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What is Cloud Cost Optimization? 7 Best Practices to Reduce Cloud Costs

Without cloud cost optimization, large companies can spend $2.4 million to $6 million a year on cloud computing. Meanwhile, this can take $600,000 to $1.2 million for small businesses.

Thus, understanding and cutting cloud costs is crucial for businesses nowadays. Cloud cost tools and alternatives can help businesses manage finances smartly in the digital era.

This guide examines factors affecting cloud bills and provides key strategies for saving money effectively. In addition, considering other tools for projects, design, storage, and passwords can also help.

What is Cloud Cost?

Cloud cost is what you pay for using cloud services. It includes fees for stuff like computing power and storage space. Basically, it’s the bill from your cloud vendor. Currently, the average cloud computing service costs $400 a month.

On the other hand, cloud cost management is the practice of understanding and controlling expenses. 

This includes spotting unused resources, adjusting services, and using cost-saving options. With cloud cost optimization, you can save money and optimize your cloud usage.

Factors That Affect Cloud Costs

Understanding what affects your cloud costs can help you reduce them more effectively. With insights from cloud cost optimization services, businesses can cut expenses and boost efficiency in the cloud.

  • Cloud Resource Usage. This is how much computing power, storage, network bandwidth, and databases you use in the cloud. 
  • Cloud Pricing Model. Cloud providers charge in different ways—on-demand (per hour), reserved instances (discounted upfront), and spot instances (cheap, unused). Picking the right model affects costs. 
  • Data Transfer Fees. Moving data in and out of the cloud costs money. Factors like storage location and compression affect fees.  

7 Cloud Cost Optimization Strategies

Companies on the cloud can save up to 92% – double that of organizations not on the cloud with only 43%. And imagine if you can save even more. Thus came cloud cost optimization

When it comes to managing cloud expenses wisely, cloud cost optimization is crucial. This guide offers essential strategies to identify and manage unused resources effectively. 

By following these steps, businesses can ensure they get the most value from their cloud services while keeping costs under control.

Identify unutilized and idle resources

To optimize cloud costs, detect resources you pay for but don’t use, like an oversized instance for a basic website or a dormant development server at night. 

Cloud cost management tools locate these and propose actions to shut down or scale back, reducing expenses effectively.

Right-size the services

Cloud cost optimization means using the best cloud resources efficiently. Picture a small store using a huge server for big businesses. 

“Right-sizing” swaps it for a smaller server that suits the store’s needs, slashing cloud costs without losing performance.

Use reserved instances and savings plans

Cloud cost optimization involves leveraging reserved instances and savings plans (like bulk grocery purchases for discounts). With reserved instances, you commit to a certain cloud service for a while and get a big discount upfront. 

Savings plans work similarly, giving discounts for using the cloud a lot, even with different types of tasks. These methods help save money by matching cloud expenses with how much you use it.

Leverage spot instances

Using spot instances in cloud cost optimization is like grabbing last-minute flight deals. They’re discounted cloud resources that can be interrupted by the provider. 

Great for tasks like batch processing, they can pick up where they left off if stopped. You save big without messing up the outcome.

Choose a single or multi-cloud deployment

Picking a cloud deployment plan affects costs. Think of a bakery with a loyalty program on one cloud. 

Choosing one provider might get you discounts and simplify things. But if your bakery has stores all over, using different clouds in each region can cut data costs. 

Overall, deciding which is best depends on factors such as money, complexity, and whether you’re stuck with one company.

Use appropriate storage options

Cloud cost optimization services suggest selecting the appropriate storage tier. Consider the difference between photos and documents.

Think of photos versus documents. A cheaper storage tier, like cold storage, for less-used photos, instead of a pricier one, saves money—as long as speed isn’t a big deal for retrieval.

Track cost center spending

In cloud cost optimization, spending is monitored per department. Take, for example, a marketing team using a powerful cloud server for video rendering. 

By assigning cloud costs to the marketing department, it helps identify which teams use the most resources. This empowers them to optimize their cloud usage.

Cloud Cost Optimization Tools: Alternatives to Reduce Cloud Billing

Looking at different options instead of the usual cloud cost management tools can help businesses save money in different ways. 

Here are some alternatives for managing projects, design tasks, storage, and passwords effectively and affordably.


ClickUp isn’t directly a cloud cost management tool, but it can be an alternative that helps reduce cloud billing indirectly. It’s a project management platform where you can manage tasks, resources, and budgets. 


If you use cloud-based design software for occasional tasks, Canva’s free plan with templates and editing tools can be a cost-effective alternative. 

Google Drive

Cloud cost optimization services typically offer advanced features for managing and analyzing cloud spending across various services. 

Google Drive, though, gives you 15GB of free storage. You can keep documents, files, and backups without paying for extra cloud storage. It’s good if you don’t need fancy features.


Lots of businesses use cloud-based password managers to keep employee credentials safe. Fortunately, Bitwarden has a free plan with tough encryption to handle logins and passwords.


Understanding and controlling cloud costs is crucial for businesses today. This guide offers key insights and strategies to reduce expenses effectively through cloud cost optimization. Here are five important takeaways:

  • Implement strategies like identifying unused resources and right-sizing services to optimize spending.
  • Use reserved instances, savings plans, and spot instances for maximum cost savings without compromising performance.
  • Consider single or multi-cloud deployment to minimize data transfer costs and increase flexibility.