Quick cloud cost optimization strategies for early-stage startups

Navigating the delicate balance between rapid growth and cost control can be daunting for startups. Managing expenses becomes increasingly crucial to maintaining profitability and competitiveness as the business expands.

However, startups often find themselves torn between dedicating resources to developing innovative products and implementing cost-saving measures. The good news is that cost optimization doesn't have to be a resource-intensive endeavor.

By leveraging the right strategies, startups can quickly gain visibility into their spending, make data-driven decisions, and optimize their architecture to drive significant cost savings.

In this post, we'll explore three actionable cost optimization techniques that can be easily integrated into your existing workflow, allowing you to refocus on what matters most – building features that deliver value to your customers. These strategies center around three key areas: spending awareness, architecture adjustments, and usage discounts.

Understanding Cloud Cost Structures

Before diving into cost optimization strategies, it's essential to understand the different cloud cost structures and their pros and cons for startups. Here are three common cloud cost structures:

Pay-as-You-Go

Pay-as-you-go pricing models charge you only for the resources you use, providing flexibility and scalability. However, this model can lead to unpredictable costs and make budgeting challenging.

- Pros: Flexibility, scalability, and no upfront costs

- Cons: Unpredictable costs, potential for cost overruns

Reserved Instances & Savings Plans

Reserved Instances and Savings Plans offer a discounted rate for a committed usage period, providing cost savings for predictable workloads. These models provide flexibility in payment options, including no upfront payment, but can lead to wasted resources if the commitment is not fully utilized.

- Pros: Cost savings, predictable costs

- Cons: Potential for wasted resources

Spot Instances

Spot Instances offer a highly discounted rate, providing significant cost savings for flexible workloads. However, it's essential to understand that Spot Instances can be interrupted at any time, as they are subject to the availability of spare capacity within AWS.

Spot Instances are best suited for flexible workloads, fault-tolerant, and can be easily restarted or re-launched, such as stateless web servers, batch processing, or data processing jobs.

Strategies For Cloud Optimization

Now that we've covered the different cloud cost structures, let's dive into three easy-to-implement cost optimization strategies for early-stage startups.

Spend Awareness

Before making any changes, it's essential to understand what and where you're currently spending. AWS Cost Explorer and AWS Budgets are the most efficient tools to help you make informed cost decisions.

Understand the Trends

AWS Cost Explorer helps you understand general spending trends quickly. As your business scales, so will your infrastructure costs, and Cost Explorer gives you a bird's-eye view of that spend.

The home view of Cost Explorer shows your last six months of spend grouped by service, which will help you assess the following:

●      Where should I start my cost optimization efforts? The default view will show the top five services contributing to monthly spending, which is helpful if you're wondering which service you should start cost-optimizing and looking to make the biggest impact on spending.

●      Am I spending significantly on a service that doesn't fit standard patterns? Your answer may be workload-dependent, but, for example, storage costs are typically lower than compute expenses, so you may not expect EBS volume spending to be significantly higher than your spending on Amazon Elastic Compute Cloud (Amazon EC2).

Architecture Adjustment

Once you understand your costs, you'll want to consider streamlining your architecture to be more cost-efficient. The changes we've highlighted below could yield the most significant savings for the smallest amount of effort so you can quickly get back to building your product.

Turn Off Resources When Not in Use

This advice may sound obvious, but the easiest, fastest, and most impactful way to save costs is to turn off resources when they're not being used. In an average workweek, 70% of the hours are non-working hours. Imagine how much you could save by turning off non-production resources during that time! Tips to help you identify what to turn off:

●      Use Tags: Tags to determine what to turn off and differentiate between production and non-production resources.

●      Check Trusted Advisor: The Cost Optimization pillar of Trusted Advisor, as shown below, will show idle resources. It is a good starting point to check for resources that can be turned off if you haven’t tagged anything.

●      Identify non-constant workloads: Workloads that aren’t constantly running can be turned off and turned back on again when needed. For example, you can stop Amazon SageMaker notebooks when not in use. Amazon Redshift has a pause and resume feature, where customers only pay for storage but not compute, making this even easier.

Even if you know what needs to be turned off, that won’t yield savings unless you actually turn them off. If you struggle with this, automate the process by leveraging solutions like the AWS Instance Scheduler to configure start and stop schedules for Amazon EC2 and Amazon RDS.

Use the Newest Offerings

A simple way to reduce costs while maintaining performance is by using the latest and greatest of what AWS has to offer, including:

●      Using the latest generation of an instance type: Using the latest version of an instance type, for example, moving from m4 to m5, will improve price performance.

●      Exploring new instance types like the ARM-based AWS Graviton2 instances: Graviton2 processors offer up to 40% better price performance than current-generation x86-based instances. In addition to EC2, Graviton2 instance types are available with managed services like Amazon RDS, Amazon Aurora, Amazon ElastiCache, Amazon OpenSearch, and Amazon EMR. Because managed services eliminate infrastructure management tasks, switching to Graviton2 is a great way to yield cost savings without application code changes.

Usage Discounts

If you're running a steady-state workload, you can confidently generate commitment numbers for a usage discount. But what if you're in your early stages of growth, or have unpredictable usage?

Compute Savings Plans help you strike a balance between evolving usage and getting savings for what you already use. They also give you more flexibility than EC2 Instance Savings Plans and Reserved Instances, making them the ideal choice if you're still making architectural changes. They offer a percent discount on any compute usage (Amazon EC2, AWS Fargate, and AWS Lambda), meaning you can always use the newest generation of hardware while still getting savings.

It's also ideal if you think you may switch instance types or re-architect between self-managed and serverless computing. The Savings Plan recommendations in AWS Cost Management give a baseline value of how much to commit to.

Because Savings Plans are a dollar-per-hour commitment, the recommendation is sized against the minimum amount of computing you use every hour. You can stack multiple Savings Plans, so it's good practice to start with a conservative plan and add more plans later if you continue to hit 100% use.

FAQs Related To Cloud Cost Optimization

What's the #1 most effective way to manage and optimize cloud cost

Identify and remove unused resources. The easiest way to optimize cloud costs is to identify and remove unused or underutilized resources.

How can I identify areas where my cloud spending can be reduced?

Analyze your usage patterns and costs using detailed billing reports and cost management tools to identify areas where cloud spending can be reduced. AWS Billing and Cost Management provides features to help you set up your billing, retrieve and pay invoices, and analyze, organize, plan, and optimize costs.

Look for underused or idle resources, unnecessary services, and opportunities to right-size computing instances. Consider leveraging cost-saving options like reserved instances and spot instances. Regularly reviewing and optimizing your cloud architecture can also reveal potential savings.

What are the best practices for effectively managing and optimizing cloud costs?

The best practices for effectively managing and optimizing cloud costs include monitoring usage and spending through detailed analytics, leveraging managed services and auto-scaling to match resources to demand, and regularly reviewing and right-sizing instances and services to ensure they align with current needs.

Additionally, taking advantage of reserved and spot instances, optimizing storage solutions, and employing cost-management tools can further enhance cost efficiency.

Ready to Get Started?

Cost optimization is a continuous process and should be a part of your software development lifecycle. These suggestions are only the beginning of how early-stage startups should think about cost optimization.

Your development teams should consider cost when deploying new features, and your AWS account team can also be a great source to guide you through the optimization process.

By understanding your spending using AWS Cost Explorer and AWS Budgets, turning off unused resources, adopting the newest hardware, and leveraging Compute Savings Plans for flexible usage discounts, you can stay agile while streamlining costs.

Join now and begin optimizing your AWS environment today.