Starting your Cloud Financial Management journey: Cost visibility

When starting your cloud journey, building a Cloud Financial Management (CFM) strategy is essential. As your company starts to innovate faster, develop new solutions, and take advantage of the flexible model of the cloud, you need to ensure your CFM setup can handle it all.

To help you get started, this blog series is going to take you through each of the four AWS CFM principles: See, Save, Plan, and Run. We’ll give you practical recommendations you can implement to set your business up for success. Our ultimate goal is to equip you with the right knowledge, tools, and data, and ensure the services in your account family are configured to give you a clear overview of your accounts and how to optimize them.

The goal of this series isn’t just to provide a checklist of tasks for you to complete. Instead, we want to provide a framework for how you should think about each CFM pillar and understand how to layer tooling into your strategy. These 4 pillars do not need to be tackled in any particular order, but we’re going to kick off with See – establishing cost visibility to ensure transparency and accountability for spend.

Enable cost visibility tools

First things first, let’s make sure you can see what you’re spending in the cloud.

1. Enable AWS Cost Explorer – Cost Explorer is a free native AWS tool that lets you see your spend at either the management or linked account level. You can filter and group your costs and usage with daily or monthly granularity, create a forecast of your spend, and save custom reports. Cost Explorer is the first tool we suggest you use to get started with understanding your cloud costs.
2. Set up AWS Cost & Usage Report (CUR) – Want to deep dive into your data? With CUR, you can review, itemize, and organize the most comprehensive cost and usage data for your account. The sooner you do this the better, since the CUR only starts tracking usage from the date you create it. Even if you aren’t ready to dive into it just yet, you should set it up. That way when you’re ready, you’ll have the most comprehensive data history available to you. When setting up the CUR, make sure you include the following data elements to maximize your benefits and give you the most granular insight into your cost data and where it’s coming from:

• • Include resource IDs: See cost and usage data down to each unique running resource (i.e., per S3 bucket or EC2 instance).
  • Choose parquet format (it’s for Amazon Athena): This will simplify your ability to query data.
  • Select overwrite existing files: Keep your storage costs lower while retaining the same level of data transparency.
  • Select hourly information: Get a view into the elasticity of your resources.

Now that you can see your data, we recommend setting time on your calendar to regularly review your costs. This can be a new and specific review session, or it can combined with an existing team mechanism. This regular cadence alongside availability of AWS Cost data to all stakeholders will help establish and build your cost aware culture.

Establish cost visibility strategy

With the newfound ability to see your cost and usage data, you can do these three things to support transparency and ownership by accurately managing and organizing your data:

• Create an ownership strategy. Ownership doesn’t necessarily need to be implemented via a tagging strategy; tagging doesn’t work for every business. But to understand and attribute costs, you’ll need an ownership strategy that lets you identify who owns each resource and what they are used for. An ownership strategy may be done through tagging or it can be achieved via account metadata and an account strategy.
• Set up AWS Cost Categories. You can also manage your cost grouping in Cost Categories by defining custom rules that categorize your costs to your internal business and organizational structures. These can be used with account, tag, service, charge type, or other categories.
• Utilize AWS Organizations. Enabling AWS Organizations allows you to create three key features when it comes to CFM and is offered at no additional charge:

1. 1. Apply tagging policies or access policies across resources to accounts for governance.
   2. Using group accounts, you can bring together accounts under organizational units so you can apply polices or tag these accounts with data you can use in your ownership strategy.
   3. Streamline billing and payments for multiple AWS accounts to one single invoice by using a single payment method.

By organizing your data, you can allocate costs, identify who can make a change to optimize workloads, and accurately track your individual deployments performance goals.

Set cost visibility goals

Finally, setting goals allows you to comprehensively track your progress in the cloud. But, what does good look like? Here are a couple places to start:

Key Performance Indicators (KPIs) – These are measurable values that provide meaningful information on performance and gauge progress towards business outcomes. Some examples could be unit cost, coverage of Savings Plans, or % of resources using Graviton. The best advice we can give is to track metrics that work for YOU!

Let’s start simple: pick 5 KPIs you can set achievable goals for and that you’ll have the data to support and collect.  Then, be sure to review them regularly in your meetings, including related actions and impact. The thing to remember is if they don’t help drive change, you need to re-evaluate them. Fail fast and move on. If you need help getting started, the KPI Dashboard is a good source for inspiration.

Unit Metric – A unit metric (which is a good example of a KPI) represents the rate by which a demand driver causes change to an entity. At AWS, Compute Unit cost and Storage Unit cost are two commonly used and simple unit metrics. Having these as KPIs means you can track how optimization efforts impact your usage, even if your overall spend is going up. For example, if your Compute spend is increasing, the increased cost could be because business is booming and you need additional resources each month. However, as you use things such as Savings Plans, Instance Schedule, and Rightsizing you may be using your resources more efficiently despite the top line cost increase. Relying on unit metrics can help you make sense of your cost efficiency and optimization efforts.

Creating these KPIs gives you relevant goals to work toward, a data-driven means to measure success, and a vital opportunity to gain stakeholder trust not only through individual ownership, but by tracking organizational optimization efforts over time.

Now you have a way to see your costs, who has incurred them, and if your spend is on track with your business goals.  In the next blog we’ll take a closer look at the Save pillar, and explore some tools you can use to identify and achieve cost optimization opportunities.

Check out related resources

📰Read the blog: Crafting a robust metrics strategy to quantify your benefits from the cloud