Tag: Cloud Cost Dashboard

Managing Azure and AWS costs do not have a strategic or even tactical flavour to it.

At first glance!

In this blogpost we will take a closer look at what you should include in a cloud cost dashboard if you as a CIO (or someone reporting on cloud costs to leadership) want to be able to answer the question:

Do we need to spend more time managing our cloud costs?

Why bother? We are on budget!

… and our priorities are to move our digitalization projects forward and ensure stable and secure operations.

Having worked with customers ranging from smaller SaaS-companies to large enterprises we see insightful CIOs and IT leaders refer to three unwanted effects they want to avoid:

Making wrong business decisions due to flawed understanding of costs
Wasting time on internal cost decisions
Getting started with cost optimizations too late

Making wrong business decisions is maybe the most critical one.

You might decide on the wrong scope of migrations for your existing infrastructure slowing down your digitalization journey.

You might see earning erosions because the pricing structure towards your end customers do not consider that pricing structures and cost levels are so different in cloud compared to on-premises.

Or you might be spending valuable time in leadership meetings discussing if you cloud costs are too high when you really should be spending your time on top-line focused digitalization initiatives.

These issues would all impact the digitalization agenda negatively.

The last point on getting started with cost optimizations too late have two sides to it: Firstly, it is annoying to overpay for your cloud services, and secondly, you don’t want someone else to take up the agenda of price optimizations – this is your domain.

In this context we will take a closer look at four questions you would like to know the answer to.

How is our total cloud spend developing?

This question is really straightforward. Take your monthly cost and see how it is developing.

Surely, you are on top of this, yet you might recognize that your team spends too much time manipulating data and explaining the following issues:

Firstly, make sure you do not report on actual costs but amortized costs. By this, we mean that if you buy a reservation upfront, have a prepaid monetary commit, or another type of payment option where you pay for the service in chunks, then you will see your costs jumping up and down.
Secondly, remember that there might be costs associated with software licenses outside your cloud bill, i.e., when you use on-premises licenses. This means that you might see a drop in costs where it is not transparent that a different account holds the charge.

Also, you may want to report on a normalized cost, i.e., taking the number of days in a month into account. Otherwise, you will tend to see a cost reduction of about 10% from January to February.

All the numbers are available in your cloud portal. You can read a recent blog post on how to get data for your FinOps.

What is a reasonable forecast for our cloud costs?

Forecasting is trickier. Most companies are on a journey to use the cloud more and more, but at what pace? And how much do the historic numbers say about future growth?

Our recommendation would be to use at least the following two – mathematically simple – scenarios to give a range for where the cost can end up for the current financial year:

Scenario 1: We will be keeping the current monthly spend stable, i.e., forecasting the same monthly spend for the rest of the budget year as the last month reported.

Scenario 2: We will continue growing (or reducing) our spending with the same average rate as the last six months.

Why take scenario one into consideration when you expect increasing costs? The main reason is that almost all companies can continue expanding their use of the cloud without adding costs for a shorter period when the cost becomes a matter of priority. In a recent blog post, we outlined the three most important ways to save in Azure, and the principles apply to a large degree also for AWS.

Hence, if you are faced with budget issues, you just might be able to get on or close to the lower cost scenario.

What are the main cost drivers of our cloud costs?

Your quarterly report should give a quick overview of which areas to monitor – and where to ask questions. You could have lists highlighting:

“What”: Total cost split on services (Compute, storage, databases, containers, PaaS, AI/ML, etc.)
“Who”: Top five spenders (i.e., cost centers or projects)
“Who is growing”: Top five growing spenders

Getting this reporting level right requires a bit more from your side. Your team should use subscriptions (Azure) or accounts (AWS) in a way that supports your reporting structure as well as applying an appropriate tagging structure for more advanced reporting.

It may sound like a daunting task, but we recommend you start early and talk to your team, cloud partner, or cloud cost partner about the few vital things you should get right from the start – then it becomes second nature.

Can we save material amounts on our cloud costs?

Did you ever have to discuss with your leadership colleagues why costs are higher than anticipated?

The blessing – and curse – of cloud is agility. Projects and departments can easily add resources, but it makes it challenging to manage costs.

Hence, it is a great help for many CIOs to answer with affirmation any questions on higher than anticipated costs. Is this because we consume more (typically the responsibility of the business), or because we overpay for the services we buy.

Some helpful reports would be:

Cost efficiency index (like the energy rating on your refrigerator, house, etc.)
Realized savings (how much did your cloud team already save)
Additional savings potential leveraging pricing and discount models

Getting data for this section of your dashboard is more complicated. The data are not available in your portal, so you need access to a tool directly or from a partner.

However, it is a powerful way to demonstrate your contribution to the cloud journey – and even more so when you can show continuous improvement over time.

External benchmark: How do our prices compare to others?

If you are struggling to understand your savings potential as mentioned above there is another way you could get valuable insights.

Compare the unit price you pay with what others are paying for the main categories of cloud services, ie. virtual machines, storage, databases etc.

External benchmarks like these have their virtues and pitfalls.

We use it with our customers in context with other measure to identify areas worth taking a closer look at. Are we leveraging the cheaper storage options? Are premium versions necessary? And a range of other architectural choises that may or may not have been done on purpose.

If you have downloaded your billing data (see below) you can calculate your total spending on a category, and how much of ie. storage you are consuming to get to a unit price (ie. cost per GB per month).

In the most recent version of Kostner’s Quarterly Insight we provide you with unit costs for the main categories our customers are buying. Download below.

How do I build a Cloud Cost Dashboard?

Most of the data is in your cloud portal. The free tools also include some graphs and tables that will answer some variants of the questions above.

However, you cannot get a trustworthy number for additional savings. There are free tools in your cloud portal providing an incomplete (and sometimes misleading) list of possible savings, but let us just put it this way: it is not the best built-out feature of your cloud portal.

Talk to your cloud team to see what questions they already know the answer to for a start.

Many tools and providers of cloud cost management and FinOps related services can make your life a lot easier.

It need not be very expensive or time-consuming to get started on a standardized periodic report – you may want to check our pricing page to get a feel for the price levels. However, prices and price models do vary substantially between providers.

Download Kostner Quarterly Insights

Download the report to get data on public cloud (Azure, AWS) usage:

… and our comments on “How to use the data”.

The three questions leaders care about when discussing cloud costs

If you can’t measure it, you can’t manage it. Hence, reporting on costs is always the first step in cloud cost management.

The challenge is that when you are working with the leadership team, their focus is on managing strategy and growth. Cost management is a necessary evil.

Your success depends on the leadership team having to spend as little time as possible on the budget, and they are looking to get an affirmative answer to these questions:

Are we in control of our total spend?
If no, can you solve the problem in the FinOps (or cloud) team?
If no, (deep sigh) do we need to involve other parts of the organization? And how?

The first “yes” will let them lean back and refocus on growing and developing the business. So what does that mean for what you should include in your management reporting?

What is the core of cloud cost reporting?

Your colleagues have these common elements in their cloud cost dashboard:

The total spending over time and compared to the budget.
Top 5 spenders
Top 5 growth areas
Top 5 savings

The total spending is the main graph to understand if spend is in control. The top 5 spenders and top 5 growth areas are looking for any signs of cost areas that may drive future costs. The top 5 savings are to see if we have made significant savings somewhere that are hiding a general increase in spending – and make sure to highlight your contributions in driving down costs.

You must be prepared for additional questions on any deviations, particularly if you experience any budget issues or your organization is under general cost pressure.

Generally, our recommendation is not to provide more detailed reporting or drill-down functionality for the leadership team. Focus on the high-level dashboard, discussing the numbers and demonstrating your knowledge and ability to find solutions.

The One Question You Must be Able to Answer.

You will eventually run into a budget problem, and the leadership team will look at you and ask question number 2, “Can you solve the problem for us?”.

Going back to the fundamental equation of cloud costs: Total spend = Price * Quantity, you are left with two options to reduce total cost. Either you can reduce the unit prices you pay, or you can reduce the quantity. (see also our recent blog post on how to take control of your cloud costs).

The responsibility for unit prices typically is with you as a FinOps professional. Hence you must be able to credibly answer if you and the team can solve the problem by applying Azure price optimization techniques. If there is untapped potential in price optimization, this is the fastest route.

But if you and the team can’t solve the problem, then what?

We strongly recommend that you have a firm grip on how to demonstrate that you are in control of prices – you don’t want to get the blame for cost overruns.

Decision time – Increase budgets or work with the business?

When you go into the budget review meeting, you already know that the meeting will require the leadership team to make one of two decisions:

Do we increase the budget (or allow an overrun), at least for a while? or
Do we go to the biggest spenders and work with them to reduce their consumption?

If the decision is the latter, get explicit support from the leadership at the meeting, and agree that they communicate it clearly to all stakeholders.

So much on the process, the next question you should consider is what could derail the discussions?

For the meeting and decision process to go as smoothly as possible, you should know which projects or departments you recommend doing a consumption review.

Some pitfalls in cloud cost reporting you are likely aware of

Firstly, let us reiterate how powerful it is to document that you control price optimization. Without this documentation, it is only too easy to point at you to find the solution. (sign-up to get a notification at the bottom of this article – we will be addressing this topic in a separate post)

Besides that, the most common issue in cost discussions is the numbers. To mention a few

Disagreement with Finance about what the cloud spend is in a given month.
There can be many valid reasons for that, i.e., prepaid reservations, derived costs for licensing etc.
Discussions about spend changes even when the consumed quantity is the same. The reason can be that a reservation has run out or has moved to another resource. As billing is per hour, February can seem 10% smaller than January, even if there has been no change in the environment.
Dissatisfaction with the size of non-allocated costs. “Why didn’t WE benefit from reservations”
Concern about derived costs. If you bring your own license (i.e., Azure Hybrid Benefits), the license cost will not appear in your billing – only the lower price for the resource.

We will leave these questions for now and return to them in a later blog post on showback and chargeback.

These pitfalls may appear technical – and they are. However, they lead to genuine discussions about the validity of the numbers. Hence, getting to the right solution will become more challenging and reduce your credibility and impact.

How to get started?

By now, you might have a lot of ideas about what you want to do, what tools to implement, etc. But in the early phases of a cloud journey, where budget is not yet seen as a significant issue, getting funding for cost management tools is not always easy.

We recommend that you start by reporting the monthly cost in a normalized form compared to the normalized budget. It will create awareness about any increase in spending, free from month-length noise, and you can discuss some of the challenges in getting accurate reporting in place.

There are free tools in all cloud portals to help you get started, although these tools do not offer normalized costs. You can read more about the Azure tools in one of our recent blog posts, which links to Azure for additional detail. Read more about AWS Billing and Cost Management on the AWS site.

You will likely soon experience that the monthly reporting becomes a time-consuming effort, and you want a better solution. Then what?

Use Power BI or similar tools to report on cloud costs.

Even though you only present high-level data to the leadership team, you need a firm grip on the underlying data. Otherwise, you cannot answer the leadership team’s questions or present the business with relevant data on what areas they need to reduce consumption.

You must ensure that all internal reporting is consistent from top to bottom, and you only do that if you have one consolidated data source.

You can use the same Power BI tool to:

Produce Management Reporting
Investigate variances
Make custom reports
Create chargeback files for your ERP-system
Produce showback reports with drill down to your internal customers
And much, much more

The data you need is your cloud detailed billing data (read how to get data for your finops), your hierarchies for reporting, and any derived costs you want to include. We recommend you review options for third-party tools – it is not entirely trivial to build something like this yourself.

Want additional resources on cloud cost management?

Over the coming weeks, we will be issuing a handful of blog posts going into more detail about FinOps core disciplines, roles and responsibilities, and how to create a roadmap for your FinOps journey.

If you want an alert when a new post is out, leave us your name and e-mail below. You can also join our free live webinars or book a meeting if you want to discuss your specific issues with one of our experts.

All the best on your FinOps Journey.