Cost optimization / resource optimization (Capex / Opex)
In this we will learn and understand about Cost optimization / resource optimization (Capex / Opex).
Cost optimization with people and processes
The highest standards, like most things in technology, are only as good as how well they are followed. More often than not, the limiting factor isn’t the technology’s potential, but the people and procedures involved. When it comes to cost optimization, however, the junction of executive teams, project leaders, finance, and site reliability engineers (SREs) all come into play. To begin, these important stakeholders should get together to create a set of corporate standards that define expected service levels of profitability, dependability, and performance.
Using cloud’s enhanced cost visibility
The increased insight into your utilization statistics is a fundamental benefit of a cloud system. Each cloud service is tracked and measurable on its own. This has the potential to be a double-edged sword. To put it another way, you suddenly have tens of thousands of SKUs and you have no idea who is buying what services and why. The total cost of ownership (TCO) for the application(s) or service(s) put in the cloud becomes harder to comprehend.
However, when businesses go from an on-premises capital expenditures (CapEx) model to cloud-based operating expenditures (OpEx), this is a regular issue. A central financial team is used to determine a fixed budget and then buy the necessary resources. Forecasting was done using a statistic like historical growth to calculate what was needed in the coming month, quarter, year, or even many years. Furthermore, no purchase was made before everyone in the firm had a chance to meet and weigh in on whether or not it was necessary.
Understanding value vs. cost
The purpose of constructing a complicated cloud system isn’t just to save money. As an example, consider your fitness goals. Many people focus on shedding weight when trying to become in shape. However, reducing weight isn’t always a good key sign on its own. Being unwell or dehydrated, on the other hand, might cause you to lose weight. What we really care about when we strive for a metric like weight reduction is our general fitness, or how we look and feel while we’re active. In the same way, cost optimization is about more than just decreasing expenses. It’s all about finding waste and making sure you’re getting the most out of every dollar you spend.
Implementing standardized processes from the get-go
It is necessary to establish and enforce a system to ensure that you are consistently executing these guidelines. Automation tools like Terraform and Cloud Deployment Manager, on the other hand, may assist you set up guardrails before deploying a cloud resource. Retroactively implementing a standard is far more complex.
It’s also crucial to organise your resources for successful cost management. It’s advisable to go with the most basic structure that meets your first needs. Then, if your needs change, alter your resource hierarchy. The setup wizard, on the other hand, may help you design your ideal environment by guiding you through recommendations and actions. You may utilise projects, folders, and labels to assist construct logical resource groupings that meet your management and cost attribution needs inside this resource hierarchy.
The tools of the cost optimization trade
Once you have a firm grasp on how to approach cost optimization in the cloud, it’s time to think about the various tools at your disposal. At a high level, cost management on Google Cloud relies on three broad kinds of tools.
- Firstly, Cost visibility. This includes knowing what you spend in detail, specific services bills, and the ability to display how you spent a specific amount to achieve a business outcome. Using a standardized strategy for organizing your resources, you can accurately map your costs to your organization’s operational structure. This is to create a show back/chargeback model.
- Secondly, Resource usage optimization. This is reducing waste in your environment by optimizing usage. Moreover, it implements a specific set of standards that draws an appropriate intersection between cost and performance within an environment.
- Lastly, Pricing efficiency. This includes capabilities such as sustained use discounts, committed use discounts, flat-rate pricing, per-second billing, or other volume discounting features. Further, these features allow you to optimize rates for a specific service. However, these capabilities hold more centralized teams within your company. This includes the Cloud Center of Excellence (CCoE) or FinOps team that can lower the potential for waste while optimizing coverage across all business units.
Reference: Google Documentation