Cloud cost optimization is the process of reducing your overall cloud spending by identifying mismanaged resources, eliminating waste, reserving capacity for higher discounts, and right-sizing computing services to scale.

The objective is to understand cloud spending and usage, and then take strategic action to control and optimize expenses. This process is critical for businesses to ensure they are getting the most value from their cloud investment. Read this in-depth blog post for more background on cloud cost optimization.

Cutting down on unnecessary costs doesn’t mean compromising on the quality of services. It’s about smart management and making the most of what you have. Let’s see how the principles of cloud cost optimization apply to three common cloud deployment models: VM, VPS, and bare metal servers.

Three Options for Running Servers in the Cloud

Virtual Private Servers (VPS)

A Virtual Private Server (VPS) is a virtual machine sold as a service by an internet hosting service. A VPS runs its copy of an operating system, and customers have superuser-level access to that operating system instance, allowing them to install almost any software that runs on that OS. VPS provides a higher level of control compared to shared hosting.

Virtual Machines (VMs)

Virtual Machines (VMs) are emulations of computer systems. They can run applications and operating systems just like a physical computer. VMs are often used in cloud computing platforms to provide computing resources. They are a critical part of the infrastructure-as-a-service (IaaS) cloud service model.

Bare Metal

Bare Metal refers to a physical server dedicated to a single tenant, contrary to the concept of a virtual server that shares resources with other users. Although it is less flexible than its virtual counterparts, bare metal provides high performance and is ideal for data-intensive workloads that require superior processing power.

VMs vs. VPS vs. Bare Metal: What Are the Differences?

Now that we’ve understood the key concepts let’s delve into the specifics of each and how they impact your cloud costs.

Pricing Models

When it comes to VMs, VPS, and Bare Metal, their pricing models differ significantly. VMs and VPS usually have a pay-as-you-go pricing model, meaning you pay for what you use. On the other hand, Bare Metal servers often require a significant upfront investment but can be more cost-effective in the long run for high-demand applications.

Performance and Resource Allocation

Performance and resource allocation are other factors that play a significant role in the cost. VMs and VPS offer a shared resource environment where the physical server’s resources are divided among multiple users. On the other hand, Bare Metal servers provide dedicated resources, resulting in better performance but at a higher cost.

Scalability and Flexibility

Scalability and flexibility are key factors to consider when choosing between VMs, VPS, and Bare Metal. VMs and VPS offer a high degree of scalability and flexibility, allowing you to easily scale up or down based on your business needs. Bare Metal servers, on the other hand, offer less flexibility but provide a higher level of performance.

VMs, VPS, and Bare Metal: Cost Optimization Strategies

1. Right-Sizing Resources

  • Virtual Private Servers (VPS): Right-sizing in a VPS context typically involves choosing the best plan that aligns with your resource requirements. You can adjust CPU, memory, and storage allocations based on your specific use case. Upgrading or downgrading is usually straightforward, allowing for dynamic resource management.
  • Virtual Machines (VMs): Cloud platforms often offer various VM types tailored for different needs—compute-optimized, memory-optimized, etc. Right-sizing here would involve choosing the correct VM type and scaling your VM instances according to your application’s demands. Dynamic resource allocation is often possible, allowing you to adapt to changing requirements without any downtime.
  • Bare Metal: Since these servers are not virtualized and are dedicated to a single tenant, right-sizing typically involves a more in-depth hardware selection process. The process is often less flexible and may require longer-term commitments. Make sure to evaluate your needs carefully before making a choice to avoid overprovisioning and unnecessary costs.

2. Managing Storage Costs

  • VPS: Storage costs can escalate quickly if not managed well. VPS usually offers various storage options like SSDs or HDDs. Choose the type of storage based on your application’s needs—SSDs for high-speed data access or HDDs for cheaper, less-critical data storage.
  • VMs: Similar to VPS, you can choose between high-performance SSDs and cost-effective HDDs. Additionally, many cloud providers offer cold or archival object storage services, which can be a cost-effective solution for infrequently accessed data.
  • Bare Metal: Bare Metal servers usually allow for extensive storage customization. High-performance RAID configurations or large-scale HDD deployments can be optimized for cost depending on the workload requirements.

3. Monitoring and Analyzing Usage

  • VPS: Most VPS providers offer built-in monitoring tools that can track CPU usage, data transfer, and disk utilization. Regularly checking these metrics can help you identify underutilized resources and allow you to downgrade or upgrade your plan accordingly.
  • VMs: Monitoring and logging services are usually more extensive for VMs, giving insights into not only resource usage but also network performance, application errors, etc. Utilize these metrics to identify inefficiencies and optimize configurations.
  • Bare Metal: Given that Bare Metal servers are often used for resource-intensive tasks, robust monitoring systems are essential. These could include hardware-level monitoring, network usage stats, and application performance metrics. Use this data to fine-tune your environment and potentially save costs.

4. Leveraging Reserved Instances and Discounts

  • VPS: Some providers offer discounts for long-term commitments. If your usage pattern is predictable, committing to a one or three-year plan can save substantial amounts.
  • VMs: Cloud providers often offer reserved instances, which come at a significantly lower cost if you can commit to a long-term contract. Additionally, they may offer spot instances—temporary resources at lower costs—that can be beneficial for non-critical, ephemeral workloads.
  • Bare Metal: Given the significant upfront costs, long-term contracts are standard in the Bare Metal environment. However, discounts can be negotiated for long-term commitments or high-volume usage.

5. Consider Total Cost of Ownership (TCO)

  • VPS: The TCO includes not just the cost of the server but also the overheads for maintenance, security, and potential software licenses. VPS costs are generally more transparent but still require budgeting for these additional costs.
  • VMs: While the compute costs may be straightforward, additional costs can include network transfer fees, additional services like load balancers, and monitoring solutions. Make sure to include these when calculating the TCO.
  • Bare Metal: Bare Metal servers typically have a higher TCO due to initial hardware costs, maintenance, and potential software licenses. However, they may offer better performance per dollar for specific, resource-intensive workloads, making the TCO favorable when considered over an extended period.


Cloud cost optimization is not a one-size-fits-all proposition; rather, it requires a nuanced approach tailored to the specific needs and objectives of each organization. In this article, we examined the three prevalent cloud deployment models—Virtual Private Servers (VPS), Virtual Machines (VMs), and Bare Metal—to understand how each can impact your overall cloud spending.

While VPS and VMs offer flexibility and scalability with a pay-as-you-go pricing model, Bare Metal servers excel in providing superior performance, albeit at a higher upfront cost. Right-sizing resources, managing storage costs, monitoring usage, leveraging discounts, and taking into account the total cost of ownership are critical strategies that apply across all three models.

The key takeaway is to align your choice of cloud deployment model with your specific business requirements—be it performance, scalability, or cost-effectiveness. Regularly reviewing and adjusting your cloud configurations can result in substantial cost savings without compromising the quality of services. Therefore, whether you’re running a small application or a data-intensive workload, smart management and continuous optimization are vital to getting the most value from your cloud investment.

Author Bio: Gilad David Maayan

Gilad David Maayan is a technology writer who has worked with over 150 technology companies including SAP, Imperva, Samsung NEXT, NetApp and Check Point, producing technical and thought leadership content that elucidates technical solutions for developers and IT leadership. Today he heads Agile SEO, the leading marketing agency in the technology industry.