Embodiments of the present invention provide an approach for optimizing a configuration of virtual machine (VM) instances. In a typical embodiment, such optimization comprises either the splitting of a single VM instance into multiple VM instances or the consolidation of multiple VM instances into fewer (e.g., a single) VM instance. Along these lines, it will first be determined which VM instances would be good candidates for reconfiguration. Under one approach, VM instances that are candidates for reconfiguration are identified based upon an analysis of applicable/associated service level agreement (SLA) terms versus the performance of the VM instances. For example, VM instances can be reconfigured if such reconfiguration will maximize a benefit provided by the applicable SLA terms (e.g., if the splitting of a single VM instance into multiple VM instances would cause a workload to be processed more efficiently, resulting in a more favorable cost/benefit ratio). In another embodiment, candidate VM instances can be identified based upon a commonality of an entity (e.g., a consumer) associated therewith. For example, if a single entity is utilizing multiple VM instances, such VM instances could be considered candidates for consolidation to avoid unnecessary computing resource consumption.