Usage and Expenditure Awareness
Understanding business cost drivers is critical to managing business expenditure effectively and identifying cost-reduction opportunities. Businesses typically operate multiple systems run by numerous teams. These teams might be in different business units, each with its revenue stream. The capability to attribute resource costs to the systems, individual business, or product owners drives efficient usage behavior and helps reduce waste. Accurate cost attribution allows understanding of how profitable business units and products are, and enable making more informed decisions about where to allocate resources within the business.
Consider taking a multi-faceted approach to becoming aware of cloud service expenditures. The R&D team needs to gather data, analyze, and then report. These are the key factors to consider:
- Visibility and governance
- Cost attribution
- Entity lifecycle tracking
Relevant stakeholders within the business need to be involved in usage and expenditure discussions at all stages of the cloud journey. The following are typical stakeholders for engagement and their roles:
CFO and financial controllers must understand the cloud model of consumption, purchasing options, and the monthly billing process and accompanying data. Because there are fundamental differences between the cloud (the rate of change in usage, pay-as-you-go pricing, and detailed billing and usage information) and an on-premises operation, it is essential that the financial team understands how this new variable IT model impacts several aspects of the business, procurement processes, incentive tracking, and financial statements.
Business unit owners
Business unit owners must understand the cloud business model to provide direction to the business units and the whole company. This cloud knowledge is critical when there is a need to forecast growth and system usage, and also when assessing different purchasing options.
Tech leads must translate external business, usage, or cost factors from the financial and management stakeholders into system attributes or adjustments. This allows the system to be implemented to achieve the desired goals of the business.
If the business is employing third parties, ensure that they are aligned to common financial goals, and demonstrate the alignment through their engagement models. Typically, third parties will contribute to reporting and analysis of any systems that they manage, and they will provide cost analysis of any systems that they design.
Visibility and Governance
Before taking action, a detailed level of visibility into the cloud environment will enable the identification of opportunities for saving. Cost optimization begins with a granular understanding of the breakdown in spending, being able to model and forecast future spending, and putting sufficient mechanisms in place to align cost and usage to business objectives.
Several cloud services provide reports and tools to estimate, monitor, plan, notify, report on, and analyze cloud services, enabling to do the following:
- Estimate and forecast cloud services cost and usage
- Receive notifications when budgeted thresholds are exceeded
- Assess most significant investments in cloud resources
- Analyze spend and usage data
- Reserved Instance Utilization Report
- Reserved Instance Coverage Report
Use cost attribution to drive cost management by assigning costs to systems, revenue streams, or parts of the organization, departments, business units, products, and internal teams.
To organize and manage cloud service costs, consider using account structuring and tagging. Either of these, or a combination of the two, provides the cost attribution required.
Many cloud providers have a one-parent-to-many-children account structure that is commonly known as a payer (parent) account-linked (child) account. Implement either a single cloud provider account or a structure with multiple accounts. There is no one-size-fits-all answer for how many accounts one needs. First assess the current and future operational and cost models to ensure that the structure of the cloud accounts reflects that of the organization. Some companies will want to create more than one account for business reasons; for example, in the following situations:
- Administrative, fiscal and billing isolation is required between business units, cost centers, or specific workloads.
- Cloud service limits are set to be specific to particular workloads.
- Specific instance reservations are required for certain workloads (e.g. high availability and disaster recovery).
Consolidated billing is used to create the construct between one or more linked accounts and the payer account. Linked accounts allow usage and billing to be isolated and distinguished by defined groups. A common practice is to have separate linked accounts for each business unit (e.g. finance, marketing, and sales), or for each environment lifecycle (development, test, and production), or for each project, and then aggregate these linked accounts using consolidated billing. Consolidated billing allows the consolidation of payment for multiple cloud accounts under a single-payer account, while still providing visibility for each connected account’s activity. Because costs and usage are aggregated at the payer account, this allows maximization of service volume discounts, Reserved Instances volume discounts, and Reserved Instances benefits.
Tags allow overlaying of business and organizational information onto the billing and usage data. This helps categorize and track cost by meaningful, relevant business information. Apply tags that represent business categories (cost centers, application names, projects, or owners) to organize costs across multiple services and teams.
Tags applied to cloud resources are added to the cost and usage reports. Assigning tags to resources allows higher levels of automation and ease of management. Execute management tasks at scale by listing resources with specific tags, then performing the appropriate actions. For example, list all resources with the tag and value of
environment:test, then for each of the resources either delete or terminate them. This is useful to automate the shutdown or removal of a test environment at the end of the working day. Running reports on tagged and, more importantly, untagged resources allows greater compliance with internal cost management policies.
Creating and implementing a tagging standard across the organization’s accounts will enable cloud environments to be managed and governed in a consistent and uniform manner.
Entity Lifecycle Tracking
When managing a list of projects, employees, and technology resources over time, identify resources that are no longer being used, or orphaned projects that no longer have an owner.
Devek provides a detailed inventory of cloud resources and configuration and continuously records configuration changes.
Integrate Devek with existing projects or asset management systems to keep track of active projects and products within the organization. Combining the current system with the rich set of events and metrics provided by Devek will allow the user to build a view of significant lifecycle events, and proactively manage resources to reduce unnecessary costs.
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