AWS Chargeback Controls Cloud Sprawl

Cloud use is exploding, AWS cloud bills are spiking, and organizations can’t point to the reason why (“Is our AWS bill going up because our cloud migration is going well or is it because someone’s going rogue with the corporate credit card?”).

Eliminate cloud waste by adopting cloud chargeback to recover costs and shape demand.

Eliminate AWS sprawl with AWS chargeback.

The old IT operating model of on-prem IT had a built-in brake on sprawl.  It takes time to build a datacenter or develop an in-house application—time that tempers impetuous decisions. It’s hardly a clarion call for IT efficiency (#Slownessisyourfriend isn’t trending anytime soon), but it creates space—to reflect, to reconsider—between capacity planning and go-live.

Cloud solutions work in a different paradigm: there is no need for a pause between decision and action.

There aren’t operational limits to AWS capacity—just budgetary ones.

This is a good news/bad news scenario.  When you pay as you go, you can go and pay for what you want (good) but also blindly pay for far more than your organization may need (bad).

Accountability for cloud spend: linked accounts, tags, and best practices

Hold people accountable for AWS spend by holding them accountable for consumption.

A strong CCoE brings together AWS users (engineering, finance, operations, business partners) and maps out a path to adoption and accountability.

Build accountability with linked accounts, tagging, and cloud cost management best practices.

Linked Accounts

An organization doesn’t just have one universal account with AWS. Anyone in your organization can spin up an AWS cloud solution—and that makes it hard to see enterprise-wide AWS spend.

A strategy for cloud cost management begins with full visibility into total spend. Linked accounts offer the mechanism to do that.

 

Linked accounts split AWS bills by cost center or business unit, while centralizing payment into one organizational account. Linked accounts are managed through the consolidated billing feature in AWS Organizations. Consolidated billing breaks out member accounts associated with the corporate master account.

Tags

Tags categorize AWS resources in different ways (e.g., by purpose, owner, or environment) to identify ownership and tag consumption of cloud services.

AWS Cost Explorer allows you to analyze costs by tag. This is useful for direct attribution of AWS spend to BUs—a prerequisite for cost recovery with chargeback.

Tags can be used to identify operational (e.g., dev/stage/prod) or business alignment (e.g., RTB, GTB, TTB) types of spend.

Tagging options expand the report taxonomy of cloud spend. A common taxonomy for all cloud spend delivers an apples-to-apples comparisons between services and across cloud providers.

READ MORE: 5 Phases of a Successful Cloud Tagging Strategy

Adopting—and enforcing—cloud cost management best practices

Cloud solutions at the enterprise level are still relatively new. Building a culture for AWS accountability takes work. Corporate IT is taking on the role of IT broker over IT provider and that involves advocating for cloud use best practices.

Adopt best practices when AWS spend is small so you reap the benefit of good habits when AWS spend grows. Including:

  • Pay for what you use—turn off what you aren’t using
    • e.g., switch-off Dev resources on weekends.
  • Leverage the appropriate service for your use case
    • e.g., store archive data in AWS Glacier over S3 Standard
  • Use alerts, notifications, and AWS Budgets to help teams stay on track
    • e.g. receive alerts for resources over budget
  • Report waste on a team- and company-level
    • e.g., % utilization of Reserved Instances
  • Monitor cloud usage
    • e.g., spot instance purchases vs. reserved instances
  • Deliver cost management visibility
    • e.g., communicate cloud usage as part of monthly business reviews.

READ MORE: Why you need a cloud spend and optimization solution

Challenges of AWS chargeback

Chargeback is a well-established IT financial management tactic of recovering IT costs from BUs—but it’s still early days for consumption-based AWS chargeback.

Getting BU buy-in for a change in cost recovery methods is hard, especially when costs for some BUs will go up. This has been true for on-prem cost recovery for decades, it’s as much of an issue with AWS chargebacks.

Public cloud billing isn’t a bill of IT

Indirect costs for AWS (a.k.a. vendor management) aren’t in your AWS bill, and consumption isn’t automatically mapped to a business unit. The AWS bill doesn’t tell the complete story of AWS-generated costs that BUs are accountable for—you need tagging and linked accounts.

Hidden cloud costs undercut migration value

Using chargeback to accelerate AWS migration (e.g., subsidize EC2 to accelerate retirement of legacy hardware) requires accurate pricing of the on-prem infra you are moving from and the IaaS you are moving to.

The decision to, say,  refactor an app for AWS vs. retiring the app and adopting a cloud-native alternative needs a comparison between the fully-burdened cost of AWS (including discount programs and variable pricing) and existing on-prem options.

Businesses consume AWS like it’s free—if you give them a reason to

Every EC2 instance you have provisioned (used or not) is captured in your cloud provider bill: per-second billing has consequences. Business partners need to understand the billing implications of their behavior.

Good tagging is the key to putting a price tag on AWS. If tagging is poor, and AWS bills are spread evenly amongst BUs, there isn’t an incentive for BUs to change their consumption. Even spread allocations of AWS spend ties everyone to the consequences of (someone else’s) poor cloud cost management.

Business users can game AWS chargeback

AWS chargeback drives accountability if on-prem chargeback operates at the same maturity.

There are winners and losers when on-prem chargeback is allocated by an even-spread allocation.  What is unfair for some (“We don’t consume Tier 1 storage, why are we being charged for it?”) is a boon for others (“We get charged the same for Tier 1 storage regardless of how much we use? Brilliant!”).

The canny BU drags its feet on AWS adoption when on-prem even-spread chargeback costs less than consumption-based AWS chargeback.

Four strategies to implement AWS chargebacks

Strategy #1: Avoid institutional turbulence

Make AWS chargebacks transparent. BUs must understand the differences from the old cost recovery model. Get ahead of BU pushback by showing how consumption drives cost.

Track AWS consumption patterns before rolling out AWS chargeback. Infrastructure and Operations (I&O) teams should use the AWS bill to identify, and educate, BUs on the “winners” and “losers” of AWS chargeback. 

 

Strategy #2: Generate stakeholder buy-in

Explain pricing before the first billing period.  If business stakeholders think that AWS chargebacks are unfair, they’ll purchase their own shadow IT and bypass AWS chargeback.

Be the voice of authority on AWS bills. If AWS cloud cost recovery is a nascent motion, any price will have “sticker shock.” BUs will have questions—IT leadership must provide answers. Higher service unit rates may imply a newly-coined profit center; lower ones would call into question all the ‘excess’ charges from years gone by. Neither is a good look for corporate IT.

 

Strategy #3: Socialize bills early and often

Build trust in AWS chargeback. AWS chargeback should provide BUs levers to control spend.  Give BUs time to understand how to pull those levers (e.g., turning off dev resources outside of business hours) to control AWS spend.  Early access to the billing system helps BUs understand the new system during implementation and advocate for it after go-live.

“Apptio’s cloud analytics provides us with the guardrails and the framework to ensure we understand our cloud consumption and costs across applications. Leveraging the cloud reports has also been a major driver to increase user adoption now that budget owners are accountable for aligning spend to budget.”

– Chris Anderson, IT Program Manager, Premera Blue Cross

 

Strategy #4: Adopt a scalable chargeback solution.

Successful AWS chargebacks share common DNA: defensible pricing, identifiable levers for users to control spend, and robust governance with tagging and linked accounts.

Apptio Cloudability applies machine learning to optimize cloud resources and translates bills and tags into insights to provide real-time clarity on consumption.  It delivers the accountability that AWS chargeback is built on.

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Apptio Cloudability optimizes cloud resources and translates bills and tags into insights to provide real-time clarity and accountability for consumption.