Three High Impact, Low Effort Tasks Small and Medium Businesses Can Do to Optimize IT Costs

Did you know managing cloud IT spend is one of the top challenges for 80 percent of small and medium sized businesses (SMBs)? In today’s turbulent business landscape which includes inflation, supply chain constraints, and rising energy costs, it has become important for all the businesses around the world to proceed with caution. Especially for SMBs with a limited number of resources and budget constraints, it has become more important than ever to manage IT costs as effectively as possible in ensuring a healthy bottom line.

If you’re a non-technical leader and are tasked with finding cost reductions, we are here to help. The good news is that there are several high impact projects which SMBs can execute quickly to deliver measurable results with considerably low effort. In this blog post, we will explore some of the most practical initiatives that can help SMBs to achieve savings without requiring extensive resources and investments. But first, some education may be helpful.

Understanding Cloud Financial Management

If you do not have an IT background, planning for technical costs might be challenging. So let’s think about this simply: you’re aware that as businesses grow and evolve, they might need adjust how they budget for specific recurring costs like utilities, warehouse storage, and more. For the cloud, it’s no different—business computing and digital storage needs change as market conditions do. This concept is known as Cloud Financial Management (CFM). Cloud cost optimization is a continuous effort that starts with identifying areas where you are over spending and working backwards from it. This can range from looking holistically into the following areas:

• Underutilized development and quality assurance (QA) resources
• Un-optimized cloud software
• Excessive data storage
• Too much compute power for business apps or systems

Amazon Web Services provides its customers with a set of CFM solutions which allows you to track costs and data usage, providing you an ability to budget and forecast to further lower your costs. Using CFM solutions, you can get the benefit of having a single view for your AWS costs—allowing you to gather meaningful data and grow your business.

To help you get started, we recommend three common areas where you can quickly save costs.

1. Optimizing your compute costs

Compute costs, in simple terms, refers to the costs associated when you use processing power and memory for any program or application. These resources can be in the form of physical hardware or virtual environments in the cloud and both of them have costs involved.

Having a good understanding of your compute costs in AWS allows you to find the right opportunities where you can quickly optimize. From our experience working with thousands of SMB customers, compute infrastructure sees the most cost benefit by optimization. Below are the projects which can be your quickest wins in optimizing your compute resources:

Right sizing resources

Often times when customers first move their workloads to the cloud, we observe that speed and performance are their top priority. This also means that customers end up selecting instances which are either over-provisioned or incorrectly matched with their application’s need. This ends up creating unnecessary power which increases the overall compute cost. Think of this like a novice rider purchasing a high-speed, all-terrain bicycle.

Right sizing is a continuous process as your application demands are constantly evolving. For your existing workloads, you can rely on some of the most powerful tools AWS provides such as AWS Compute Optimizer to look for opportunities where you can downsize (or get upsizing recommendations) if your application has performance issues. With it, you can improve your resource utilization as well as reduce costs by up to 25 percent.

You should always keep analyzing your usage needs and select the least expensive instance which meets your performance and business needs. After all, scaling up is easy to do in the cloud.

Automating the scheduling of your resources

Imagine keeping your lights on 24 hours a day, 7 days a week, even when you do not need them. Sounds like a lot of wasteful energy, right?

That same ideology is applicable to your IT infrastructure as well. The primary goal of having an optimized environment is to use the resources only when you need them. Thankfully, with AWS you get a wide variety of tools to be able to help you track and optimize your infrastructure.

We offer a pre-built solution called Instance Scheduler on AWS which allows you to eliminate wasted spend from idle resources running in your development, staging or QA environments. Whether you have an in-house IT team or you work with a managed service provider (MSP), they can quickly get started with this solution. The solution can help you reduce your operational costs by allowing you to schedule your compute resources to run only when you need them. For cost-conscious SMBs, this is an easy win.

Using the correct pricing model

The primary intent of using the right pricing model is to ensure you are maximizing the value of your investments, improving cost predictability, and creating a culture of ownership and cost transparency.

You may be using AWS Cloud for a wide variety of workloads but you may have different ones which can follow different predictable patterns. Since AWS provides resizable compute across a lot different compute instances, there are highly flexible pricing options that you can leverage quickly to improve your overall cost optimization strategy.

Amazon Elastic Compute Cloud offers the broadest and deepest compute platform which is suited for a wide variety of use cases. It supports purchase models to help you match different needs.

In Figure 1, three different cost-conscious purchase models are illustrated:

• Spot Instances: This purchase model provides you up to a 90 percent discount compared to on-demand. This model is well suited if you can be flexible about the time when your application runs and if your applications can be interrupted. For example: If you have an optional data analysis task or any background processing operations which does not impact your business if interrupted.
• On-Demand Instances: This purchase model does not have any long-term commitments and allows you to transform large fixed costs to smaller variable costs. The is well-suited for workloads where you will need uninterrupted service for your application needs. For example: If you have an e-commerce website which is expecting a spike in its usage, this purchase model will serve the purpose without any interruptions.
• Reserved or Savings Plan: This purchase plan is ideal for predictable and steady workloads where you can have a 1-3 year commitment. It allows you to save up to 72 percent compared to on-demand prices.

Figure 1: Cloud resource purchasing options

2. Optimizing your storage costs

According to a IDC research, businesses can save up to an average of 31 percent on their storage costs when using AWS versus maintaining that same storage on-premises. When it comes to optimizing storage, understanding the profile of your storage workload is important to determine how you can optimize for different scenarios.

You can understand your storage requirements by asking the following questions:

• How critical and sensitive is my data? This will give you an understanding of how regulated your data needs to be against not only data loss but also accidental changes.
• How large is my data set? This will help you gain insights about estimating how much storage you need and what the cost associated will be.
• How often and quickly do I need access to my data? Understanding your access patterns will determine how optimally you can segment your data to ensure you are using the best storage option based on your data access requirements.
• How much can my SMB afford? This will give you an understanding of how much additional hardware you would require and the associated cost. For SMBs, we recognize price is a crucial component.

With AWS, you simply pay for the capacity you use each month without any concern about over- or under-provisioning your resources. We provide you with a robust storage options along with different pricing tiers which you can explore for your different storage requirements.

Reducing Amazon Simple Storage Service (S3) costs with less effort

Amazon S3 is one of our most popular storage service offerings which allows customers of all sizes to store and protect any amount of data depending on their business and organizational need. Amazon S3 provides allows you to optimize your storage costs based on different access patterns.

If you are already storing data on Amazon S3 today or if you are planning to in the future, you can utilize Amazon S3 Intelligent Tiering. This option is one of the quickest ways to start optimizing your storage costs on AWS as it allows you to automate costs savings without any operational overhead. This storage class has helped save our customers almost $1 billion USD in storage costs as it automates the transition of data to the cheapest storage class available.

3. Optimizing your database costs

According to our colleagues’ blog post on reducing database costs, there is an exponential increase in the amount of data being generated and with the current rate of data creation, it will double the world’s data every two years.

Analysts at IDC research found cloud managed database services offer customers a three-year return on investment of 264 percent. Moving to a managed database will offload a significant amount of undifferentiated heavy lifting that your team would need to manage otherwise. The same IDC research also highlights that moving to a cloud managed database service would result in lower infrastructure and database licensing costs by an annual average of $575,900 USD per organization.

Understanding Total Cost of Ownership (TCO) of your databases is critical to operating efficiently on AWS. We offer databases that are scalable and cost-effective. You can start small and scale as your applications grow. You can also match your storage and compute needs easily, and rely on high availability, and reliability for business-critical workloads.

For relational databases, multiple factors contribute to the TCO of your databases including but not limited to:

• License & tenancy
• Database architecture
• Pricing strategy (Reserved vs. On Demand, for example)
• Storage volume types
• Operational maintenance

Focusing your team’s effort on one or more of these to evaluate where the biggest savings can come from yields meaningful cost savings. Figure 2 illustrates database cost-optimization approach.

Figure 2: Four parts to reducing database costs

How can you enable your team to take active role in cost optimization?

CFM is about more than just reining in costs. It is about continuously embracing the agility, innovation, and scale of AWS to maximize the value that the cloud provides to your business. Managing cloud technology and its finances can no longer be a siloed endeavor. Finance needs to partner with IT to create and socialize a value story, helping the executives understand how tech spend is linked to business outcomes. This way, technology expenditures are viewed not as costs, but rather as investments.

Depending on your SMB’s staffing model, finance, business, and IT leads can come together to form a Cloud Center of Excellence team tasked with CFM functions such as:

• Reviewing historical spend and metrics
• Identifying top spending applications and services
• Correlating cloud spend with business metrics
• Preparing for future applications by assessing relative costs and risks

This can ensure that with their analysis and findings, teams can improve their approach through right sizing and automation. Use Figure 3 as a source of inspiration.

Figure 3: Circular diagram illustrating the continuous cycle of cost optimization

AWS Partners are uniquely positioned to help organizations best utilize the services available to them for cloud cost management and optimization. AWS and MSP Partners are full life cycle support providers focusing on consulting, professional services, managed operations, and continuous optimization as an extension of your team. AWS Marketplace has many CFM offerings from our tech partners that help you identify ongoing cost savings opportunities for your cloud environments with an aim to ensure appropriate implementation.

Next steps

The three points highlighted in this blog providesyou with a mental model on how to approach cost optimization strategies which can have high impact with significantly less effort than you might expect. Ready to get started? Contact Us or learn more about what we offer SMBs on AWS Smart Business.