Cost Optimization

Cloud Cost Optimization

Strategies and patterns for optimizing cloud costs across AWS, Azure, and GCP.

Do not use this skill when

• The task is unrelated to cloud cost optimization
• You need a different domain or tool outside this scope

Instructions

• Clarify goals, constraints, and required inputs.
• Apply relevant best practices and validate outcomes.
• Provide actionable steps and verification.
• If detailed examples are required, open resources/implementation-playbook.md.

Purpose

Implement systematic cost optimization strategies to reduce cloud spending while maintaining performance and reliability.

Use this skill when

• Reduce cloud spending
• Right-size resources
• Implement cost governance
• Optimize multi-cloud costs
• Meet budget constraints

Cost Optimization Framework

1. Visibility

• Implement cost allocation tags
• Use cloud cost management tools
• Set up budget alerts
• Create cost dashboards

2. Right-Sizing

• Analyze resource utilization
• Downsize over-provisioned resources
• Use auto-scaling
• Remove idle resources

3. Pricing Models

• Use reserved capacity
• Leverage spot/preemptible instances
• Implement savings plans
• Use committed use discounts

4. Architecture Optimization

• Use managed services
• Implement caching
• Optimize data transfer
• Use lifecycle policies

AWS Cost Optimization

Reserved Instances

Savings: 30-72% vs On-Demand
Term: 1 or 3 years
Payment: All/Partial/No upfront
Flexibility: Standard or Convertible

Savings Plans

Compute Savings Plans: 66% savings
EC2 Instance Savings Plans: 72% savings
Applies to: EC2, Fargate, Lambda
Flexible across: Instance families, regions, OS

Spot Instances

Savings: Up to 90% vs On-Demand
Best for: Batch jobs, CI/CD, stateless workloads
Risk: 2-minute interruption notice
Strategy: Mix with On-Demand for resilience

S3 Cost Optimization

resource "aws_s3_bucket_lifecycle_configuration" "example" {
  bucket = aws_s3_bucket.example.id

  rule {
    id     = "transition-to-ia"
    status = "Enabled"

    transition {
      days          = 30
      storage_class = "STANDARD_IA"
    }

    transition {
      days          = 90
      storage_class = "GLACIER"
    }

    expiration {
      days = 365
    }
  }
}

Azure Cost Optimization

Reserved VM Instances

• 1 or 3 year terms
• Up to 72% savings
• Flexible sizing
• Exchangeable

Azure Hybrid Benefit

• Use existing Windows Server licenses
• Up to 80% savings with RI
• Available for Windows and SQL Server

Azure Advisor Recommendations

• Right-size VMs
• Delete unused resources
• Use reserved capacity
• Optimize storage

GCP Cost Optimization

Committed Use Discounts

• 1 or 3 year commitment
• Up to 57% savings
• Applies to vCPUs and memory
• Resource-based or spend-based

Sustained Use Discounts

• Automatic discounts
• Up to 30% for running instances
• No commitment required
• Applies to Compute Engine, GKE

Preemptible VMs

• Up to 80% savings
• 24-hour maximum runtime
• Best for batch workloads

Tagging Strategy

AWS Tagging

locals {
  common_tags = {
    Environment = "production"
    Project     = "my-project"
    CostCenter  = "engineering"
    Owner       = "team@example.com"
    ManagedBy   = "terraform"
  }
}

resource "aws_instance" "example" {
  ami           = "ami-12345678"
  instance_type = "t3.medium"

  tags = merge(
    local.common_tags,
    {
      Name = "web-server"
    }
  )
}

Reference: See references/tagging-standards.md

Cost Monitoring

Budget Alerts

# AWS Budget
resource "aws_budgets_budget" "monthly" {
  name              = "monthly-budget"
  budget_type       = "COST"
  limit_amount      = "1000"
  limit_unit        = "USD"
  time_period_start = "2024-01-01_00:00"
  time_unit         = "MONTHLY"

  notification {
    comparison_operator        = "GREATER_THAN"
    threshold                  = 80
    threshold_type            = "PERCENTAGE"
    notification_type         = "ACTUAL"
    subscriber_email_addresses = ["team@example.com"]
  }
}

Cost Anomaly Detection

• AWS Cost Anomaly Detection
• Azure Cost Management alerts
• GCP Budget alerts

Architecture Patterns

Pattern 1: Serverless First

• Use Lambda/Functions for event-driven
• Pay only for execution time
• Auto-scaling included
• No idle costs

Pattern 2: Right-Sized Databases

Development: t3.small RDS
Staging: t3.large RDS
Production: r6g.2xlarge RDS with read replicas

Pattern 3: Multi-Tier Storage

Hot data: S3 Standard
Warm data: S3 Standard-IA (30 days)
Cold data: S3 Glacier (90 days)
Archive: S3 Deep Archive (365 days)

Pattern 4: Auto-Scaling

resource "aws_autoscaling_policy" "scale_up" {
  name                   = "scale-up"
  scaling_adjustment     = 2
  adjustment_type        = "ChangeInCapacity"
  cooldown              = 300
  autoscaling_group_name = aws_autoscaling_group.main.name
}

resource "aws_cloudwatch_metric_alarm" "cpu_high" {
  alarm_name          = "cpu-high"
  comparison_operator = "GreaterThanThreshold"
  evaluation_periods  = "2"
  metric_name         = "CPUUtilization"
  namespace           = "AWS/EC2"
  period              = "60"
  statistic           = "Average"
  threshold           = "80"
  alarm_actions       = [aws_autoscaling_policy.scale_up.arn]
}

Cost Optimization Checklist

• Implement cost allocation tags
• Delete unused resources (EBS, EIPs, snapshots)
• Right-size instances based on utilization
• Use reserved capacity for steady workloads
• Implement auto-scaling
• Optimize storage classes
• Use lifecycle policies
• Enable cost anomaly detection
• Set budget alerts
• Review costs weekly
• Use spot/preemptible instances
• Optimize data transfer costs
• Implement caching layers
• Use managed services
• Monitor and optimize continuously

Tools

• AWS: Cost Explorer, Cost Anomaly Detection, Compute Optimizer
• Azure: Cost Management, Advisor
• GCP: Cost Management, Recommender
• Multi-cloud: CloudHealth, Cloudability, Kubecost

Reference Files

• references/tagging-standards.md - Tagging conventions
• assets/cost-analysis-template.xlsx - Cost analysis spreadsheet

Related Skills

• terraform-module-library - For resource provisioning
• multi-cloud-architecture - For cloud selection