This article provides a general overview of leveraging unit metrics to manage AWS Costs. Let dive into details…
It’s a very common question that you’ve or your team might had came across, How do I manage my AWS costs more effectively? Most of the teams & organizations are under the impression that spend is directly proportional to the bad cloud management. One simple reason can be not accurately predicting the granular costs from AWS Invoice itself. Sometimes the costs associated are providing more value & other times, its mostly under-utilized or unused cloud resources. That’s why unit metrics come in place to help teams/organizations to identify the difference.
What is a unit metric?
In simple terms, unit metric acts a Key Performance Indicator (KPI) that represents the rate of spend (or) rate of resource consumption. Depending on the audience, both can provide value appreciatively. I mathematical terms, it can be expressed as
Incremental unit cost = (amount of spend)/(number of resources being utilized) (or) Incremental unit consumption = (resource consumption)/(number of resources being utilized)
From above formula, we can understand that the main objective of unit-metrics are to provide value in terms of demand. According to AWS Cloud Financial management, demand driver is a word used to associated with these metrics and can be directly correlated to AWS Costs or AWS resource usage. The resources used and cost associated with them decides the demand driver which may increase or decrease accordingly.
Mapping Unit-Metrics with Demand
The best way to identify the demand driver candidate is to map it with your business activity itself. In simple terms, If you are running a Mobile company, the demand-driver metric can be dependent on the number of mobiles sold. Similarly in Cloud, demand-driver depends on the impact your products (or) services made positively (or) negatively on your customers. The increase in demand-driver will subsequently increase the resource usage (or) consumption. The opposite is true as well.
Let’s discuss a few more scenarios where the costs are increased (or) can be justifiable with increasing costs.
- Fixing a bug, Before the bug the costs can be understated since the application is not working as expected.
- Implementing/Updating the regulatory (or) compliance requirements. This is necessary and need to be in-place.
- Teams working on development/sandbox environments. Developers deploy code and test their work to make enhancements to the existing app or create a new one entirely. This might impact on spend accordingly.
It’s recommended to estimate of costs associated with the resources when teams are working on the product’s backlog. This helps developers to understand the cost-levers of the AWS services. Not only this, these estimates can act as a reference points that can be compared with an actual costs. The difference between expected and actual costs can help your engineers to architect the better cloud practice keeping all technical constraints in place. This approach further helps in reducing costs.
Also, expect that there should be a review process to calculate your unit-metrics. This improves confidence in choosing unit-metrics. Moreover, it’s recommended to preform a audit once in a while. This audit helps the teams to assess the systems nature and performance which might be useful to make their systems better.
Finally, I will conclude the article by providing few more details about unit-metrics that can improve your cloud posture.
- Forecasting the future cost scenarios from the existing spend patterns will improve the cloud cost operations. This forecasting & predicting will greatly assist to determine if additional workload can align with the expected costs or not.
- Chargebacks is normally used to accurately quantify the costs to the respective teams (or) Cost-Centers. This serves the purpose of attributing costs to proper ledger accounts and actions can be taken within the specific teams (or) Cost-Centers.
- Gross Margin Analysis helps the financial teams to understand the impact of the specific product (or) application. Breaking down resources costs can be a great mechanism to improve & prioritize future costs accordingly.
- Organizational Management by dividing the entire org into different functional units like Sales, Product, Engineering etc. can also improve the posture wrt. Cloud Operations.