Best Practices for Cloud Cost Governance

Managing cloud costs is a growing challenge, with 30% of cloud spending wasted and many organisations exceeding their budgets. For UK businesses, this isn't just about cutting costs - it's about meeting strict regulations like GDPR while maintaining control over complex cloud environments. Here's what you need to know:

• Cost Waste: 30% of cloud investments in 2023 were wasted.
• Budget Overruns: 87% of APAC companies exceeded cloud budgets in the last two years.
• UK Compliance Pressure: GDPR and data sovereignty rules demand stricter governance.

Key Takeaways for Effective Cloud Cost Governance:

• Create Policies: Define cost and compliance standards, especially for regulated sectors like finance.
• Assign Clear Roles: Involve strategy, governance, and adoption teams to track and control spending.
• Integrate with DevOps: Embed cost controls into workflows for real-time efficiency.
• Run Regular Audits: Identify waste, optimise resources, and ensure compliance.
• Use Automation: Real-time tracking, AI forecasting, and tagging improve cost visibility and control.

For UK organisations, balancing cost efficiency with compliance is critical. Structured governance frameworks, regular audits, and automation tools can reduce waste by up to 50%, while ensuring adherence to regulations.

Cost Control and Financial Governance Best Practices (Cloud Next '19)

Building a Cloud Cost Governance Framework

Establishing a cloud cost governance framework goes beyond setting simple budgets. With 71% of organisations identifying governance as a major cloud challenge [4], it's evident that many businesses struggle to maintain proper oversight. For UK organisations, this issue is heightened by strict regulatory requirements that demand a balance between compliance and cost control.

A solid governance framework acts as the backbone of cost management efforts, offering structure, accountability, and clear guidance. This enables teams to make informed decisions about cloud spending while adhering to UK regulations. Below, we outline how to develop policies that support effective cost governance.

Creating Governance Policies and Standards

Governance policies must address both cost efficiency and regulatory compliance. For UK financial institutions, this includes adhering to the Financial Conduct Authority (FCA) Handbook when using cloud services [5][6]. The FCA mandates that firms take necessary steps to avoid operational risks and prohibits outsourcing that undermines internal controls or regulatory oversight [5][6].

The cornerstone of any governance policy is a clear, documented definition of shared responsibilities between the organisation and the cloud provider [5][6]. This documentation is essential for audits and ensures compliance obligations are met alongside cost-saving measures.

UK organisations must also implement strong controls for data-in-transit, data-in-memory, and data-at-rest [5][6]. These controls can influence costs through choices in encryption, storage locations, and backup strategies.

Public sector organisations face additional pressures under the government's Cloud First policy, which states:

When procuring new or existing services, public sector organisations should default to Public Cloud first, using other solutions only where this is not possible [2].

This policy requires public entities to demonstrate their decision-making process, business rationale, and value for money if they opt against public cloud solutions [2].

For dual-regulated firms, the Prudential Regulation Authority (PRA) Rulebook also applies, aligning closely with the FCA Handbook [5][6]. Even post-Brexit, the FCA expects firms to adhere to the European Banking Authority (EBA) guidelines on outsourcing [5][6].

Defining Roles and Responsibilities

Clear roles and responsibilities are crucial for managing cloud costs effectively. Research indicates that organisations with well-defined accountability structures achieve better cost outcomes.

Typically, three teams are involved in successful cost management:

• Cloud strategy team: Sets budgets and evaluates return on investment (ROI).
• Cloud governance team: Oversees costs across the organisation and ensures policy enforcement.
• Cloud adoption teams: Act as the first line of defence against overspending [7].

Allocating costs to specific teams or projects encourages accountability and helps pinpoint areas of excessive spending [8]. Role-based access ensures stakeholders see accurate cost data, while chargeback and showback models align costs with actual usage [1].

For UK firms, retaining contractual rights to perform onsite audits for material outsourcing arrangements is vital [5][6]. Governance teams must maintain detailed records of cloud usage and costs to meet regulatory requirements.

These defined roles create a foundation for integrating governance into agile DevOps workflows.

Connecting Governance with DevOps Practices

Modern cloud environments demand governance frameworks that align seamlessly with DevOps workflows. Traditional monthly or quarterly cost reviews fall short in environments where resources are constantly provisioned and deprovisioned.

DevOps methodologies help reduce costs in software development, deployment, and maintenance by leveraging cloud services [10]. However, this requires embedding cost management into DevOps pipelines to automate controls and minimise unnecessary spending [10].

Standardising and automating DevOps processes enables more accurate cost forecasting [11]. By incorporating cost considerations into workflows, teams can proactively manage expenses [11].

One effective strategy is implementing Cost NFRs (Non-Functional Requirements) and validating them at each stage alongside other performance metrics [11]. Infrastructure-as-code solutions are particularly valuable, ensuring all deployed resources are properly tagged. These tags feed into data collection systems, improving cost forecasting [11]. Testing environments can also be used to evaluate the financial impact of new architectures and confirm alignment with budget goals [11].

Jim D'Agostino from Synopsys highlights the importance of this integration:

All developers in Synopsys have access to recommendations within Harness CCM. We recommend that developers use this information when deploying new microservices to the cloud. This is what makes this cloud cost management tool a game changer for us as we balance the speed of innovation with its cost [9].

For UK organisations, integrating governance with DevOps is even more critical due to compliance demands. DevOps practices must assess business continuity for material cloud outsourcing arrangements and test exit strategies [5][6]. As a result, governance frameworks must account for the complexities of modern deployment practices while ensuring regulatory compliance.

A cloud governance board plays a key role in maintaining consistency across the organisation [3]. Including representatives from DevOps teams on this board ensures that governance policies are practical and aligned with operational needs.

Running Regular Audits for Cost Optimisation

Conducting regular cloud cost audits is a must for keeping expenses in check while ensuring compliance with UK regulations. These audits help organisations pinpoint inefficiencies and eliminate unnecessary spending, all while maintaining key performance benchmarks like reliability and scalability [12]. Without a structured approach to auditing, wasteful costs can go unnoticed.

A thorough audit not only tackles technical inefficiencies but also ensures adherence to regulatory standards - an essential consideration for UK businesses navigating strict data protection and financial regulations. By combining regular audits with a solid governance framework, organisations can consistently validate both cost efficiency and compliance.

Audit Processes and Tools

The first step in effective cloud cost audits is uncovering and addressing wasteful spending. This includes identifying underused resources such as idle compute instances, unused databases, and unattached storage volumes [12]. By right-sizing these resources and exploring different compute instance types, businesses can optimise their cloud environments.

Auto-scaling is another useful tool, allowing resources to dynamically adjust based on demand. Additionally, leveraging reserved instances can cut costs by up to 72% compared to on-demand pricing, while spot instances can offer savings of up to 90% [12].

Storage audits also play a critical role. Reviewing backup retention policies and deleting outdated backups can significantly reduce unnecessary storage costs [12]. Setting up automated alerts for budget overages and anomalies provides an extra layer of cost control [12].

When it comes to tools, organisations have several options:

• Native tools like AWS Cost Explorer provide real-time insights and detailed cost breakdowns but are typically limited to single-cloud setups [14].
• Third-party solutions support multi-cloud environments and often include advanced analytics for more comprehensive monitoring [14].
• Open-source tools offer high customisation potential, though they may require technical expertise for setup and ongoing maintenance [14].

Beyond cost management, these audits also ensure that businesses remain compliant with applicable regulations.

Regulatory Compliance Checks

For UK organisations, compliance is a complex but essential aspect of cloud auditing. Adhering to regulations like GDPR, HIPAA, NIS2, and SOC 2 is non-negotiable, as non-compliance can lead to hefty fines and legal consequences [13]. Each industry and region has its own set of rules, so audits must be tailored accordingly.

These compliance checks build on governance practices by assessing whether cloud operations meet required standards. Cloud audits help identify risks and gaps in compliance, enabling organisations to take corrective action quickly [13]. Under the shared responsibility model, cloud providers handle the security of the infrastructure, while customers are responsible for securing their data and applications [13].

Defining the audit's scope is critical - this involves pinpointing which regulations apply to your operations [13]. Many cloud providers offer compliance tools, such as logging, monitoring, and reporting features, to track user activity and data access. When combined with manual reviews of configurations and access controls, these tools provide a robust compliance framework [13]. For added assurance, organisations can engage third-party auditors for more in-depth assessments [13].

Managing Audit Trails and Reporting

Clear documentation is the backbone of effective audits. This includes compliance policies, procedures, and detailed audit trails. Audit trails should capture key details, such as timestamps for resource provisioning, user access logs, configuration changes, and cost allocation records. Dates should follow the UK’s DD/MM/YYYY format (e.g. 28/06/2025).

Cost reports should adhere to UK accounting standards and present figures in pounds sterling (£). Regular reporting schedules ensure that stakeholders have timely access to critical information. Documenting audit findings and implementing corrective measures are vital for strengthening compliance over time [13].

Continuous monitoring of costs and compliance not only keeps expenses under control but also supports long-term governance strategies. Employee training on cloud security, compliance standards, and data protection further reinforces these efforts [13].

For businesses needing expert support, Hokstad Consulting offers tailored cloud cost engineering services. Their approach integrates compliance with cost-saving strategies, helping UK organisations cut cloud expenses by 30–50% while staying within regulatory boundaries.

Using Automation and Analytics for Cost Monitoring

Tracking costs manually can be a slow and error-prone process. By integrating automation and analytics into governance frameworks and audit practices, businesses can gain real-time insights that improve compliance and cost management. Automation plays a key role here, offering instant visibility and actionable insights to guide financial decisions. With up to 32% of cloud budgets often going to waste, automated monitoring is crucial for maintaining financial discipline [15]. These tools can collect, analyse, and classify cloud spending in real time, helping businesses stick to their budgets and improve forecasting accuracy. Let’s explore three essential components of modern cost monitoring: real-time tracking, AI-driven forecasting, and metric-based reporting.

Real-Time Cost Tracking Tools

Real-time monitoring tools give businesses immediate insight into their cloud spending by tracking usage across active, idle, and unallocated resources. They also enable automated tagging, which assigns costs to specific teams, projects, or business units. These tools can send real-time alerts when spending spikes unexpectedly, allowing teams to respond quickly. Advanced automation can even trigger actions, such as scaling down cloud clusters, when spending exceeds predefined thresholds [15].

For UK businesses, various pricing models are available. For instance, ManageEngine CloudSpend charges 1% of the cloud bill [17].

AI-Driven Forecasting and Budgeting

Artificial intelligence takes cost monitoring to the next level by introducing predictive analytics and automated optimisation [18]. AI tools analyse historical data and usage trends to create accurate budgets, adjust infrastructure settings, and offer tailored recommendations. They also excel at detecting inefficiencies, such as unusual resource consumption, and can automate resource tagging to ensure all cloud resources are categorised correctly. Budgets can be generated automatically using APIs or templates, simplifying the process [16]. For organisations with multiple departments, AI provides a centralised platform for managing and analysing cost data [19].

In addition to forecasting, having clear metrics is vital to validate predictions and maintain effective cost control.

Metric-Based Reporting

Successful cost monitoring depends on tracking key metrics, such as resource utilisation, cost attribution, budget adherence, and optimisation efforts. In 2024, 80% of organisations exceeded their cloud budgets by 20–50% due to insufficient cost controls [21]. Regularly tracking daily cloud spend can help businesses predict monthly expenses and flag anomalies early. Metrics like the cost per provisioned CPU versus requested CPU can reveal inefficiencies, while historical cost allocation data shows how expenses are distributed. Monitoring budget variance by team, application, or environment can identify overspending before it escalates. Tracking off-hours utilisation helps pinpoint idle systems, highlighting potential savings. Additionally, setting alerts for anomalies in data transfer costs can prevent unexpected spikes [21].

You can't manage what you can't measure. - Economize.cloud [22]

For UK businesses, presenting cost data in a clear and localised format is essential. Financial figures should be shown in pounds sterling (£) with commas as thousand separators (e.g. £1,234,567.89), dates should follow the DD/MM/YYYY format, and percentages should include decimal points (e.g. 15.5%). According to a 2023 Flexera survey, respondents estimated that 28% of their public cloud spend was wasted. However, effective cloud cost optimisation strategies can reduce expenses by 15–25% while maintaining essential business functions [20].

For businesses seeking expert guidance, Hokstad Consulting offers cloud cost engineering services that combine automated monitoring with strong compliance measures. Their approach has helped UK organisations cut cloud expenses by 30–50%, using data-driven strategies to ensure regulatory compliance while improving operational efficiency.

Setting Up Resource Tagging and Allocation Strategies

Effective tagging and allocation strategies are cornerstones of managing cloud costs, tying resource management directly to financial responsibility. By implementing a structured tagging system, businesses can clearly track their cloud expenses, identify cost drivers, and ensure accountability across teams. Without proper tagging, it’s almost impossible to pinpoint where money is being spent or which departments are responsible for certain costs. A thoughtful tagging approach not only boosts transparency but also helps cut unnecessary expenses, lowers risks, and simplifies automation processes [27]. For UK organisations navigating intricate cloud systems, tagging is particularly crucial for accurate financial reporting and meeting regulatory obligations.

Tagging for Cost Allocation

Tagging plays a key role in breaking down cloud costs, allowing businesses to assign expenses to specific teams, projects, or departments. This detailed tracking aligns with the FinOps framework that many UK companies are adopting [23]. Real-world examples show the impact of tagging on cost management:

• Adobe uses tags to monitor spending across departments [28].
• Netflix employs tags to identify and address underutilised resources [28].
• Zoom integrates AWS cost tagging to evaluate costs by enterprise customer, enabling smarter decisions on pricing and contracts [28].

Tagging also supports showback and chargeback models by directly linking cloud costs to the responsible teams or units [23]. For instance, a pharmaceutical company implemented a detailed tagging strategy, including tags like ResearchArea, ProjectID, and WorkloadType. Along with standardised naming conventions, this approach improved cost allocation, encouraged collaboration, and enabled data-driven decisions in its R&D department [26]. Moreover, analysing historical data associated with tagged resources can refine cost forecasts and budgets, offering greater financial clarity [23].

Creating Standard Naming Conventions

Consistency in naming conventions is vital for maintaining accurate cost tracking, especially in multi-cloud setups. Since different cloud providers have unique tagging requirements, standardisation is essential to keep data clean and organised.

To maintain uniformity, businesses often adopt a case-sensitive format like camelCase for all tag values [30]. Asking specific questions such as What is the cost per development environment? can guide the creation of meaningful naming practices [30]. Some organisations take it a step further - Slack, for example, uses tags with expiration dates to automatically clean up temporary resources, reducing unnecessary expenses [28].

Essential tags typically include:

• Cost centre
• Environment (e.g., development, staging, production)
• Project identifier
• Owner contact

Optional tags might cover aspects like application version, backup needs, or compliance classifications [24]. To ensure consistent application, it’s important to document these standards and share them across all teams [31]. A standardised naming system not only makes tagging easier to manage but also streamlines audits, improving compliance reporting.

Improving Compliance Reporting

Accurate tagging supports compliance by simplifying audits and generating clear reports on resource usage, access, and cost attribution. Automated tagging minimises errors and ensures alignment with internal policies and external regulations [29]. Conducting regular audits of tags helps keep them relevant and aligned with organisational goals [25]. For example, Salesforce uses tagging to allocate costs across multiple customers, ensuring fair pricing and balanced resource distribution [28].

Do not add personally identifiable information (PII) or other confidential or sensitive information in tags. Tags are accessible to many AWS services, including billing. Tags are not intended to be used for private or sensitive data. – AWS [27]

Monitoring for tagging errors, such as misspelled names or incorrect values, is equally important. A company-wide communication strategy can help enforce compliance, ensuring that all teams follow the established tagging framework [32]. These practices not only improve cost attribution but also enhance regulatory compliance, supporting broader governance goals.

For UK businesses looking for expert help in setting up tagging strategies, Hokstad Consulting offers tailored cloud cost engineering services. Their expertise ensures compliance with UK regulations while improving cost allocation and reporting accuracy in multi-cloud environments.

Applying Cost Controls and Guardrails

To keep cloud spending in check and ensure compliance, organisations need effective cost controls and guardrails. These tools act as automated protections, helping to avoid unexpected expenses while adhering to internal policies and external regulations. A centralised cloud operations team can play a pivotal role here, setting policies and offering guidance to various cloud teams. This centralised monitoring of usage, billing, and cost-saving opportunities ensures consistency across departments while allowing for the flexibility that individual business units may require. Below, we explore specific measures to implement these controls.

Setting Budget Thresholds

Budget thresholds act as an early warning system, helping to prevent cloud costs from spiralling out of control. By setting alerts for when spending crosses predefined limits, teams can react quickly to unexpected usage spikes. These thresholds should be based on historical data and business forecasts rather than arbitrary limits, which might disrupt legitimate operations.

Another effective measure is automating the shutdown of idle resources. Identifying and removing unused or underutilised resources can significantly cut costs. For instance, a healthcare provider once discovered several idle virtual machines through routine checks, reallocating those resources to critical operations and reducing expenses [39].

Accurate tracking of resources is crucial for setting realistic thresholds. Regularly calibrating these limits based on actual usage patterns ensures they remain effective. Many organisations find that even a short assessment period - around two weeks - can yield savings of up to 70% on cloud costs [13].

Adding Compliance Policies

Cost control isn't just about saving money; it's also about meeting regulatory and internal compliance requirements. For UK organisations, this includes adhering to GDPR and other industry-specific regulations. Integrating compliance checks into deployment pipelines ensures that cost governance aligns with legal obligations [34].

The shared responsibility model means cloud providers secure their infrastructure, but customers are responsible for securing their deployments. This requires implementing compliance policies tailored to the provider's framework while meeting specific regulatory needs.

Given the ever-changing nature of cloud environments, continuous compliance monitoring is essential. Automated tools for logging, checks, and reporting should be embedded at every stage - from initial provisioning to ongoing operations. These tools provide a robust foundation for maintaining compliance [13].

For businesses operating across multiple jurisdictions, data mapping and classification are critical. Understanding data flows and addressing data sovereignty requirements help organisations maintain compliance. Strong encryption and access controls offer an additional layer of security, especially when legal safeguards fall short [33].

Regular training on cloud security, compliance standards, and data protection ensures that human errors don't undermine these technical measures. Periodic reviews of compliance policies help organisations adapt to evolving business needs and regulatory changes.

Reviewing and Updating Policies

Cloud pricing models and business requirements are constantly evolving, making regular policy reviews essential. Routine audits can identify areas of wasteful spending and uncover opportunities for cost optimisation. For example, a mid-sized tech company used tools like AWS's Trusted Advisor and Azure's Cost Management + Billing to align resources with actual usage, achieving a 30% reduction in cloud costs within six months [39].

Staying informed about regulatory changes is equally important. With UK and EU regulations frequently updated - particularly around data protection and digital sovereignty - organisations must ensure their policies remain compliant to avoid potential gaps.

Another way to save costs is by leveraging Reserved Instances and Savings Plans. Reserved Instances can offer discounts of 30% to 75% compared to on-demand pricing [36], while Savings Plans can cut AWS usage costs by up to 70% [37]. For example, an e-commerce company used Reserved Instances during peak shopping seasons, securing cost-effective scalability without compromising performance [39].

Automated alerts for budget thresholds can trigger timely policy reviews when spending patterns shift, enabling organisations to respond strategically to changing conditions [35].

For UK businesses looking for expert advice on cost controls and compliance, Hokstad Consulting provides tailored cloud cost engineering services. Their expertise helps companies achieve measurable savings while meeting UK and EU regulatory requirements.

Comparing Cloud Cost Governance Tools

Choosing the right cloud cost governance tool can be the deciding factor between keeping expenses under control and facing budget overruns. With 64% of CIOs overspending on their cloud budgets [40] and 32% of cloud budgets being wasted [41], it's crucial for UK organisations to select a tool that aligns with their specific needs.

Cloud cost governance tools vary widely in their features, user-friendliness, and compliance capabilities. For smaller teams, native cloud provider tools might suffice, but larger organisations often gain more from specialised cloud cost management platforms [41]. For UK businesses, compliance with GDPR and data residency laws is a critical factor when evaluating these tools.

Modern tools are designed to help businesses optimise their cloud architecture, ensuring they only pay for what they truly need. They typically offer features like customisable reports, user-friendly dashboards, secure collaboration options, and the flexibility to adapt to changes in both the cloud landscape and business priorities [41].

When assessing these tools, it's important to consider factors such as the specific governance gaps you need to address, the intended users of the tool, and the number of licences required [42]. Below is a comparison of popular tools, focusing on features relevant to UK organisations.

Tool Comparison Table

Here’s a breakdown of key cloud cost governance tools, highlighting their features, compliance capabilities, and suitability for UK businesses:

Each tool caters to different needs, whether you’re working in a native cloud environment or managing a multi-cloud setup. For example, Umbrella has helped clients reduce cloud costs by up to 40% annually, earning an overall rating of 4.9/5 [41].

Azure stands out for public sector organisations due to its strong track record with NHS migrations and compliance with GDPR and NHS data residency standards. Its hybrid management capabilities, supported by Azure Arc and integrations with Microsoft 365 and Dynamics 365, make it an ideal choice for organisations already invested in the Microsoft ecosystem.

Cloud cost management is the process organisations use to keep cloud costs under control.
– Kevin Bogusch, Oracle Senior Competitive Intelligence Analyst [40]

Ultimately, the right governance tool strengthens your cloud cost management strategy by ensuring compliance and cost efficiency. The best choice depends on your organisation's specific needs and cloud maturity. AWS is a strong option for cloud-native environments with automation features like AWS Config Rules, while Google Cloud is ideal for teams with advanced technical expertise, thanks to its API-first design and custom automation capabilities.

For tailored guidance on selecting and implementing the right tool, UK organisations can rely on Hokstad Consulting. Their expertise in cloud cost engineering helps businesses navigate the complexities of cost governance tools while maintaining compliance with UK and EU regulations. Many clients have achieved cost reductions of 30–50% through their strategic advice and implementation services.

Conclusion

Managing cloud costs effectively isn't a one-off task - it’s an ongoing process. As cloud technologies advance and business needs shift, governance strategies must keep pace to remain effective [44]. With around 30% of cloud spending classified as waste spend [43], organisations across the UK simply can't afford to overlook the importance of robust cost governance.

The most successful organisations make cloud cost management a routine part of their operations. They regularly reassess their strategies, forecast usage patterns, and seek out fresh opportunities to save. The projected growth of the cloud governance platform market to £3.04 billion by 2034, with a solid CAGR of 12.5% [45], underscores just how essential governance has become for businesses. These ongoing efforts tie back to earlier discussions on building strong frameworks and conducting thorough audits.

To truly control costs and align with business goals, organisations need to embed compliance, transparency, and efficiency into every step of their governance practices. From crafting frameworks to automating audits and tagging resources, these actions form the backbone of a comprehensive approach that ensures regulatory compliance while driving cost efficiency.

For those looking to refine their strategies further, tailored expertise can make a significant difference. Hokstad Consulting, for example, has delivered 30–50% cost reductions for its clients, working on a no savings, no fee model [46][47].

Our approach is simple: deliver real savings with minimal disruption - and if we can't save you money, you don't pay a fee [47].

Sustaining these results requires more than just initial efforts. Continuous monitoring and regular updates are essential to keeping costs optimised and ensuring businesses get the most value from their cloud investments [38]. As highlighted earlier, systematic audits and automated tools are invaluable for maintaining control. By committing to ongoing evaluation and refinement, UK organisations can ensure their cloud environments remain efficient and aligned with evolving business needs.

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