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Planning for Cost Management with Amazon Web Services

As firms progress through the transition from traditional IT to the AWS Cloud, there is often a moment of fear and anxiety related to managing cost. The integration and planning group has done an excellent job of selecting the right consulting partner. Contracts have been negotiated by legal and procurement. Capital funding has been allocated to cover the cost of application migrations. Designs are accepted and the project manager has laid out the critical path to success. Then at the last hour, just before production launch, the finance team chimes in – “How are we going to account for each application’s monthly usage?”

So much planning and preparation is put into integration, because we’ve gone through this process with each new application. But moving to the public cloud presents a new challenge, one that’s easily tackled with a well-developed model for managing cost in a usage-based environment.

AWS allows us to deploy IaaS (Infrastructure as a Service), and that infrastructure is shared across all of our applications in the cloud. With the proper implementation of AWS Resource Tags, cloud resources can be associated with unique applications, departments, environments, locations and any other category for which cost-reporting is essential.

Firms must have the right dialog in the design process with their cloud technology partner. Here’s an outline of the five phases of the 2nd Watch AWS Tagging Methodology, which has been used to help companies plan for cloud-based financial management:

Phase 1: Ask Critical Questions – Begin by asking Critical Questions that you want answered about utilization, spending and resource management. Consider ongoing projects, production applications, and development environments. Critical Questions can include: Which AWS resources are affecting my overall monthly bill? What is the running cost of my high availability features like warm standby, pilot light or geo-redundancy? How do architectural changes or application upgrades change my monthly usage?

Phase 2: Develop a Tagging Strategy – The Cloud Architect will interpret these questions and develop a tagging strategy to meet your needs. The strategy then turns into a component of the Detailed Design and later implemented during the build project. During this stage it’s important to consider the enforcement of standards within the organization. Configuration drift is when other groups don’t use standardized AWS Resource Tags, or those defined in a naming convention. Later when it’s time for reporting, this will create problems for accounting and finance.

Phase 3: Determine Which AWS Resources Are In Scope – Solicit feedback from your internal accounting department and application owners. Create a list of AWS Resources and applications that need to be accounted for. Refer frequently to AWS online documentation because the list of taggable resource types is updated often.

Phase 4: Define How Chargebacks and Showbacks Will Be Used – Determine who will receive usage-based reports for each application, environment or location. Some firms have adopted a Chargeback model in which the accounting team bills the internal groups who have contributed to the month’s AWS usage. Others have used these reports for Showback only, where the usage & cost data is used for planning, forecasting and event correlation. 2W Insight offers a robust reporting engine to allow 2nd Watch customers the ability to create, schedule and send reports to stakeholders.

Phase 5: Make Regular Adjustments For Optimization – Talk to your Cloud Architect about automation to eliminate configuration drift. Incorporate AWS tagging standards into your cloud formation templates. Regularly review tag keys and values to identify non-standard use cases. And solicit the feedback of your accounting team to ensure the reports are useful and accurate.

Working with an AWS Premier Consulting Partner is critical to designing for best practices like cost management. Challenge your partner and ask for real-world examples of AWS Resource Tagging strategies and cost reports. Planning to manage costs in the cloud is not a step that should be skipped. It’s critical to incorporate your financial reporting objectives into the technical design early, so that they can become established, standardized processes for each new application in the cloud.

For more information, please reach out to Zachary Bonugli zbonugli@2ndwatch.com.

– Zachary Bonugli, Global Account Manager

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