Cloud financial management

Plan - The cost of migrations or new cloud native workloads are modeled using the AWS Pricing Calculator or information from AWS service-specific product pricing pages. For existing cloud spend, finance teams rely on historical spend and trend-based forecasting to plan and set cloud budgets.

Measure – AWS account structures take into account workload architecture and deployment requirements and the benefits provided by AWS Organizations and consolidated billing (such as simplified billing, volume discounts and commitment discount sharing). Cost allocation models are implemented with account structures and tagging schemas in mind. Cost allocation tags are applied to resources in order to perform showbacks (such as cost reporting incurred by a business unit, product, or team). Cloud stakeholders use AWS Cost Explorer to report on cost and usage or an APN CFM solution offering to accelerate the establishment of cost transparency.

Optimize – AWS spend is optimized using Savings Plans and Reserved Instances that do not require cloud resource modifications and deliver immediate cost savings. Commitment recommendations provided by AWS Cost Explorer guide these purchasing decision, typically performed by line of business stakeholders.

Plan – Organizations engage with the AWS Migration Evaluator team, AWS Professional Services, or an AWS Migration and Modernization Competency partner to build a business case to quantify the cost reductions associated with moving to AWS. In some cases, organizations engage with the AWS Cloud Economics team to build business cases that quantify the creation of business value above and beyond cost savings. Finance stakeholders responsible for budgeting engage with their technology counterparts to review existing spend and cloud budgets, and solicit inputs that inform more dynamic technology forecasts and budgets.

Measure – A formal tagging schema is published with inputs from technology, finance, business and security stakeholders, requiring user-defined tags to be applied to cloud resources. AWS Cost Categories, AWS Billing and Cost Management Conductor, and/or AWS Application Cost Profiler are used to perform showback-based cost allocations. Stakeholders with more nuanced cost reporting needs query the AWS Cost and Usage Reports (CUR) using Amazon Athena. They also deploy and customize Amazon QuickSight dashboards, including the Cost Intelligence Dashboard.

Optimize – AWS spend optimization takes place through individual teams that use recommendations provided by AWS Cost Explorer (such as rightsizing recommendations), AWS Compute Optimizer, AWS Trusted Advisor, and Amazon S3 Analytics to audit, identify, and suspend/delete unused resources; for example, unattached Amazon Elastic Block Store (Amazon EBS) volumes. Engineering teams implement resource-level optimizations before commitments are purchased using a centralized purchasing model for the entire organization, increasing purchase accuracy and effectiveness.

Plan – Workload migration scoping includes quantifying both expected cloud costs and expected value creation (such as improvements to staff productivity, operational resilience, and business agility). Value is quantified using third party benchmark data, or through an engagement with the AWS Cloud Economics team. New born-in-the cloud initiatives undergo cost modeling inclusive of licensing to inform business profit and loss (P&L) statement. Cloud planning is part of the organization’s overall (cloud and hybrid) technology financial planning process and cloud-service delivery model. Finance and technology stakeholders maintain an ongoing business partnership responsible for developing driver-based technology forecasts with high accuracy, and establishing budgets.

Measure – AWS account lifecycles are governed using AWS Organizations APIs and AWS Control Tower. A tagging policy ensures user-defined tags are applied to cloud resources, and governance ensures non-compliant resources are remediated (for example, tagged, shutdown, or ended). Cost allocation models define how commitment purchases, shared resources (for example, containers, AWS Support, or other shared resources charges) and untaggable spend is handled.

Finance team members, P&L owners and the organization’s auditors agree on a specific chargeback model for the attribution of cloud spend, which is incorporated into an overall technology cost allocation model inclusive of hybrid technology-related spend (such as infrastructure, labor, and licenses). Cloud stakeholders with cost reporting needs define and track unit metrics to measure cloud efficiency—for example, cost per Amazon Elastic Compute Cloud (Amazon EC2) hour, and cost per business transaction—as cloud usage continues to grow.

Teams monitor spend using AWS Budgets or AWS Cost Anomaly Detection monitors, and ensure all variances and/or anomalies are actioned through a standard operating procedure including root cause identification, and remediation.

Optimize – Cloud workloads are Well-Architected and operated in the most cost-effective manner. Cost optimization takes place throughout the cloud development lifecycle, including upfront (during design and architecture stages), and during operation (using an audit-based approach). Cost is traded off against other requirements, and cost-aware architectures are built using Amazon EC2 Spot instances for fault-tolerant applications, AWS Auto Scaling for dynamic workloads, and storage tiering for workloads with heterogenous storage needs.

Workload deployments take into consideration network related costs, and optimize license usage. Commitment lifecycles are managed using a centralized portfolio approach to maximize savings for the entire organization. Once products are running on the cloud, individual teams are responsible for identifying and remediating cloud waste associated with their workloads leveraging recommendations or information provided by AWS Cost Explorer (such as rightsizing recommendations), AWS Compute Optimizer (to optimize Amazon EC2, Amazon EBS, and AWS Lambda usage), AWS Trusted Advisor, and Amazon S3 Analytics. Lifted-and-shifted workloads are modernized using containers, serverless, managed databases, managed analytics, or new cloud resources such as AWS Graviton.

There exists a programmatic approach for CFM, consisting of centralized responsibilities managed by a single threaded owner (for example, an individual, Cloud Operations team, Cloud Business Office, CFM or FinOps team, or AWS Services Path Partner). The central function is also responsible for defining and completing a cost management tooling strategy (procurement versus build), defining and deploying financial guardrails in conjunction with organizational requirements, and implementing mechanisms to drive organizational cost awareness. Executive sponsorship of the CFM program, and cost-related organizational goals ensure that technology teams prioritize cost alongside feature development, while maintaining agility.