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Managing AWS Billing

Without a doubt, AWS has fundamentally changed how modern enterprises deploy IT infrastructure.  Their services are flexible, cost effective, scalable, secure and reliable. And while moving from on-premise data centers to the cloud is, in most cases, the smart move; once there managing your costs becomes much more complex.

On-premise costs are straight forward, enterprises purchase servers and amortize their costs over the expected life.  Shared services such as internet access, racks, power and cooling are proportionally allocated to the cost of each server. AWS on the other hand, invoices each usage type separately.  For example, if you are running a basic EC2 instance, you will not only be charged for the EC2 box usage but also the data transfer, EBS Storage and associated snapshots. You could end up with as many as 13 line items of cost for a single EC2.

Example: Pricing line items for a single c4.xlarge Linux virtual machine running in the US East Region (Click on image to view larger)

Linux Example_Managing AWS Billing

When examining the composition of various workload types the numbers of line items to manage will vary. A traditional VM-based workload may have 50 cost line items for every $1,000 of spend while an agile, cloud-native workload may have as many as 500 per $1,000 and a dynamic workload leveraging spot instances may have upwards of 1,200 per $1,000. This “parts bin” approach to pricing makes the job of cost account challenging.

To address this complexity and enable accurate cost accounting of your cloud costs; we recommend creating a business-relevant financial tagging schema to organize your resources and associated cost line items based on your specific financial accounting structure.

Here are some recommended financial management tags you should consider (Click on image to view larger):

Financial Management Tags_AWS Billing Management

AWS Tagging data integrity is extremely important in ensuring the quality of the information it provides and is directly dependent upon the rigor applied in adopting a systematic and disciplined approach to AWS Tagging.

Financial Management Tagging – Best Practices

  • Create a framework or standard for your enterprise that outlines required tag names, tag formatting rules, and governance of tags.
  • Tags should be enforced and automated at startup of the resource via Cloud Formation templates or other infrastructure as code tools, such as Terraform, to ensure cost accounting details are captures from time of launch.
    • NOTE:  Tags are point in time based.  If a resource is launched without being tagged and then tagged sometime in the future, all hours the resource ran prior to being tagged will not be included in tag reports in the AWS console.
  • Manually creating tags and associated values is strongly discouraged as it leads to miss-tagged and untagged resources and in-accurate cost accounting
  • Select all upper case or all lower-case keys and values to avoid discrepancies with capitalization.
    • NOTE: “Production” and “production” are considered two different tag names or values.
  • Monitor resources with AWS Config Rules and alert for newly created resources that are not tagged

Once your tagging schema is created, automation is in place to tag resources during startup and alerts are set up to ensure tagging is managed, you can accurately to view, track and report your cost and usage using any of your tagging dimensions.

Financial Management Reporting – Best Practices

  • Using your tagging schema, group your resources by workload.
  • Apply Reserved Instance discounts to the workloads you intended them to be for.
    • NOTE: 2nd Watch’s CMP Finance Manager tool converts reserved instances into resources so that you can add them to the workload they were intended for.
  • Organize your groups to match your specific multi-level financial reporting structure.
  • Managed shared resources
    • Create groups for shared resources. If you have resources that are shared across multiple workloads such as a database used my multiple applications or virtual machines with more than one applications running on it, create groups to capture these costs and allocate them proportionally to the applications using them.
  • Manage un-taggable resources
    • Create a group for un-taggable resources. Some AWS resources are not taggable and should be grouped together and their associated costs proportionally allocated to all applications.
  • Manage spend to budget
    • Create budgets and budget alerts for each group to ensure you stay in budget throughout the year.
    • Key alerts
      • Forecasted month end cost exceeds alert threshold
      • MTD cost is over alert threshold
      • Forecasted year end cost exceeds alert threshold
      • YTD cost is over alert threshold
    • Sign up to receive monthly cost and usage reports for integration into your internal cost accounting system.
      • Cost by application, environment, business unit etc.


Even though AWS’ “parts bin” approach to pricing is complicated, following these guidelines will help ensure accurate cost accounting of your cloud spend.


–Timothy Hill, Senior Product Manager, 2nd Watch




2W Insight Cloud Cost Accounting Tool: New Features

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.

Organizational Hierarchy

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:

Insight 7.0
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.

Showback reports

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 insight.support@2ndwatch.com.

-Tim Hill, Product/Program Manager