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Cloud Cost Complexity: Bringing the unknown unknowns to light

When first speaking to mid-size and large enterprises considering embracing the Amazon Web Services (AWS) cloud, the same themes come up consistently.  Sometimes it comes out explicitly and sometimes it is just implied, but one item that nearly all are apprehensive about is their discomfort with “unknown unknowns” (the stuff you don’t even know that you don’t know). They recognize that AWS represents a paradigm shift in how IT services are provisioned, operated, and paid for, but they don’t know where that shift might trip them up or where it will create gaps in their existing processes.  This is a great reason to work with an AWS Premier Partner, but that is a story for another day.

Let’s talk about one of the truly unknown unknowns – AWS Cost Accounting.  The pricing for Amazon Web Services is incredibly transparent.  The price for each service is clearly labeled online and publicly available.  Amazon’s list prices are the same for all customers, and the only discounts come in the form of volume discounts based on usage, or Reserved Instances (RIs).  So if all of this is so transparent, how can this be an unknown unknown?  The devil is in the details.

The scenario nearly always plays out the same way.  An enterprise starts by dipping a toe into the AWS waters.  It starts with one account, then two or three. Six months later they have 10 or 20 AWS accounts.  This is a good thing. AWS is designed to be easy to consume – Nothing more than a credit card is required to get started.  The challenge comes when your organization moves to consolidated invoice billing.  Your organization may be doing this because you want central procurement to manage the payments, you want to pool your volume for discounts, or it may be as simple as wanting it off your credit card. Either way, you now have an AWS bill that might not be what was expected (the unknown unknown).

If you have ever seen an AWS bill, you know they contain a phenomenal amount of useful information.  Amazon provides a spreadsheet monthly with every line item that was billed for the period with amazing detail and precision.  The down side of this wealth of information is that once you start accumulating several AWS accounts on the same consolidated bill, the bill becomes exponentially more difficult to rationalize and track your costs.

In contrast to the unknown unknown, the ability to accurately attribute per-workload costs is one of AWS’ best features and a strong attractor to AWS.  For many organizations, the ability to provide showback or chargeback bills to business units is extraordinarily valuable.  Once a business unit can see the direct costs of their IT resources they can make more informed business decisions.  It is amazing how often HA and DR requirements get adjusted when a business unit can calculate the cost / benefit of each option.

Along with the apprehension of unknown unknowns, many organizations are both excited and a little scared of going to a truly variable cost model.  They are used to knowing what their costs are (even if they are over provisioned).  The idea that they won’t know what the workload will cost until it is up and running on AWS can be a scary one.  This fear can be flipped into a virtue – try it!  Run a quick POC and the workload for performance, cost etc.  See if it works for your use case.  If it does, great; if not, it didn’t cost much to find out.

Managing your costs in AWS means more than just deciphering your bill this month.  It also means the ability to track historical spend by service and interpret the results.  Business units need to understand why their portion of the bill is going up or down and what is driving the change.

The solution to the cost accounting challenge is to use a cost accounting tool specific to AWS.  As Amazon is quick to point out, the pricing model, while transparent, is also fluid.  They have dropped pricing on various services more than 50 times in the last few years.  To effectively manage AWS costs, users want a comprehensive solution that can take a consolidated bill and make it easy to generate real insights.  Most on-premise or co-located solutions cannot match the granularity and accuracy of AWS with a properly implemented cost accounting tool.  With the right tool you can take one of the unknown unknowns and make it a powerful advantage for your journey to the public cloud!

2nd Watch offers software and services that simplify your cloud billing as part of our Managed Billing solution.  This solution expands upon our industry-leading cloud accounting platform with a trained concierge to help facilitate billing questions, making analyzing, budgeting, tracking, forecasting and invoicing the cost of the public cloud easier. Our Managed Billing Service lets you accurately allocate deployment expenses to your financial reporting structure and provides business insights through detailed usage analytics and budget reporting. We offer these services for free to our Managed Services customers.  Find out more at www.2ndwatch.com/Managed-Cloud.

-By Marc Kagan, Managed Cloud Specialist