Cloud Cost Optimization

FinOps practices for managing and optimizing cloud spending.

When to Use

• Analyzing and reducing cloud costs
• Implementing cost allocation and tagging
• Right-sizing resources
• Choosing commitment options
• Setting up cost alerts and budgets

Cost Optimization Framework

The Three Pillars

Pillar	Actions
See	Tagging, allocation, visibility
Save	Right-sizing, commitments, spot
Plan	Forecasting, budgeting, governance

Tagging Strategy

Required Tags

locals {
  required_tags = {
    Environment = var.environment
    Project     = var.project
    Owner       = var.owner
    CostCenter  = var.cost_center
    ManagedBy   = "terraform"
    Application = var.application
  }
}

resource "aws_instance" "example" {
  # ...
  tags = merge(local.required_tags, {
    Name = "${var.project}-web"
    Role = "webserver"
  })
}

Tag Policy (AWS)

{
  "tags": {
    "Environment": {
      "tag_key": { "@@assign": "Environment" },
      "tag_value": {
        "@@assign": ["production", "staging", "development"]
      },
      "enforced_for": {
        "@@assign": ["ec2:instance", "rds:db", "s3:bucket"]
      }
    },
    "CostCenter": {
      "tag_key": { "@@assign": "CostCenter" },
      "enforced_for": {
        "@@assign": ["*"]
      }
    }
  }
}

Right-Sizing

Identify Over-Provisioned Resources

-- AWS Cost Explorer query
SELECT
  line_item_resource_id,
  product_instance_type,
  AVG(line_item_usage_amount) as avg_usage,
  MAX(line_item_usage_amount) as max_usage
FROM cost_and_usage_report
WHERE line_item_product_code = 'AmazonEC2'
GROUP BY 1, 2
HAVING avg_usage < max_usage * 0.3  -- Under 30% utilized

Right-Sizing Recommendations

Current	Recommendation	Savings
m5.xlarge (4 vCPU, 16GB)	m5.large (2 vCPU, 8GB)	~50%
r5.2xlarge (8 vCPU, 64GB)	r5.xlarge (4 vCPU, 32GB)	~50%
Provisioned IOPS SSD	General Purpose SSD	~60%

Terraform Right-Sizing

variable "instance_sizes" {
  type = map(string)
  default = {
    development = "t3.small"
    staging     = "t3.medium"
    production  = "m5.large"
  }
}

resource "aws_instance" "app" {
  instance_type = var.instance_sizes[var.environment]
}

Commitment Discounts

Comparison

Type	Discount	Flexibility	Best For
On-Demand	0%	Full	Variable workloads
Reserved (1yr)	30-40%	Low	Steady-state
Reserved (3yr)	50-60%	Low	Predictable long-term
Savings Plans	20-30%	Medium	Flexible compute
Spot/Preemptible	60-90%	None	Fault-tolerant

AWS Savings Plans

resource "aws_ce_savings_plan_purchase_recommendation" "compute" {
  lookback_period_in_days = "SIXTY_DAYS"
  payment_option          = "NO_UPFRONT"
  savings_plan_type       = "COMPUTE_SP"
  term_in_years           = "ONE_YEAR"
}

GCP Committed Use

resource "google_compute_resource_policy" "commitment" {
  name   = "commitment-policy"
  region = var.region

  instance_schedule_policy {
    vm_start_schedule {
      schedule = "0 9 * * MON-FRI"
    }
    vm_stop_schedule {
      schedule = "0 18 * * MON-FRI"
    }
  }
}

Spot/Preemptible Instances

AWS Spot Instances

resource "aws_spot_fleet_request" "workers" {
  iam_fleet_role  = aws_iam_role.spot_fleet.arn
  target_capacity = 10

  launch_specification {
    instance_type     = "m5.large"
    ami               = data.aws_ami.amazon_linux.id
    spot_price        = "0.05"

    tags = {
      Name = "spot-worker"
    }
  }

  launch_specification {
    instance_type     = "m5.xlarge"
    ami               = data.aws_ami.amazon_linux.id
    spot_price        = "0.10"
  }

  # Diversify across instance types
  allocation_strategy = "diversified"
}

GCP Preemptible VMs

resource "google_compute_instance" "worker" {
  name         = "worker"
  machine_type = "e2-standard-4"

  scheduling {
    preemptible         = true
    automatic_restart   = false
    on_host_maintenance = "TERMINATE"
  }
}

Kubernetes Spot Nodes

# EKS Node Group with Spot
apiVersion: eksctl.io/v1alpha5
kind: ClusterConfig
metadata:
  name: my-cluster
  region: us-east-1

managedNodeGroups:
  - name: spot-workers
    instanceTypes: ["m5.large", "m5.xlarge", "m4.large"]
    spot: true
    minSize: 2
    maxSize: 20
    labels:
      lifecycle: spot
    taints:
      - key: lifecycle
        value: spot
        effect: NoSchedule

Storage Optimization

S3 Lifecycle Policies

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

  rule {
    id     = "archive"
    status = "Enabled"

    transition {
      days          = 30
      storage_class = "STANDARD_IA"  # 45% cheaper
    }

    transition {
      days          = 90
      storage_class = "GLACIER"  # 68% cheaper
    }

    transition {
      days          = 180
      storage_class = "DEEP_ARCHIVE"  # 95% cheaper
    }

    expiration {
      days = 365
    }
  }
}

EBS Optimization

# Use gp3 instead of gp2 (20% cheaper, better performance)
resource "aws_ebs_volume" "data" {
  availability_zone = var.az
  size              = 100
  type              = "gp3"
  iops              = 3000   # Baseline included
  throughput        = 125    # Baseline included
}

Budget Alerts

AWS Budget

resource "aws_budgets_budget" "monthly" {
  name         = "${var.project}-monthly"
  budget_type  = "COST"
  limit_amount = "1000"
  limit_unit   = "USD"
  time_unit    = "MONTHLY"

  cost_filter {
    name   = "TagKeyValue"
    values = ["user:Project$${var.project}"]
  }

  notification {
    comparison_operator        = "GREATER_THAN"
    threshold                  = 80
    threshold_type             = "PERCENTAGE"
    notification_type          = "FORECASTED"
    subscriber_email_addresses = [var.alert_email]
  }

  notification {
    comparison_operator        = "GREATER_THAN"
    threshold                  = 100
    threshold_type             = "PERCENTAGE"
    notification_type          = "ACTUAL"
    subscriber_email_addresses = [var.alert_email]
  }
}

GCP Budget

resource "google_billing_budget" "project" {
  billing_account = var.billing_account
  display_name    = "${var.project} Budget"

  budget_filter {
    projects = ["projects/${var.project}"]
  }

  amount {
    specified_amount {
      currency_code = "USD"
      units         = "1000"
    }
  }

  threshold_rules {
    threshold_percent = 0.5
  }

  threshold_rules {
    threshold_percent = 0.8
  }

  threshold_rules {
    threshold_percent = 1.0
    spend_basis       = "FORECASTED_SPEND"
  }

  all_updates_rule {
    pubsub_topic = google_pubsub_topic.budget.id
  }
}

Cost Analysis Queries

AWS Athena (Cost and Usage Report)

-- Daily cost by service
SELECT
  DATE(line_item_usage_start_date) as date,
  line_item_product_code as service,
  SUM(line_item_unblended_cost) as cost
FROM cost_report
WHERE MONTH(line_item_usage_start_date) = MONTH(CURRENT_DATE)
GROUP BY 1, 2
ORDER BY 1, 3 DESC;

-- Cost by tag
SELECT
  resource_tags_user_project as project,
  SUM(line_item_unblended_cost) as cost
FROM cost_report
WHERE MONTH(line_item_usage_start_date) = MONTH(CURRENT_DATE)
GROUP BY 1
ORDER BY 2 DESC;

Quick Wins

Action	Effort	Savings
Delete unused resources	Low	5-15%
Right-size instances	Medium	20-40%
Use spot/preemptible	Medium	60-90%
Reserved/Savings Plans	Low	30-60%
S3 lifecycle policies	Low	40-90%
Schedule dev environments	Low	65%

Checklist

• Consistent tagging implemented
• Cost allocation reports enabled
• Budgets and alerts configured
• Unused resources identified
• Right-sizing analyzed
• Commitment options evaluated
• Storage tiering configured
• Dev environments scheduled

Integration

Works with:

• /aws, /gcp, /azure - Cloud cost analysis
• /terraform - Cost-aware infrastructure
• /devops - Cost in CI/CD