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Best Practices: Developing a Tag Strategy for AWS Billing

Tag Strategy is key to Cost Allocation for Cloud Applications.

Have you ever been out to dinner with a group of friends and at the end of the dinner the waiter comes back with one bill?  Most of us have experienced this.  Depending on the group of friends it’s not a big deal and everyone drops in a credit card so the bill can be split evenly.  Other times, someone invites Harry and Sally, and they scrutinize the bill line by line.  Inevitably they protest that they only had one glass of wine and Sally only had the salad.  You recall that Sally was  a little ‘handsy’ with the sampler platter, but you sit quietly.  It’s in that moment you remember, that’s why the group didn’t include Harry and Sally to last year’s New Year’s dinner.  No need to start the new year with an audit, am I right?

This situation can be eerily similar in many ways to cloud billing in a large enterprise.  The fact that Amazon Web Services (AWS) has changed the way that an organization uses computing resources is evident.  However, AWS has also delivered on the promise of truly enabling ‘chargeback’ or ‘showback’ in the enterprise so that the business units themselves are stakeholders in what was traditionally silo’d in an IT Department budget.

Now multiple stake holders from many organizations have a stake in the cost and usage of an app that resides in AWS.  Luckily there are tools like 2nd Watch’s Cloud Management Platform (CMP) that can easily provide visibility to the cost of their app, or even what their entire infrastructure is costing them at the click of a button.

2nd Watch’s CMP tools are great for showing an organization’s costs and can even be used to set budget notifications so that the business unit doesn’t inadvertently spend more than is budgeted on an environment.   CMP is a powerful tool that can deliver powerful insights to your business and can be made more powerful by implementing a thorough tagging strategy.

Tag your it…

We live in a world of tags and hashtags.  Seemingly overnight tags have made their way into everyday language.  This is not by accident as cloud interactions with Facebook and Twitter have become so commonplace, they have altered the world’s language.

Beyond their emergence in our everyday vernacular, they have a key function. In AWS, applying tags to various cloud resources like EC2 and RDS is key to having quality accounting for allocating charges.  Our team of experts at 2nd Watch can work with you to ensure that your tagging strategy is implemented in the most effective manner for your organization.  After all, a tagging strategy can and will vary by organization.  It depends on you and how you want to be able to report on your resources.  Do you want to be able to report on your resources used by cost center, application, environment type (like dev or prod), owner, department, geographic area, or if this resource was managed by a managed service provider like 2nd Watch?

Without having a well thought out tagging strategy your invoicing discussions will sound much like the fictional dinner described above.  Who pays for what and why?

Tag Strategy and Hygiene…

Implementing a sound tagging strategy at the outset when a resource or environment is deployed is the first step.  At the inception it’s important to know some “gotchas” that can derail a tagging implementation.  One of these is that tags are case sensitive.  For example, mktg will report separately from Mktg.  Also keep in mind, that in today’s ever changing business environment organizations are forced to adjust and reorganize themselves to stay competitive.

Revisiting your tagged resource strategy will need to be done from time to time to ensure tag relevance.  If a stake holder moves out of a role, gets promoted, or retires from the organization altogether, you will need to stay on top of the tagging for their environment to be sure that it is still relevant to the new organization.

What about the un-taggables?

Having standardization and a tag plan works great for AWS resources like EC2 and RDS as explained before.  What about untaggable resources, Network transfer charges, and items like a NAT gateway or a VPC Endpoint?   There will be shared resources like these in your applications environment. It is best to review these shared untagged resources early on, and decide where to best allocate that cost.

At 2nd Watch, we have these very discussions with our clients on a regular basis. We can easily guide them through the resources associated with the app and where to allocate each cost.  With a tool like CMP we can configure a client’s cost allocation hierarchy so they can view their ongoing costs in real time.

For it’s part, Amazon does a great job providing an up-to-date user guide for what resources can be tagged.  Click here for great reference documentation to help while you develop your tag strategy.

Rinse and repeat as necessary

Your tagging strategy can’t be a ‘fire and forget’ pronouncement.  To be effective your organization will need to enforce it on a consistent basis. For instance, as new devops personnel are brought into an organization, it will be key to insuring it stays under control.

These are the types of discussions that 2nd Watch adds a lot of value to.  Our cloud expertise in AWS for large enterprises will insure that you are able to precisely account for your cloud infrastructure spend at the click of a button through CMP.

After all, we all want to enjoy our meal and move on with the next activity. Stop by and visit us at re:Invent booth #1104 for more help.

— Paul Wells, Account Manager, 2nd Watch

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Budgets: The Simple Way to Encourage Cloud Cost Accountability

Controlling costs is one of the grea challenges facing IT and Finance managers today.  The cloud, by nature, makes it easy to spin up new environments and resources that can cost thousands of dollars each month. And, while there are many ways to help control costs, one of the simplest and most effective methods is to set and manage cloud spend-to-budget. While most enterprise budgets are set at a business unit or department, for cloud spend, mapping that budget down to the workload can establish strong accountability within the organization.

One popular method that workload owners use to manage spend is to track month-over-month cost variances.  However, if costs do not drastically increase from one month to another, this method does very little to control spend. It is only until a department is faced with budget issues that workload owners work diligently to reduce costs.  That’s because, when budgets are set for each workload, owners become more aware of how their cloud spend impacts the company financials and tend to more carefully manage their costs.

In this post, we provide four easy steps to help you manage workload spend-to-budget effectively.

Step 1: Group Your Cloud Resources by Workload and Environment

Use a financial management tool such as 2nd Watch CMP Finance Manager to group your cloud resources by workload and its environment (Test, Dev, Prod).  This can easily be accomplished by creating a standard where each workload/environment has its own cloud account, or by using tags to identify the resources associated with each workload. If using tags, use a tag for the workload name such as workload_name: and a tag for the environment such as environment:. More tagging best practices can be found here.

Step 2: Group Your Workloads and Environments by Business Group

Once your resources are grouped by workload/environment, CMP Finance Manager will allow you to organize your workload/environments into business groups. For example:

a. Business Group 1
i. Workload A
1. Workload A Dev
2. Workload A Test
3. Workload A Prod
ii. Workload B
1. Workload B Dev
2. Workload B Test
3. Workload B Prod
b. Business Group 2
i. Workload C
1. Workload C Dev
2. Workload C Test
3. Workload C Prod
ii. Workload D
1. Workload D Dev
2. Workload D Test
3. Workload D Prod

Step 3: Set Budgets

At this point, you are ready to set up budgets for each of your workloads (each workload/environment and the total workload as you may have different owners). We suggest you set annual budgets aligned to your fiscal year and have the tool you use programmatically recalculate the budget at the end of each month with the amount remaining in your annual budget.

Step 4: Create Alerts

The final step is to create alerts to notify owners and yourself when workloads either have exceeded or are on track to exceed the current month or annual budget amount.  Here are some budget notifications we recommend:

  1. ME forecast exceeds month budget
  2. MTD spend exceeds MTD budget
  3. MTD spend exceeds month budget
  4. Daily spend exceed daily budget
  5. YE forecast exceeds year budget
  6. YTD spend exceeds YE budget

Once alerts are set, owners can make timely decisions regarding spend.  The owner can now proactively shift to spot instances, purchase reserved instances, change instance sizes, park the environment when not in use, or even refactor the application to take advantage of cloud native services like AWS Lambda.

Our experience has shown that enterprises that diligently set up and manage spend-to-budget by workload have more control of their costs and ultimately, spend less on their cloud environments without sacrificing user experience.

 

–Timothy Hill, Senior Product Manager, 2nd Watch

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