Why Cloud Bills Are Rising And How to Push Them Down

Your cloud bills are rising for three main reasons: wasted resources, poor monitoring, and choosing the wrong pricing models. Here’s the quick fix:

• Stop Wasting Resources: Unused resources like idle instances or oversized machines are eating up your budget. Tools like AWS Compute Optimizer can help you right-size them.
• Improve Monitoring: Most businesses don’t know where their money is going. Use tools like AWS Cost Explorer or Azure Cost Management for better visibility.
• Choose Smarter Pricing Models: On-demand pricing is expensive. Switch to Reserved Instances or Spot Instances to save up to 72%.

💡 Quick Tip: Automate scaling and shutdown schedules to avoid overpaying for unused resources. Use tagging systems to track spending by project or team.

Lower Your Cloud Bill in 2024 (5 Cost Optimization Tips)

Main Reasons Your Cloud Bills Are Rising

If your cloud costs seem to climb higher every month, you're not alone. For many small and medium-sized businesses (SMBs), the reasons boil down to three main issues that quietly eat away at budgets.

Wasted Resources and Poor Allocation

One of the biggest culprits? Paying for resources you don’t actually use. Idle instances, oversized machines, and forgotten storage can quietly rack up costs. For example, a development team might set up a powerful test database but forget to scale it down after use. This oversight could cost hundreds of pounds each month for something that could run on far fewer resources.

The numbers are eye-opening: cloud users waste about 35% of their spend. For SMBs, this translates into an average of £1 million wasted per business annually. Considering that the typical SMB spends around £120,000 per year on cloud services - with 10% spending £1.2 million or more - this level of waste is a serious problem. Common mistakes include:

• Unused or unattached resources (e.g., test environments or unattached IP addresses)
• Underutilised virtual machines
• Paying for inactive user accounts or unnecessary admin privileges

Without tools like tagging systems or dashboards, these issues often go unnoticed until the damage is done. And when monitoring is inadequate, the problem only gets worse.

No Monitoring or Control Over Usage

Another major factor driving up costs is a lack of visibility into your cloud spending. In 54% of cases, cloud waste happens because organisations simply don’t know where their money is going. Shockingly, over 20% of businesses have little to no understanding of how various parts of their operations contribute to cloud expenses. To make matters worse, 80% report that visibility into their cloud infrastructure is becoming increasingly difficult.

When you can’t see what’s causing the costs, it’s nearly impossible to make smart decisions about resource allocation. As a result, 78% of organisations only notice cost spikes after they’ve already occurred. The FinOps Foundation explains this challenge well:

"Anomaly Management is the ability to detect, identify, clarify, alert and manage unexpected or unforecasted cloud cost events in a timely manner, in order to minimise detrimental impact to the business, cost or otherwise."

Shadow IT - when employees or teams use unsanctioned cloud apps - makes things even harder to manage. A staggering 97% of enterprise cloud apps fall into this category, as employees adopt tools to boost productivity without going through official channels. This lack of oversight means 49% of businesses struggle to control their cloud costs and often only realise there’s a problem when they see the monthly bill. Beyond visibility, choosing the wrong pricing structure can also inflate your expenses.

Wrong Pricing Models for Your Workload

Finally, many SMBs fall into the trap of using pricing models that don’t match their actual needs. On-demand pricing is convenient, but it’s also one of the most expensive options. By not exploring alternatives like Reserved Instances or Savings Plans, businesses miss out on potential savings of up to 72% on infrastructure costs.

One of the main challenges is predicting usage patterns. Many businesses stick with on-demand pricing because they’re afraid of committing to reserved capacity they might not use. However, this cautious approach often leads to higher bills. The situation becomes even more complicated when different teams or projects rely on varied billing models, making it tough to predict overall expenses. According to IDC, companies without strong financial management for their cloud services waste between 10% and 30% of their public cloud spending.

As Shruthi Nambi, Product Manager at Google Cloud, puts it:

"Pricing education leads to purchasing power."

In short, a better understanding of pricing options and usage patterns could help businesses unlock significant savings. But without that knowledge, many end up paying far more than they need to.

How to Cut Your Cloud Costs

Understanding why your cloud expenses are climbing is just the first step. The good news? Cutting those costs doesn’t mean you need to completely overhaul your infrastructure. With some smart strategies, small and medium-sized businesses (SMBs) can address the root causes of rising bills and achieve meaningful savings. Let’s dive into the actionable steps.

Right-Size Your Resources

One of the easiest ways to lower cloud costs is to ensure your resources align with your actual needs. This process, known as right-sizing, involves adjusting instance types and capacity to avoid over-provisioning or under-utilising resources.

Start by using built-in tools like AWS Compute Optimizer or Azure Advisor. These tools help monitor usage, identify underused resources, and suggest alternative configurations. For example, if your web server has consistently low utilisation, switching to a smaller instance could save you money.

Set up alerts to flag prolonged periods of low CPU or memory usage. This allows you to quickly identify and eliminate waste.

Netflix’s engineering team provides a great example of right-sizing. By analysing usage patterns and dynamically adjusting resource allocation based on demand, they achieved significant cost savings.

You can also use heatmaps to visualise computing demand over time. Heatmaps make it easier to spot patterns, such as predictable lulls or unexpected spikes. These insights can guide decisions on adjusting instance types or improving load balancing, helping you avoid both overuse and underuse.

Automate Scaling and Shutdown Schedules

Managing resources manually is not only time-consuming but also prone to errors. Automation can help ensure your resources scale up when needed and scale down during quieter periods, so you’re only paying for what you use.

Auto-scaling groups are a great way to adjust the number of instances in real time based on factors like CPU usage or incoming requests. Many companies in industries like media and travel have successfully cut costs by using dynamic resource allocation.

Another effective tactic is to schedule shutdowns for non-production environments. If these environments are only needed during business hours, automating their shutdown outside of these times can lead to substantial savings without disrupting critical operations.

Infrastructure as Code (IaC) is another tool worth considering. By defining your infrastructure in code, you can automate provisioning, replicate environments as needed, and tear them down when they’re no longer required.

Before fully implementing automation, test it on non-critical workloads. While automation helps reduce waste, combining it with optimised pricing models can further align costs with actual needs.

Switch to Better Pricing Models

On-demand pricing is convenient but not always the most cost-effective option. Exploring alternative pricing models can lead to considerable savings, especially when paired with right-sizing and automation.

• Reserved Instances are ideal for predictable, long-term workloads. If you’re confident about needing a certain compute capacity for at least a year, these can save up to 72% compared to on-demand pricing.
• Spot Instances offer discounts of up to 90% off on-demand rates. However, they come with the risk of interruption and only a two-minute warning before termination. These are perfect for tasks like batch processing, CI/CD pipelines, or development environments where occasional interruptions are acceptable.
• Savings Plans strike a balance between flexibility and discounts. By committing to a minimum hourly spend for one to three years, you can save across various instance types and services. This is particularly useful for businesses with evolving needs.

Combining these models can maximise savings. For instance, you might use Reserved Instances for your baseline capacity, Spot Instances for batch tasks, and on-demand instances for unexpected spikes. This hybrid approach often delivers better results than relying on a single model.

For businesses in the UK, it’s worth noting that regional pricing can vary. For example, the EU (London) region may have different costs compared to other European markets. Understanding these differences can help you deploy resources in the most cost-effective locations for your specific needs.

Make it a habit to regularly review and adjust your pricing strategy. Cloud workloads evolve, and keeping your pricing model aligned with your usage patterns ensures you’re not paying more than necessary.

Tools to Track and Control Cloud Spending

Having the right tools at your disposal is crucial for managing cloud spending effectively. While most cloud providers offer built-in tools to cover the essentials, specialised third-party platforms can provide advanced features for businesses with more complex needs.

Built-in Cloud Cost Management Tools

Major cloud providers come equipped with tools designed to help you monitor and control spending:

• AWS Cost Explorer: This free tool delivers detailed cost analysis, budget alerts, and cost-saving recommendations. It includes features like Cost Allocation Tags, which allow you to categorise resources by project or department, and Cost Anomaly Detection, which uses machine learning to highlight unusual spending patterns.
• Azure Cost Management + Billing: Azure’s tool integrates with Power BI for custom reporting, offering detailed cost analysis. Paired with Azure Advisor, it provides tailored recommendations to optimise resource use and cut costs.
• Google Cloud Platform: Google Cloud offers Cloud Billing Reports and Cost Tables, giving clear insights into spending trends and areas where you can make improvements.

To get the most out of these tools, it’s crucial to implement strategic tagging policies. By categorising resources according to projects or departments, you can easily identify unnecessary spending and hold teams accountable. Additionally, setting up budget alerts at key thresholds (e.g., 50%, 80%, and 100% of your budget) can help you take corrective action before costs spiral out of control.

For businesses seeking more advanced analytics or custom reporting capabilities, third-party platforms can be a game-changer.

Third-Party Cost Management Platforms

When built-in tools don’t meet your needs, specialised platforms offer deeper insights and tailored features.

CloudZero is a standout option for SMBs, focusing on unit economics to help you analyse costs per customer, feature, or product. This granular approach makes it easier to link spending directly to business value.

"CloudZero has been instrumental in helping us drive cultural and operational shifts towards cloud cost accountability, visibility, and optimisation... the two biggest reasons that swung it in their favour were the people at CloudZero, who are fantastic, and the speed at which we could onboard engineers and managers into the tool." – Verified User, Industry: Software, Size: $1-3 Billion

Other platforms like Vantage, Harness, and Kubecost have also proven effective in helping SMBs achieve savings by tying cloud spending to business outcomes.

When selecting a third-party tool, look for features such as data aggregation, historical spending analysis, custom reporting, and seamless integration with your existing DevOps tools. The ability to create custom allocation rules and quickly detect anomalies can significantly improve your cost management efforts.

For UK-based businesses, Critical Cloud’s FinOps add-on offers a tailored solution. Priced at £400 per month, it provides cost optimisation, anomaly detection, and proactive alerts. This option is particularly appealing for SMBs looking for expert guidance without the hassle of managing multiple tools.

It’s worth noting that up to 32% of cloud budgets are at risk of being wasted. Investing in the right cost management tools isn’t just a smart move - it’s a necessary step to keep cloud expenses under control. By leveraging these tools, businesses can better align their spending with their goals and avoid unnecessary costs.

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Making Your Team Care About Cloud Costs

Even the best cost management tools won't save you money if your team isn't actively involved in using them. To create a culture where developers and engineers consider the financial impact of their technical decisions, you need more than just monthly expense reports. It requires a fundamental shift in how your organisation approaches cloud spending.

Get Developers to Own Their Costs

Developers need clear guidance when it comes to costs. Start by onboarding them with straightforward cost guidelines and resources for optimisation. This early step sets the tone that cost awareness is a core part of their responsibilities.

Provide developers with direct access to cost data through a unified dashboard. Breaking down expenses by team, project, or feature transforms abstract figures into something tangible and actionable, encouraging personal accountability.

Consider implementing showback or chargeback models to make costs more visible. Sharing internal success stories can also motivate teams to take ownership of their spending.

Start small when introducing cost-saving measures. Show that meaningful improvements don’t require massive time investments by dividing optimisation tasks into manageable steps. Make cost discussions part of everyday workflows - integrate them into sprint planning, code reviews, and regular check-ins. Pair accountability with empowerment by setting sensible defaults in your codebase that encourage cost-effective decisions. Create an environment where experimenting with optimised technologies is both supported and celebrated.

Additionally, incorporating cost-conscious design into your architecture helps reinforce a sense of individual accountability.

Design Your Architecture for Lower Costs

Aligning your technical decisions with cost-saving goals complements team accountability. By embedding cost-consciousness into your architecture from the start, you can achieve long-term savings while reducing the need for constant manual oversight. Smart architectural choices not only lower expenses but often improve performance as well.

For example, serverless technologies are a great fit for event-driven workloads. They automatically scale and only charge for the time functions run, making them ideal for API endpoints, background jobs, and applications with fluctuating traffic.

Edge caching strategies can cut costs and improve response times by serving content closer to users, reducing bandwidth expenses while enhancing the user experience. Similarly, container orchestration with defined resource limits ensures that applications only use the compute and memory they require, keeping costs predictable.

Database optimisation is another area for potential savings. Choose the right database type for each use case, ensure proper indexing, and use read replicas for workloads with high read demands. Design your auto-scaling policies to respond to meaningful metrics (not just CPU usage) and include cooldown periods to avoid unnecessary scaling. Incorporating a mix of instance types, such as spot instances, can further reduce costs without compromising reliability.

The key is to create an architecture that naturally enforces cost efficiency. When your infrastructure is designed to make cost-effective choices the default, your team can focus on innovation without constantly worrying about financial oversight.

UK-Specific Cloud Cost Considerations

When managing cloud infrastructure in the UK, businesses face unique cost factors that can impact their budgeting and efficiency. From VAT obligations to regional pricing differences, these considerations require careful planning. Additionally, decisions around using local data centres for better latency versus international regions for cost savings add another layer of complexity.

UK Region Pricing and Tax Requirements

One of the key financial factors for UK businesses is VAT. If your taxable turnover exceeds £90,000 within 12 months, you must register for VAT, which adds 20% to most cloud service costs. While VAT-registered businesses can reclaim this as input tax, the upfront payment can strain cash flow, as claims are processed through quarterly VAT returns.

To simplify VAT management, ensure your VAT number is registered with your cloud provider to activate the reverse charge mechanism. Also, compliance with Making Tax Digital (MTD) requires using compatible accounting software to link cloud transactions with VAT submissions. Popular tools include Xero (£16–£59/month), QuickBooks (£16–£115/month), and Sage (£15–£39/month).

Pricing differences across regions are another factor to weigh. Hosting customer-facing applications in UK data centres can provide lower latency and meet local data sovereignty requirements. However, for non-critical workloads like development, batch processing, or backups, hosting in cost-effective EU regions can significantly reduce expenses. Balancing these costs with performance needs is crucial for an efficient cloud strategy.

Energy-Efficient Cloud Options

Energy consumption and sustainability are increasingly important for UK businesses. AWS Graviton instances provide a compelling solution, offering up to 20% cost savings, 20% performance gains, and 60% lower energy use compared to x86 instances.

A great example comes from Ably, a UK-based real-time messaging company:

"We migrated a majority of our Java, Ruby, and Go-based Ably platform to Graviton-based instances and realised up to 40% better price performance over comparable x86-based instances."
– Lewis Marshall, Distinguished Engineer, Ably

The migration process can also be quick. For instance, Cordial transitioned its core applications to Graviton2-based instances in just five days, achieving a 10–15% reduction in their instance footprint and cutting total ownership costs by 87%.

AWS’s European data centres are leaders in energy efficiency. In 2024, AWS reported its top-performing European site achieved a Power Usage Effectiveness (PUE) of 1.04, meaning nearly all electricity was used directly for computing rather than cooling or other overheads. Here’s a snapshot of average efficiency metrics:

Sustainability is becoming a key factor in procurement decisions, with many UK clients now requesting carbon footprint data from vendors. AWS infrastructure can reduce workloads' carbon footprint by up to 99% compared to on-premises setups and cut energy use by nearly 80%.

To further enhance efficiency, consider consolidating services and automating provisioning. AWS also matches 100% of its electricity consumption with renewable energy, making it easier to align with sustainability goals without additional effort.

Finally, leverage cloud provider tools to monitor energy usage and emissions. This data is invaluable for ESG reporting and can strengthen the case for cloud investments with stakeholders who prioritise environmental impact.

Taking Back Control of Your Cloud Spending

Keeping your cloud bills in check starts with addressing wasted resources, inadequate monitoring, and mismatched pricing plans. For small and medium-sized businesses (SMBs), taking deliberate steps can significantly cut cloud expenses without compromising the performance or reliability that customers expect.

The numbers tell a concerning story. Over 24% of public cloud spending is wasted globally, with at least 30% of cloud costs being unnecessary. For UK SMBs spending as much as £600,000 annually on cloud services, this represents a huge amount of money going down the drain. It’s no wonder that 57% of technical professionals are prioritising cloud cost optimisation. These figures highlight the urgency of taking practical actions to reclaim wasted funds.

Start by auditing your resource usage to identify unnecessary expenses. Properly tagging resources by department, project, or environment can provide visibility into spending patterns. Often, this simple step uncovers unexpected cost drains that can be addressed right away.

Automation is another powerful tool. Set up automatic shutdowns for non-production environments, use auto-scaling for production workloads, and apply lifecycle management to ensure consistent savings.

When it comes to pricing, aligning workloads with the right models can make a big difference. For example, choosing Reserved or Spot Instances based on your usage patterns can lead to significant savings. The trick is understanding your needs and selecting the most cost-effective structure.

"Optimising cloud costs is not a one-time event, but rather an ongoing strategy with a myriad of benefits - from a more cost-effective cloud environment to a more competitive business."

• Fadeke Adegbuyi, Manager, Content Marketing, DigitalOcean

Cost reduction doesn’t stop with pricing strategies. Encouraging team accountability can have a lasting impact. Build a cost-conscious culture where developers understand how their architectural decisions affect the monthly bill. When teams see the link between their choices and the company’s expenses, they naturally become more mindful. Introducing showback or chargeback models can reinforce this accountability without stifling creativity or innovation.

Lastly, continuous monitoring is essential for keeping your cost-management efforts on track. Set up budget alerts at 90%, 100%, and 110% of your target spend to catch potential overspending early. Regularly review costs using tools provided by your cloud service provider to spot spikes before they turn into major financial headaches. By staying vigilant, you can ensure your cloud spending remains under control.

FAQs

How can SMBs set up an effective tagging system to track cloud costs by project or team?

To keep cloud costs under control, small and medium-sized businesses (SMBs) should implement a clear and structured tagging strategy. Start by establishing consistent naming conventions and making tags mandatory for all resources. Useful tags might include details like project names, team identifiers, or environment types (e.g., production or staging). This approach helps ensure costs are tracked and allocated accurately.

It's important to document the tagging policy, so teams can easily understand and apply it. Conduct regular audits to identify any missing or inconsistent tags, which can significantly improve visibility into spending. By keeping the process straightforward and uniform, SMBs can effectively manage their cloud budgets without adding unnecessary complexity.

What are Reserved Instances, Spot Instances, and Savings Plans, and how do I choose the best option for your cloud workloads?

Reserved Instances (RIs), Spot Instances, and Savings Plans are AWS pricing models designed to help you manage cloud costs effectively, depending on your workload needs.

• Reserved Instances: If your workload is steady and predictable, RIs can save you up to 75% by committing to a specific instance type for one or three years. They’re a solid choice for consistent, long-term usage.
• Spot Instances: These let you tap into AWS’s spare capacity at discounts of up to 90%. The catch? They can be interrupted with little notice. This makes them ideal for tasks that are flexible and non-critical, like batch processing or testing.
• Savings Plans: By committing to a set hourly spend (£/hour) for one or three years, you can save up to 66%. Unlike RIs, these plans offer more flexibility, applying across services like EC2 and Fargate, which makes them a good fit for workloads with some variability.

When deciding, think about how predictable your workload is, how flexible it needs to be, and whether it can handle interruptions. RIs are perfect for stable, ongoing tasks; Spot Instances shine for temporary or interruptible work, and Savings Plans strike a balance between flexibility and cost savings.

How can businesses encourage developers and engineers to be more cost-conscious with cloud spending?

Building a Culture of Cost-Awareness

Creating a culture where cost-awareness thrives requires a few practical steps. Start with real-time visibility into cloud expenses by leveraging user-friendly cost management tools. This transparency allows teams to track spending effortlessly. Assigning budgets to specific teams or projects can also promote accountability, as it encourages individuals to take ownership of their expenditures.

Another important move is to educate developers on cloud cost management. By incorporating cost considerations into the development process, teams can make smarter decisions from the outset. To keep everyone engaged, you could introduce creative approaches like gamifying cost-saving initiatives or offering rewards for spotting opportunities to reduce expenses. Finally, make sure cost data is presented in a clear, digestible way so that everyone can stay aligned with the organisation’s financial goals.

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