IT Cost Optimization: Framework & 10 Strategies That Work

Cost optimization is the process of reducing IT spend as much as possible, without affecting other operational requirements such as performance and security. It creates a long-term cycle of improvement that allows you to boost your operating profit.

Why is IT cost optimization important?

IT cost optimization ensures resources are aligned with business priorities, helping organizations reduce waste while maintaining performance and agility. It improves ROI on tech investments, controls cloud spending, and prevents budget overruns. 

This is critical in dynamic environments where usage scales rapidly, like cloud infrastructure or SaaS tools. For example, 82% of cloud decision-makers point to managing cloud spend as the main challenge. 

Effective cost optimization also enables reinvestment in innovation, security, and scalability without increasing total IT spend.

Key benefits of proactive cost optimization include:

• Improved operational efficiency: Cost optimization rewards efficiency, potentially simplifying your DevOps infrastructure and supporting adoption of new technologies.
• Reduced spending and higher profits: Optimizing costs reduces unnecessary spending, freeing up more resources to invest in new development or return to shareholders.
• More effective infrastructure environments: Cost optimization often produces infrastructure that’s more effective in other ways, such as by offering improved resiliency through the use of multi-cloud environments.

Areas of focus for IT cost optimization

Optimizing IT costs is a collaborative effort that spans the entire DevOps lifecycle and involves multiple stakeholders. Business leaders play a key role by setting clear, realistic budgets and aligning cost expectations with strategic goals. These financial guardrails then guide operations teams and developers as they design and build systems. 

However, cost optimization isn’t just a top-down process — it’s crucial that engineers and operations teams are included early in the planning phase. Their technical insight helps assess whether proposed capabilities can be delivered within the budget or whether adjustments are needed to strike the right balance between cost, performance, and innovation.

IT cost optimization vs. cost reduction

Optimization is proactive and strategic, whereas reduction is reactive and typically short-term.

IT cost optimization is often seen as a hybrid of cost monitoring and cost cutting, but this is a simplistic interpretation. 

Although monitoring and reducing costs are key cost optimization tasks, the objective is to reduce waste and improve efficiency without affecting business performance. This compares favorably with basic cost-cutting, which may negatively impact product or service quality.

Here are ten actionable strategies for IT cost optimization at scale. Implementing these techniques within your DevOps processes will allow you to achieve a healthier balance between infrastructure performance and spending.

1. Use cost monitoring tools to centrally track cloud spending
2. Proactively right-size compute instances
3. Evaluate cloud spot instances and savings plans
4. Consolidate deployments to reduce infrastructure requirements
5. Investigate open-source software alternatives
6. Automate IT processes to reduce human costs
7. Mix public, private, and on-premises solutions
8. Eliminate shadow IT to prevent unplanned spending
9. Plan for future needs when budgeting and forecasting spending
10. Practice FinOps to bring finance, dev, and business teams closer together

1. Use cost monitoring tools to centrally track cloud spending

One of the biggest barriers to cloud cost optimization is a lack of visibility. You can’t reduce spending if you don’t know where your money is going in the first place. That’s why cost monitoring tools are essential for any organization running workloads in the cloud.

Use tools like AWS Cost Explorer, CloudZero, Kubecost, and Infracost to monitor the costs associated with your infrastructure. These solutions let you see exactly where costs are going so you can attribute spending to specific teams, projects, and infrastructure components.

Beyond basic visibility, these tools also make it easier to allocate and attribute costs back to the right owners. This transparency helps foster accountability — teams can see the financial impact of their decisions, making it easier to justify optimizations or identify inefficiencies. 

Many of these solutions also integrate with CI/CD pipelines and infrastructure-as-code workflows, which means you can estimate costs before deploying new resources, helping prevent overspending before it happens.

2. Proactively right-size compute instances

One of the most common ways IT costs are wasted is by computing instances that have been allocated more resources than they need. Overprovisioning CPU and memory capacity doesn’t benefit your applications, so it pays to regularly audit your instances and right-size them as required. 

Establishing a process for continuous rightsizing is essential. Begin by leveraging observability and monitoring tools (such as CloudWatch, Datadog, or Prometheus) to gather performance metrics over time. Look for patterns of consistently low CPU utilization, memory usage, or storage IOPS. For example, an instance that only ever uses 20% of its available CPU capacity is a strong candidate for resizing.

3. Evaluate cloud spot instances and savings plans

Switching between cloud provider instance types can often result in substantial cost savings. 

For example, the Spot instance options available from providers like AWS, Google Cloud, and Azure can offer savings of up to 90% compared with regular instances. If your workload can tolerate flexibility regarding when it runs, this is an easy way to reduce your bill without significantly impacting your operations.

Similarly, cloud savings plans can provide huge discounts in return for an ongoing usage commitment. If you know you’ll be sticking with a specific cloud provider for years to come,  signing up for a fixed-term savings plan could be an easy way to save costs.

See also: AWS Startup Credits : What They Are & How to Get Them

4. Consolidate deployments to reduce infrastructure requirements

Less is more when it comes to cloud costs and operational efficiency. Colocating your workloads on shared infrastructure components could offer big savings as you scale. 

By colocating services, you minimize underutilized compute and storage, which translates into direct cost savings. Technologies like virtualization and containers provide the necessary abstraction and isolation, so you can safely operate multiple applications without resource conflicts or security risks.

At larger scales, orchestration platforms such as Kubernetes or Nomad can be introduced to pool resources dynamically. These systems intelligently schedule workloads across clusters, minimizing idle capacity while maintaining resilience and scalability.

5. Investigate open-source software alternatives

Licenses for proprietary software services can quickly add up at scale. Whether fees are charged per user, per server, or per API request, costs that once seemed manageable may become prohibitive as your organization grows.

One effective way to manage vendor costs is to explore open-source alternatives. These tools’ functionality is often comparable to commercial products, but without the recurring license fees. Adopting them allows you to redirect budget toward higher-priority initiatives such as product development, customer support, or infrastructure improvements.

However, it’s important to proceed carefully. Not all open-source solutions are equal in terms of features, usability, or long-term viability. Before committing, ensure the tool covers your essential requirements, has an active development community, and offers reliable support options (through documentation, user forums, or third-party service providers). 

In some cases, a hybrid approach that combines open-source core systems with paid add-ons or managed services can provide the best balance between cost savings and reliability.

6. Automate IT processes to reduce human costs

IT has hidden costs beyond the fees you pay to your cloud providers and software vendors. The time your team spends implementing, configuring, and maintaining these solutions is an additional cost to your bills.

Automating your IT processes reduces this indirect cost by allowing team members to perform more meaningful tasks instead. 

Use IaC tools like Terraform, Pulumi, and Ansible to automate your infrastructure provisioning, configuration, and governance processes. These tools reduce your overall operating costs by eliminating infrastructure management overheads.

7. Mix public, private, and on-premises solutions

Public, private, or on-premises IT? In many cases, the most effective approach is to blend all three in a hybrid architecture.

While adopting a multicloud or hybrid model can introduce additional upfront complexity, modern IaC platforms simplify the process by providing unified workflows that can target multiple providers simultaneously. This enables you to access the most cost-effective service for each of your stack’s components, helping optimize your spending.

8. Eliminate shadow IT to prevent unplanned spending

Shadow IT refers to the IT resources that teams use without notifying managers. Giving teams a budget to make their own tooling choices can allow them to design more effective workflows, but it can also lead to inefficiencies. You could end up paying multiple vendors for very similar services.

Although restricting shadow IT autonomy risks pushback, it lets you standardize on a single set of solutions for each workflow. This lowers costs and can also help you build more powerful automation. 

For instance, you could create an internal developer platform that lets developers run key tasks on demand, without needing to interact directly with the underlying tooling.

9. Plan for future needs when budgeting and forecasting spending

Cost optimization efforts should consider your future needs alongside your current operations. If you’re only looking at today’s data, you could make decisions that prove sub-optimal in the longer term.

One example is the use of savings plans and different instance types: Locking in a fixed rate for your existing infrastructure might not be the best option if scaling up means you’ll soon switch to different resources.

Try to forecast your future operational needs and predict the budgets they’ll demand. Remember to anticipate potential external changes, such as vendors increasing their prices. Consider working backward from your desired spend: Set a budget for the next few years, and map out how you can make IT changes to achieve this.

10. Practice FinOps to bring finance, dev, and business teams closer together

FinOps (financial operations) refers to the high-level process of maximizing the value you gain from your software operations. It encourages finance, development, and business teams to work closer together to manage every aspect of financial performance, complementing cost optimization initiatives.

Implementing FinOps establishes cost optimization as a key part of your organization’s culture. It ensures everyone’s focused on monitoring, analyzing, and reducing costs. In the same way that DevOps narrows the gap between development and operations, FinOps is all about improving financial outcomes through closer inter-team collaboration.

Continuous cost optimization is easiest to achieve when it’s systemized as a framework. This ensures stakeholders always know what’s expected of them. It also prevents cost monitoring from being forgotten or misconfigured as you scale your operations with new IT resources.

Here are five simple steps to developing a framework that lets you implement the cost optimization strategies discussed above.

Step 1. Collaborate with every stakeholder

Collect input from stakeholders such as business leaders, product managers, and operations leads on their cost management requirements. This is where you work to define your high-level cost management approach, including what your cost optimization efforts should achieve. 

Try to be specific in requirements, such as saving 10% year on year without impacting service reliability or developer productivity.

Step 2. Clearly define operational requirements and budget controls

The next stage is where you become more precise in setting budgets for different teams. These need to be assessed alongside any fixed operational requirements. 

For instance, a team that’s tasked with running fully redundant deployments for all its microservices will typically need a higher minimum budget than a neighbor that can tolerate less availability.

Step 3. Prioritize areas of spending based on their business value

Based on the information collected from the previous stage, you can start prioritizing different areas of spending to make budget savings as required. Cost optimization shouldn’t mean cost-cutting for the sake of it, but it’s still worthwhile to ask each team if they can make savings. If some services contribute relatively little business value, it may make sense to reallocate some of their budget to more crucial components.

Step 4. Identify DevOps lifecycle events that let you track your spending

After assigning budgets to each cost area, it’s crucial to track your spending so you can check you’re on track. This means using cost monitoring tools to track your live infrastructure, as well as logging the indirect costs incurred throughout the DevOps lifecycle.

Seeing the impacts of spending changes on developer productivity can help inform future rounds of optimization. Therefore, you should combine direct cost data with key DevOps metrics that let you accurately assess where resources are being consumed — developer time ultimately equates to money too.

Step 5. Regularly review your spending to fine-tune your cost optimization strategy

Equipped with your budgets, operational requirement lists, and cost monitoring data, you’re now ready to drive continual cost optimization improvements. Regularly analyze your DevOps performance, check for budget breaches, and stay informed about what’s available in the IT landscape. This enables you to find new opportunities to reduce your operating costs. 

After making changes, check the data again to ensure they’ve had the effect you intended.

Spacelift takes cloud automation and orchestration to the next level. It is a platform designed to manage infrastructure-as-code tools such as OpenTofu, Terraform, CloudFormation, Kubernetes, Pulumi, Ansible, and Terragrunt, allowing teams to use their favorite tools without compromising functionality or efficiency.

If you’re looking for an easy way to track IT spending, then try integrating cost monitoring with your IaC deployment processes. You can achieve this with Spacelift’s Infracost integration, for example. Spacelift allows you to automate your IaC workflows, enforce compliance policies, and use Infracost to assess estimated cost changes directly within your IaC PRs. This keeps everyone informed of how new IaC resources will impact your cloud spend.

Spacelift provides a unified interface for deploying, managing, and controlling cloud resources across various providers. It is cloud-agnostic, so you can connect to the cloud of your choice from the platform. Still, it is API-first, so whatever you can do in the interface, you could do via the API, the CLI it offers, or even the OpenTofu/Terraform provider. 

The platform enhances collaboration among DevOps teams, streamlines workflow management, and enforces governance across all infrastructure deployments. Spacelift’s dashboard provides visibility into the state of your infrastructure, enabling real-time monitoring and decision-making. It can also detect and remediate drift.

You can leverage your favorite VCS (GitHub/GitLab/Bitbucket/Azure DevOps), and executing multi-IaC workflows is a question of simply implementing dependencies and sharing outputs between your configurations.

Cost optimization improves DevOps profitability by eliminating unnecessary IT spending. It leads to more efficient infrastructure environments that support sustainable operations in the cloud.

Building a cost optimization framework starts with gaining clear visibility into your IT assets and associated costs. Once you can see what you’re spending, you can collaborate with your stakeholders to identify savings opportunities. Use the tips we’ve discussed above to implement a cost optimization framework that lets you make continual improvements.

Read more about how Spacelift can help you with your infrastructure orchestration workflows here. If you want to take your infrastructure automation to the next level, create a Spacelift account today or book a demo with one of our engineers.