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5.1 min to readFinOps ServicesCloud ServicesSoftware Sourcing Services

Right-sizing and right-costing: A holistic view of Cloud Cost Optimization

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Javier Chávez CorralProduct Owner, Services
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Due to their ever-expanding cloud portfolio, operations and IT teams are beginning to investigate the value of Cloud Cost Optimization (CCO). CCO helps businesses reduce cloud spend by gaining visibility over mismanaged resources, allowing them to correct or eliminate extraneous applications, licenses, or resources to maximize value and performance for the best price. This delivers benefits to the organization such as reduced costs, saved time, and lower business risk.

A significant part of CCO is using the best supporting technology to optimize your technical deployment in a process called right-sizing. Another component is ensuring you’re purchasing licenses and resources for the lowest possible cost through a practice called right-costing. Unfortunately, most organizations only excel in right-sizing or right-costing initiatives and struggle to employ both at the same time, lessening the impact of their CCO strategy.

Since these customers are only seizing half – or less than half – of their CCO potential, they’re leaving money on the table. With research estimating 35 percent of public cloud resources are wasted, that could come out to hundreds of thousands of dollars in cloud spend for your organization.

To maximize your savings on cloud spend, it is crucial to optimize your approach to right-sizing and right-costing. Let’s explore why both should be performed at once in order to develop a mature CCO strategy.

Right-sizing: using technology to your advantage

Right-sizing is a crucial aspect of Cloud Cost Optimization. It is a very technical process that considers the precise specifications of each resource running in your IT environment and then seeks to attain the best possible deal on items that support the cloud.

A prime example of right-sizing is choosing the right data center and optimal configurations for your workloads. Data centers control the reliability, cost, and speed of cloud workloads and also have a direct impact on data privacy and other factors that directly impact a business’s good regulatory standing. Due to these inter-dependencies, IT teams would need to perform an in-depth analysis of their data and environment requirements before storing any data or signing any contracts. This analysis will help your team determine if the data center meets technical standards in regard to latency and reliability and ensure regulatory compliance. Once you understand these intricacies, you can start choosing the most cost-effective data center.

In the same vein, IT teams must consider the financial impact of supporting technologies like virtual machines (VMs). Many organizations with VMs run them on legacy versions that were available when their VM was originally created, paying what they believe is an acceptable price for the utility. However, organizations typically get better performance for less spend by upgrading their VMs – but knowing this for sure would involve an in-depth cost-benefit analysis using their existing and planned environment. This is an easy task, but it’s rather time consuming, and many IT teams don’t have the time or expertise required to perform an accurate analysis.

While these are two typical examples of right-sizing, this is by no means an exhaustive list.

Right-sizing can include any of the following activities:

  • Finding and removing abandoned or orphaned cloud resources that eat away at margins without providing any clear benefit
  • Modernization initiatives that ensure you are getting the most efficiency and ROI for your dollar
  • Determining if a data center in another geographic region is able to handle certain workloads more efficiently without significant trade-offs or better costs
  • Automating elastic right-sizing processes to ensure you’re only running the applications and resources that you need at that moment
  • Employing automatic on/off processes for applications that aren’t in constant use.

Right-costing: the other half of the story

Now let’s closely examine the concept of right-costing. Right-costing is an often-ignored facet of Cloud Cost Optimization, but neglecting to do it is a serious oversight. It’s important to understand right-sizing and right-costing completely, as they should be considered with equal weight and performed at the same time.

Right-costing is a process that leverages commercial resources to give you the best deal on software and cloud solutions. This often involves tactics to get certain licenses for free or at a reduced cost, by transferring existing on-premise licenses to the cloud, removing excessive licenses or solutions, or simply Taking advantage of different cloud usage rights provided by some software publishers and use them at your advantage.

Right-costing can also take the form of special discounts that must be negotiated with the cloud vendor. Vendors often offer volume-based discounts, which will reduce the sticker price for licenses depending on how many your organization purchases. In most cases, this is far cheaper than paying for the software components billed together with cloud computing resources.

Organizations should also take advantage of reserved instances, where vendors offer discounted pricing if you can predetermine how much computing capacity you will need in a set space of time. Some vendors may also offer unique savings plans, which will reduce your costs based on a number of factors.

While IT plays a significant role in orchestrating these initiatives, right-costing isn’t usually a technologically intensive activity. The most difficult part for the IT team is gaining visibility over the licenses you currently have versus how many you need – once that is determined, IT tends to take a supporting role.

That’s because right-costing is designed to lower expenses first and foremost, with little to no trickle-down effect that would improve efficiency and increase revenue. This is why right-costing absolutely must be performed in conjunction with right-sizing – both depend on each other to optimize cloud costs while enhancing efficiency.

Combining the power of right-sizing and right-costing

Right-sizing and right-costing are interlinked processes. They should both be planned and executed in tandem, accounting for any and all interdependencies that may occur between the two. To refer back to the virtual machine example, analyzing right-costing and right-sizing at the same time may uncover that upgrading your VM will improve efficiency, allowing you to downsize your machine (right-sizing), then find extraneous licenses that can be removed to save money (right-costing). Alternatively, you may find it is possible to downsize your VM and subsequently commit resources using a Reserved Instances model.

If you performed these activities in a non-logical order, your outcome would be quite different. A right-costing analysis might find that you need to buy a given number of licenses, then prompt you to buy Reserved Instances. A right-sizing analysis may then discover that upgrading to the newest VM edition would boost productivity and allow you to downsize the machine. In this situation, your analysis would result in you overspending on unnecessary licenses and reservations – requiring you to perform your right-sizing and right-costing analysis all over again. Only when your analysis is complete will you realize you overspent on bigger Reserved Instances and more licenses than you needed.

Keep in mind a right-costing and right-sizing initiative isn’t as simple as snapping your fingers and saying it’s done. You will need to gain complete visibility into your cloud assets to find and seize the best opportunities for Cloud Cost Optimization. This could be a very labor-intensive process, especially if you don’t have a FinOps-certified platform available.

Final thoughts

Cloud Cost Optimization is by no means a straightforward process – if you leave one stone unturned, you won’t truly optimize your cloud costs. This is especially true if you plan to use this CCO initiative as part of your larger FinOps strategy, as you may make mistakes again and again, resulting in perpetual overspending.

There are a lot of tools on the market that claim to assist with CCO – but they typically only focus on right-sizing. Among solutions that do include right-costing considerations alongside right-sizing, it’s incredibly rare for them to provide a full stack of all right-costing opportunities. Since these processes tend to depend on each other, you need a partner who is able to understand how both of these concepts tie together and use them in conjunction to get you the lowest cloud costs possible.

SoftwareOne is that partner. Not only are we able to tie these two practices together, but we also have the in-depth expertise and technological solutions necessary for effective Cloud Cost Optimization. To date, we’ve helped hundreds of organizations optimize their cloud environment, and saved them an average of 10 to 25 percent. We’ve even cut one organization’s cloud costs by 40 percent!

Part of this comes down to our cloud services and expertise, but a larger part of this is our helpful, FinOps-certified platform.When you partner with us, we’ll immediately add this solution to your IT team’s toolbox. With this you’ll gain a whole new perception of your owned cloud assets, illuminating the path to CCO.

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Get full visibility over your cloud estate

Without visibility, it’s difficult to right-size and right-cost. Get in touch with our CCO and FinOps experts to gain the visibility and expertise you need.

Get full visibility over your cloud estate

Without visibility, it’s difficult to right-size and right-cost. Get in touch with our CCO and FinOps experts to gain the visibility and expertise you need.


A silhouette of a person on a white background.

Javier Chávez Corral
Product Owner, Services

FinOps - Software Licensing Expert - FinOps - ITAM - Digital Supply Chain