Understanding Cloud Spend: 4 Key Variables to Optimize Your Budget

Cloud services can have many different instances when it comes to computing services. For example, Amazon Elastic Computing Cloud (EC2) has multiple instances and multiple applications for every instance, each with its own pricing structure and combinations. This high level of complexity can be very confusing when preparing and budgeting for upcoming cloud spend.

In order to prepare a budget that makes sense, we recommend utilizing this quick checklist to get you started:

1. Agility, Scalability, and Resource Allotment

It is easy to overestimate the resources you’ll need throughout the year, resulting in extraneous expenses that can be avoided. Normal fluctuations throughout the year can occur based on team growth or seasonal traffic influxes, making it additionally difficult to correctly size your needs. Planning for the biggest traffic events might increase your budget requirements for the year, even though it’s only needed for a short period of time. 

When planning for cloud infrastructure, the upfront costs can be high. To solve it, look over your plans and forecasts based on previous years' activity and use that information in assessing the right cloud provider and package. If you’re anticipating big shifts throughout the year, some providers may scale up and down better than others. 

In cloud infrastructure, virtual machines are crucial to scalability. There are many tools offered by cloud providers that can automate scaling and help minimize cost overages. Autoscaling can be incredibly beneficial to business-critical infrastructure and maintaining customer SLAs, but these tools could tip your budget if left to scale in an unmanaged way. When selecting an agile infrastructure you need to be prepared to monitor and understand how to re-adjust if there is an excessive traffic or resource event.

AWS, Azure, and Google’s elastic compute environments:

• Amazon EC2
• Azure Virtual Machines
• Compute Engine

Preparing an agile environment

When it comes to agility, your cloud computing needs to be able to respond quickly to spikes in usage. It also needs to scale both up and down in resource allocation without breaking your budget barriers. Scaling in resources should not overload and bring down your entire infrastructure when those thresholds meet the limits. 

Ask your cloud provider how it manages these situations and what kind of costs they intend to bill if overages occur or automatic scaling is required. 

Example questions you can ask:

• Does the cloud provider allocate resources efficiently i.e. is it possible to add and remove resources with ease?
• Does the provider allocate resources in a way that works best for your development workflow and how you’ve built your own infrastructure?
• How do they handle overages and what is the cost for exceeding resource allotments? (This can be quite a heavy penalty imposed by some providers)
• Can you set barriers to cost and resource allotment that won’t break your infrastructure?
• What automation does the provider offer that helps you manage your cloud infrastructure when it comes to agility and scalability?

2. Storage and Data Networks

When we think of data we think of it in two ways: storage (the place where files are stored), and network (how those files are accessed, speed and stability). It’s possible to simply store all data in one or two storage states which might seem the most simple of applications, but it can add unnecessary costs to data that is very lightly accessed or not at all. 

Your cloud storage cost is affected by storage size and upload and download latency. 

Cloud storage

Cloud storage is straightforward. You need to budget for how much space you need to fit a certain amount of data. You should also plan on how that data might grow or decline over time.

An example of this is if you are collecting customer data, and customers are creating accounts within your application, this storage needs to grow as your customers grow. Contrastingly, your website might need static data storage that won’t grow or decrease by large amounts, so that data number can be a simple number to estimate.

Network latency

Latency and accessibility of your data is how quickly your infrastructure can pull, access, download or upload to/from its storage location. This is another aspect to calculate for your budget as regularly accessed and business-critical data storage needs more advanced resource allotment such as high-performance hardware, and networking equipment that will incur higher expenses. Whereas any data that simply needs to be stored or backed up without very little access requirement can remain static in a more affordable storage state.

What is low latency?

Low Latency describes how a computer network is optimized to process very high volumes of data with very minimal or very low delay. This delay is referred to as latency. The lower the latency the better the access, and affects how quickly data is accessed in real time. 

Bucket your storage and data into four buckets:

1. Direct access is required and frequently accessed
   1. Ex: supporting files to an active application
2. Minimal access is required and infrequently accessed
   1. Ex: web pages that experience very little traffic, or archived web pages
3. Archives and low access is requiredsome text
   1. Ex: outdated documents, historical material no longer used by your company or organization, old website instances
4. Data backups and disaster recoverysome text
   1. Ex: Complete copies of infrastructure and data that can be accessed in case of a recovery event
   2. This last bucket is important. Do you want to back up your entire data infrastructure? Or is it possible to segment critical data from the non-important?

3. Automation and Built-In Tools

Cloud automation and built-in tools are solutions that can be offered by a cloud provider to help limit manual efforts in managing and developing your cloud infrastructure. Cloud providers might have automation built into their packages or they might be paid additions to their cloud offering. 

If you’re spending a lot of time and effort manually monitoring and analyzing important elements related to your cloud infrastructure, then it may be beneficial to commit to a plan that automates some if not all of these manual processes for you.

Built-in tools cover areas like monitoring, notifications, regulating, and analyzing your cloud spend. Inquire with your provider to explore any useful tools they may offer – paid or free – to help you better understand how to budget for your needs. 

Leverage automation wherever possible. To save on cost and your own time, explore your provider's tools, applicable third-party tools, or even your own coding skills.

4. Budgeting for the Three Key Cloud Environments: Development, Staging, and Production 

Allocating resources to the three different environments of development, production, and staging adds to the complexity when budgeting for cloud spend. These environments have different needs and responsibilities that can affect resource allocation. Not sizing it correctly, either too little or too much, can impact your budget. 

There are typically three main environments for cloud infrastructure:

Development

• Where the building happens and is a place for developers and creatives to assemble new projects

Staging

• Once a project enters a state of testing, it usually enters a staging environment. This can be used to test performance on load handling and how it appears, and responds once resources have been allocated

Production

• A project has been developed and tested. It now enters the production environment where it will most likely live for the remainder of its lifetime. It will need to handle influxes in usage, future updates, and live interactions

The earlier stages of environment, development, and staging may remain active even when a project is pushed into a production environment. This is because some projects may go through different stages of evolution, and change with product and company growth.

When allocating resources to each environment you need to consider who uses each environment and what are their requirements. 

An example of how teams use each environment differently:

Development: The users of this environment are usually developers and designers. An emphasis on tools and resources would most likely be key here. There are no requirements for SLAs or load-bearing traffic.

Staging: Staging is in-between. It's where the workload team can evaluate load testing effectiveness and check for fixes and UI appearances. This kind of environment will require resources, but not as many tools and once again no SLAs.

Production: This environment does have to meet customer-facing SLAs, scalability, and resources. 

Each of these aspects changes the way you will allocate and prepare your budget. 

Maintaining an Agile Cloud Spend Budget when Evaluating Cloud Infrastructure

A cloud infrastructure budget is constantly fluctuating. In many ways it is like a living and breathing organism, because your application, product, and possibly an entire company is built within a cloud computing environment, ever-changing, growing, or shrinking in different areas. 

The best recommendation is to prepare a budget that is flexible, with funds available for additional resource allotment as needed.

Flexible financing can be a perfect fit for cloud infrastructure purchases as the upfront costs can be high. Spreading out large expenses can help you avoid a cash flow crunch and free up working capital while also getting the benefits and best tools for your cloud needs. 

To feel better prepared for your next cloud decision, check out Gynger’s cloud infrastructure financing.