Enabling enterprises to accurately distribute cloud expenses to their unique cost reporting structure
Accurate distribution of cloud costs among business units, applications, projects etc. according to accepted accounting practices is one of the grea challenges facing enterprise IT Managers and Financial Accountants today. 2W Insight 7.0 simplifies cloud cost accounting by enabling enterprises to create an organizational hierarchy of cost centers aligned to their reporting structure, where resources are assigned, budgets are managed and financial reports are published.
2W Insight 7.0 enables enterprises to create a multi-level organizational structure of cost centers tailored to their financial reporting requirements. Users create cost centers for each project, applications, workload etc., then map them to the financial reporting structure. Once the cost centers and structure are established, users assign cloud resources (including reserved instances) to the cost centers where the costs are incurred. 2W Insight applies AWS pricing rules to the usage within each cost center. As you move up the hierarchy of cost centers, 2W Insight combines the usage from the linked (lower level) cost centers and re-applies the AWS pricing rules to the combined usage ensuring pricing is accurate, earned tier discounts are applied and reserved instances savings are optimized.
Example Organizational Reporting Structure:
Assigning Resources to Cost Centers
2W Insight 7.0 enables enterprises to deploy various strategies when assigning resources to cost centers. Enterprises that have implemented a strategy where each workload is placed in a separate AWS account can assign an account to a cost center. When assigned, all usage/cost in the AWS account will be included in the cost center. For enterprises that have implemented a strategy where a single AWS account includes multiple workloads, 2W Insight enables user to filter the resources in one or multiple accounts (by tag, attribute etc.) to locate and assign resources to cost centers. Once assigned, a rule can be added to automatically assign new resources that meet the filter criteria into the cost center. This provides strict governance and control of the resource assignments and provides accurate financial reporting. It also ensures that the elastic nature of the cloud (resources coming and going based on demand) are aligned to the enterprises cloud cost accounting policies.
Budget Management and Alerting
Once the organizational structure is created and resources have been assigned to cost centers, it is important to manage the budget for each cost center. 2W Insight allow users to set budgets for each cost center and receive notifications when budgets are at risk. Users can receive alerts if a single day’s usage exceeds a set daily budget threshold (e.g. if a single days cost is 120% of the daily budget), when the MTD cost exceeds a set monthly budget threshold (e.g. if the month-to-date usage reaches 100% of the monthly budget) or when the month-to-date cost exceeds a set month-to-date budget threshold (MTD cost exceeds MTD budget by 10%). Budget management and alerting ensures you know in advance if your costs are at risk of exceeding budget.
2W Insight comes standard with month-end reports for each of your cost centers. These “Showback” reports detail the costs associated with each of your cost centers by AWS product, and users can be set up to receive the reports at the end of each month. Once users begin receiving these reports, they become more aware and therefore more responsible for their AWS spend.
2W Insight Cloud Cost Accounting tool is provided at no charge to all of our Managed Cloud Services customers. To receive a demonstration of its capabilities and how 2nd Watch helps our clients manage the complexity of the public cloud, please contact us at firstname.lastname@example.org.
-Tim Hill, Product/Program Manager
When it comes to managing and monitoring IT spending, the cloud has created a new layer of complexity. Consider the fact that AWS provides as many as 28,000 service offerings, generating up to millions of billing line items each month. This creates budgeting and planning problems for CIOs because there’s no easy way to interpret what percentage of cloud spending is going toward storage, compute, or network, along with specific applications, projects and services. IT departments also need a way to merge cloud costs with on-premise IT costs to see the full picture of infrastructure spending across key categories. As well, with many individuals from different departments procuring their own AWS resources, a company can have dozens of unmanaged and unlinked accounts. This creates gaps in financial tracking and spend management and prevents a company from taking advantage of volume discounts.
IT needs a unified model to categorize cloud and non-cloud costs together, and automation to map line items into the IT cost model each month. To automate the mapping process, 2nd Watch and Apptio have worked together on a mapping table that specifies where each Amazon product fits within a standard cost model. This mapping is now embedded in the Apptio Cost Transparency application, a solution for integrating AWS usage with billing, cost categorization, modeling of total costs including internal labor and self-service analytics. This allows IT organizations to categorize cloud costs into trackable categories such as Cloud Windows in Compute or Cloud Archive in Storage.
Determining the run costs of an application is another goal, and requires mapping cloud resources, such as servers and storage, to individual applications. Many IT organizations have not yet adapted their management processes to track application relationship data for cloud infrastructure. Linked accounts and tagging are two ways to get around these hurdles on AWS.
Many enterprises have several AWS accounts at the team and departmental levels in order to encourage agility, but these unlinked accounts create gaps in cost and operational management. To unify unlinked accounts across an organization, companies can use the Apptio application to link individual accounts into one “master account” paid through an IT cost center. This provides visibility into enterprise spend on AWS yet still maintains business-unit level tracking. It also enables savings with volume discounts, that’s not possible when spending goes across several individual AWS accounts.
AWS tags help group usage and expenses across shared key resources like databases. Tagging helps accomplish the problem of mapping AWS resources back to specific business projects, such as “Marketing Web Staging” and “Marketing Web Production.” Detailed tagging can help answer questions such as, how much of an entire application portfolio is comprised of AWS services or what percentage of which projects are using cloud resources? One thing to keep in mind is that AWS tags are applied only to individual accounts. AWS tagging is ideal for environments where you need to share resources across multiple workloads.
There are some limitations to this manual approach for managing individual accounts and tagging, however – managing numerous logins and passwords, going through the AWS setup process for each individual account, creating and controlling a tagging schema, etc. For a more scalable approach to managing AWS accounts and tagging, consider solutions like our 2W Insight billing application, which enables grouping of tags across AWS accounts and provides tools to track and analyze cloud costs by cost center, business unit department, etc. For more information on 2W Insight, contact us.
To learn more about best practices for managing and tracking cloud spending, download our Analyzing Cloud Costs white paper.
-Jeff Aden, EVP, Marketing & Strategic Business Development