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Imagine receiving a lengthy and complicated cloud bill from your service provider detailing the monthly consumption across various services.
Overwhelming? Yes.
Easy to understand? Not even close!
Furthermore, it’s safe to assume that as your operations scale up, so will the size of your CUR file, making the cloud bill even harder to comprehend. There’s no doubt that the metadata provided in the bill by your cloud provider is highly detailed and important but is it useful if you can’t even deduce relevant insights from it to make smarter business decisions? The simple answer is no.
If you seek to achieve cloud cost visibility, your bills are a critical piece of the puzzle.
By understanding and monitoring your cloud expenses, you’ll know - what service you use, how much of it you use, at what rate you use it, and even know details about extra fees you paid due to unoptimized transfers or on-demand consumptions.
Achieving cloud cost visibility can help you optimize your cloud consumption, right size or remove idle resources, manage your budget effectively, and make better predictions about your RIs or Savings plan commitments ensuring overall cost savings on the cloud.
Establishing a Culture of Cloud Cost Visibility
Cloud cost visibility isn’t just a check box activity in your “to-do” list. Instead, it’s a culture that you must cultivate within your organization. Doing so will help you enjoy the following benefits:
- Efficient Cost Control: Higher cloud cost visibility will offer you more opportunities to optimize, you can identify areas of overspending or inefficiency and take corrective actions accordingly.
- Budget Management: Cloud cost visibility will provide you with insights into your current spending patterns and even help you make smarter predictions about your future consumption requirements leading to better cloud cost forecasting and budgeting. This will allow you to allocate resources more effectively.
- Resource Optimization: By understanding your usage patterns, you can identify idle and underutilized resources and accordingly take action to optimize your resource allocation, right-size instances, and even adopt cost-saving measures such as reserved instances or spot instances.
- Cost Allocation: Cloud cost visibility facilitates better cost allocation and chargeback mechanisms. This will enable your teams to understand their usage and encourage a culture of cost visibility and accountability across your organization. Each team will hence contribute to the overall cost management efforts.
- Risk Management: By monitoring costs closely, your organization will be able to quickly identify potential security risks, such as unauthorized usage or inefficient resource configurations, and mitigate them before they escalate.
- Strategic Decision Making: With clear visibility into cloud costs, your organization will be able to make informed strategic decisions about cloud adoption, workload management, and even investment in new technologies or services.
Understanding the importance of cloud cost visibility is good but not enough. You can’t just haphazardly run around attempting to track everything within the thousand-plus line item cloud bill. You must identify and understand the key performance indicators that you should keep a close eye on to extract meaningful insights from your cloud bill that will help you make better decisions to achieve maximum value out of your cloud resources.
FinOps KPIs for effective Cloud Cost Visibility and Cloud Cost Monitoring
Here are some FinOps KPIs you should track along with recommendations on how to track and analyze them for effective Cloud Cost Visibility and cloud cost monitoring:
- Cost per Unit:
This FinOps KPI measures the cost of running a specific virtual machine instance. By regularly monitoring the Cost per unit across different resource types and sizes, you’ll be able to identify the inefficiencies in your consumption which in turn provide you with opportunities for cloud rate optimization. It’ll even help you optimize your budget and make RI/ Savings plan commitments accordingly for higher cloud cost savings. - Cost Allocation Accuracy:
This KPI evaluates how accurately costs are allocated to different departments, teams, projects, or customers. This will allow you to compare allocated cloud costs against the actual resource usage and business activities promoting a culture of cloud cost visibility & accountability by making each team responsible for their share of consumption. By Implementing robust tagging strategies and automated cost allocation mechanisms you can ensure accuracy while reviewing. - Spend Variance:
This KPI measures the variance between budgeted and actual cloud spending over a specific period. This KPI will help you understand the reasons behind deviations from your cloud budget. This will enable you to either pinpoint the cause of such deviation and take corrective action or adjust your budgets and spending plans for the future accordingly. - Cost Trend Analysis:
This KPI tracks the trend of cloud costs over time to identify patterns, anomalies, and potential cost-saving opportunities. By using charts or graphs to analyze cost trends effectively you’ll be able to identify the spikes, trends, or recurring patterns that may require your attention. Monthly or quarterly reviews will give you valuable insights for better cloud cost savings and avoid leakages and idle time reducing inefficiencies. - Resource Utilization:
As the name states, this KPI measures the utilization of cloud resources to ensure that you are not over or under-provisioning your cloud resources. Monitoring resource utilization metrics regularly will enable you to take actions such as right sizing instances or implementing auto-scaling policies to avoid underused or idle resources ensuring optimized resource usage. - Savings Achieved:
This KPI quantifies the overall cloud cost savings achieved through your cloud cost optimization efforts using reserved instances, spot instances, or by using discounts from your cloud provider. Tracking your savings & continuously evaluating them will give tactical insights about what to focus more on. You can then adjust your optimization strategy based on the effectiveness of each method. - Cloud Cost Efficiency:
This KPI measures the efficiency of your cloud spending in delivering business value. This KPI is expressed as the ratio of spending to business output. You need to establish relevant business metrics/outputs that you can correlate with cloud spending to assess cost efficiency. By evaluating the ratio regularly, you can decide to focus your optimization efforts on areas that incur low costs and offer higher output.
Strategies track the FinOps KPIs effectively
To maximize your optimization effort and track these KPIs effectively, you should:
- Implement robust tagging strategies to categorize resources accurately for cost allocation and analysis.
- Regularly review and analyze KPIs to identify trends, anomalies, and opportunities for optimization.
- Foster collaboration between finance, operations, and development teams to ensure alignment on cost management goals and initiatives.
- Continuously optimize cloud spending based on insights from KPI analysis and feedback loops.
- Utilize cloud cost visibility and cloud cost monitoring tools like CloudKeeper Lens that can offer real-time insights, cost optimization recommendations, and a granular view of your cloud spending patterns and cost usage. From Billing Summary to RI & Savings Plan Utilization to even Daily Breakup Reports, it’ll help you with all these insights and empower you to make smarter decisions to optimize your cloud utilization and save cost.
With the right tools, benchmarking, and regular review, you can achieve better cloud cost visibility. Once you know your spending and consumption patterns, you’ll learn how to properly optimize your cloud spending unlocking higher efficiencies on the cloud.
