Cloud Financial Management — The New Focus of the AWS Well-Architected Cost Optimization Pillar

In July, AWS updated the cost optimization pillar of their Well-Architected Framework to focus on cloud financial management. This change is a rightful acknowledgment of the importance of functional ownership and cross-team collaboration in order to optimize public cloud costs.

AWS Well-Architected Framework and the Cost Optimization Pillar

If you use AWS, you are probably familiar with the Well-Architected Framework. This is a guide of best practices to help you understand the impact of the decisions you make while designing and building systems on AWS. AWS Well-Architected allows users to learn best practices for building high-performing, resilient, secure, and efficient infrastructure for their workloads and applications.

This framework is based on five pillars — operational excellence, security, reliability, performance efficiency, and cost optimization. Overall, AWS has done a great job with these particular resources, making them clear and accessible with links to further detail.

The Cost Optimization pillar generally covers principles we have been preaching for a long time: expenditure and usage awareness; choosing cost-effective resources; managing demand and supply resources; and regularly reviewing your environments and architectural decisions for cost.

Now, they have added Cloud Financial Management to this pillar. Cloud Financial Management is a set of activities that enables Finance and Technology organizations to manage, optimize and predict costs as they run workloads on AWS.

Why Do Businesses Need Cloud Financial Management?

Incorporating Cloud Financial Management into an organization’s cost optimization plans allows them to accelerate business value realization and optimize cost, usage and scale to maximize financial success.

This is an important part of the cost optimization pillar as it dedicates resources and time to build capability in specific industries and technology domains. Similar to the other pillars, users need to build capability with different resources, programs, knowledge building, and processes to become a cost-efficient organization.

The first step AWS proposes for CFM is functional ownership. (Further reading: Who Should Manage App Development Costs? and 5 Priorities for the Cloud Center of Excellence).The reason all of this is important is since many organizations are composed of different units that have different priorities, there’s not one standard set of objectives for everyone to follow. By aligning your organization on a set of financial objectives, and providing them with the means to make it happen, organizations will become more efficient. Once an organization is running more efficiently, this will lead to more innovation and the ability to build faster. Not to mention organizations will be more agile and have the means to adjust to any factors.

What You Need to Keep in Mind

When most people think of cost optimization they think of cutting costs — but that’s not exactly what AWS is getting at by adding cloud financial management to their framework. It’s about assigning responsibility; partnering between finance and technology; and creating a cost-aware culture.

In a survey conducted earlier this year by 451 Research, they found that adopting Cloud Financial Management practices doesn’t only lower IT costs. In fact, enterprises that adopted Cloud Financial Management practices also benefited in many other aspects of the organization such as, growing revenue through increased business agility, increasing operational resilience to decrease risk, improved profitability and the potential for increased staff productivity.

Cloud Financial Management increases with cloud maturity, so it’s important to be patient with the process and remember that small changes can have huge impacts and benefits can increase as time goes on.

Amazon provides you with a few services to manage cloud costs such as Cost Explorer, AWS Budgets, AWS Cost and Usage Report (CUR), Reserved Instances Recommendation and Reporting, and EC2 Rightsizing Recommendations. But, it’s important to note that while many CFM tools are free to use, there can be some costs associated with labor to build ongoing use of these tools and continuous organizational processes — it may be in your best interest to look into a tool that can optimize costs on an ongoing basis. Ensure your people and/or tools are able to scale applications to address new demands.

By using the framework to evaluate and implement your cloud financial management practices, you’ll not only achieve cost savings, but more importantly, you’ll see business value increase across operational resilience, staff productivity and business agility.

Originally published at www.parkmycloud.com on August 18, 2020.