compromise on the performance. Get in touch with us for a free consultation.