A Simple Analogy

Cloud cost optimization is like home energy efficiency. Small improvements multiply to significant savings over time.

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Why Optimize?

• Budget control: Manage cloud spend
• Profitability: Improve margins
• Sustainability: Reduce waste
• Scalability: More capacity per dollar
• Competitiveness: Lower operating costs

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Optimization Strategies

1. Right-size instances
   - Analyze actual usage
   - Downgrade oversized instances
   - Potential savings: 30-40%

2. Use reserved instances
   - Commit to 1-3 years
   - 25-60% discount vs on-demand
   - Good for stable workloads

3. Spot instances
   - Use spare capacity
   - 60-90% discount
   - For fault-tolerant apps

4. Storage optimization
   - Delete unused data
   - Use cheaper storage tiers
   - Compress data

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Cost Allocation

Track spending by:
- Project/Application
- Cost Center
- Environment (dev/staging/prod)
- Team

Use tags for categorization:
  - Environment: production
  - Team: backend
  - Project: order-system
  - CostCenter: engineering

Query by tag to understand costs:
  SELECT * FROM costs WHERE tag_environment = 'production'

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Auto-Scaling

# Right-size for demand
apiVersion: autoscaling/v2
kind: HorizontalPodAutoscaler
metadata:
  name: cost-optimized-hpa
spec:
  scaleTargetRef:
    kind: Deployment
    name: api
  minReplicas: 2
  maxReplicas: 20
  metrics:
  - type: Resource
    resource:
      name: cpu
      target:
        averageUtilization: 80

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Reserved Capacity

AWS EC2 Savings Plans:
  - Compute: 38% savings, covers EC2 + Fargate + Lambda
  - EC2 Instance: 63% savings, specific instance type
  - 1-year or 3-year commits

Azure Reserved Instances:
  - 25-72% savings
  - VM, SQL Database, App Service
  - Flexible scope: shared or single subscription

GCP Committed Use Discounts:
  - 25-70% savings
  - Compute, storage, networking

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Monitoring

Set up cost alerts:
- Daily email if spending > $X
- Monthly budget limits
- Anomaly detection

Use cloud cost tools:
- AWS Cost Explorer
- Azure Cost Management
- GCP Cost Management
- Third-party: CloudHealth, CloudSploit

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Best Practices

1. Monitor constantly: Know where money goes
2. Clean up: Remove unused resources
3. Automate: Turn off dev environments
4. Organize: Use consistent tagging
5. Review quarterly: Track trends

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Related Concepts

• FinOps practices
• Budget forecasting
• Capacity planning
• Chargeback models

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Summary

Optimize cloud costs through right-sizing, reserved instances, auto-scaling, and continuous monitoring. Review spending regularly and implement cost controls.