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:
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:
- ME forecast exceeds month budget
- MTD spend exceeds MTD budget
- MTD spend exceeds month budget
- Daily spend exceed daily budget
- YE forecast exceeds year budget
- 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