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The Role of Automation in FinOps: Best Practices for Cloud Cost Management

Ashutosh Behera
By Ashutosh Behera
05 May, 2023

As cloud adoption continues to grow, managing cloud costs has become a critical aspect of financial operations (FinOps) for businesses. One way to effectively reduce cloud costs is through automation. Automation tools can help businesses continuously monitor their cloud usage, identify cost optimization opportunities, and streamline their workflows. In this blog post, we will discuss the role of automation in cloud FinOps and the best practices for cloud cost management.

Continuous Monitoring and Optimization

Cloud services offer many benefits for businesses, including scalability, flexibility, and cost-effectiveness. However, cloud costs can quickly add up, if left unchecked. This is why continuous monitoring and optimization are so important.

By continuously monitoring cloud usage, businesses can identify areas to reduce cloud costs, like over-provisioned resources, underutilized instances, or inefficient storage solutions. Continuous optimization can help businesses maximize their cloud investments by ensuring that resources are allocated appropriately and effectively.

Here are some FinOps best practices for implementing continuous monitoring and optimization for AWS cloud cost management:

  1. Define a Cloud Cost Management Strategy

    A well-defined cloud cost management strategy is essential for effective monitoring and optimization. This strategy should define your cloud usage policies, governance, and cost optimization goals. It should also identify key performance indicators (KPIs) for monitoring cloud costs and provide a framework for implementing continuous monitoring and optimization practices.

  2. Establish a Cost Monitoring and Reporting System

    To effectively monitor cloud costs, businesses need a cost monitoring and reporting system in place. This system should provide visibility into your cloud usage, costs, and resource utilization. It should also enable you to track your KPIs, identify trends, and make informed decisions about resource allocation.

  3. Implement Cloud Cost Optimization Techniques

    Cloud cost optimization techniques can help businesses reduce cloud costs while maximizing their cloud investments. These techniques include rightsizing resources, using spot instances, implementing auto-scaling, and using reserved instances. Continuous optimization can help businesses ensure that these techniques are implemented effectively and consistently.

Tagging and Cost Allocation

In the world of cloud computing, effective cost allocation and chargeback are critical in cloud FinOps to accurately track and manage their cloud spending. This is where tagging and cost allocation comes into play.

Tagging is the process of assigning metadata to cloud resources, such as instances, volumes, and snapshots. This metadata can include information about the resource's purpose, owner, and cost center. By tagging resources, businesses can more accurately track their cloud usage and allocate costs to the appropriate cost centers or business units.

Cost allocation, on the other hand, is the process of attributing costs to specific business units or cost centers. This is typically done to enable chargeback, where businesses charge internal customers or departments for their usage of cloud resources. Effective cost allocation ensures that cloud costs are allocated fairly and accurately and can help businesses identify areas to reduce cloud costs.

Here are some FinOps best practices for tagging and cost allocation for effective cloud cost management

  1. Define a Tagging Strategy

    To effectively tag resources, businesses need a well-defined tagging strategy in place. This strategy should define the tags to be used, the metadata to be included in each tag, and the processes for tagging resources. It should also establish governance around tagging to ensure consistency and accuracy.

  2. Implement Automated Tagging

    Automated tagging can help businesses streamline the tagging process and ensure that resources are consistently and accurately tagged. Automation tools can automatically assign tags to resources based on pre-defined rules and policies, reducing the risk of human error and ensuring that all resources are properly tagged.

  3. Use Tag-Based Cost Allocation

    Tag-based cost allocation enables businesses to allocate costs based on the tags assigned to each resource. This allows for more granular cost allocation and can help cloud FinOps practitioners identify areas to reduce cloud costs. Tag-based cost allocation can be done manually or through automation tools that use tags to allocate costs automatically.

  4. Implement Chargeback

    Chargeback enables businesses to charge internal customers or departments for their usage of cloud resources. To implement chargeback, businesses need a well-defined cost allocation strategy and the ability to track usage and costs by department or cost center. Chargeback can be done manually or through automation tools that provide usage and cost reports by department or cost center.

Alerts and Notifications

Businesses need to manage their cloud spending carefully to ensure they are not overspending on cloud resources. Using Automation Tools is one of the most helpful FinOps best practices that can help provide alerts and notifications when cloud spending exceeds a certain threshold.

Here are some ways automation tools can provide alerts and notifications, especially for AWS cloud cost management:

  1. Threshold-based Alerts

    Automation tools can monitor cloud usage and spending in real-time, and send alerts when spending exceeds a pre-defined threshold. For example, businesses can set a threshold for monthly spending on a particular service, and receive an alert when spending exceeds that threshold. This allows businesses to quickly identify and address any unexpected increases in spending before they become a problem.

  2. Usage-based Alerts

    In addition to threshold-based alerts, automation tools can also provide alerts based on usage patterns. For example, businesses can set alerts for when usage of a particular service spikes unexpectedly or when usage of a service drops below a certain level. These alerts can help businesses identify opportunities to reduce cloud costs by adjusting their usage patterns.

  3. Cost Optimization Alerts

    Automation tools can also provide alerts and notifications for cost optimization opportunities. For example, businesses can receive alerts when they are overprovisioning resources or when they can save money by using a different pricing model. These alerts can help businesses identify areas where they can optimize their cloud spending and reduce costs. (Read more on how to choose the right AWS Service for your business)

  4. Real-Time Notifications

    Automation tools can also provide real-time notifications for critical events, such as instances being stopped or terminated, or when spending on a particular service spike suddenly. These real-time notifications enable businesses to quickly respond to any issues and prevent them from causing further problems.

Workflow Automation

Workflow automation can help streamline AWS cloud cost management and cloud FinOps. Automation tools can automate many of the tasks involved in cloud spend management, including identifying cost optimization opportunities and allocating resources to the right cost centers or business units.

Here are some ways automation tools can be used for workflow automation in cloud cost management and cost optimization:

  1. Automated Cost Allocation

    One of the challenges of cloud cost management is accurately allocating costs to the right cost centers or business units. Automation tools can automate this process by tagging resources with the appropriate cost center or business unit. This ensures that costs are allocated accurately, enabling businesses to track their cloud spending more effectively and make better decisions about where to optimize.

  2. Automated Budget Management

    Automation tools can automate budget management by providing real-time updates on cloud spending and alerts when spending exceeds predefined thresholds. This helps businesses stay within their budget and avoid overspending on cloud resources.

  3. Automated Rightsizing

    Automation tools can analyze cloud usage data and identify opportunities to rightsize resources. Rightsizing involves optimizing resources to ensure they are the right size for the workload they are running. By automating rightsizing, businesses can optimize their cloud resources and reduce cloud costs.

  4. Automated Resource Provisioning and Deprovisioning

    Automation tools can automate the provisioning and de-provisioning of cloud resources based on workload demand. This ensures that resources are only provisioned when they are needed, and are de-provisioned when they are no longer required. This enforces one of the basic concepts of FinOps best practices, allowing businesses to optimize their cloud spending by only paying for resources that they are actively using. (Learn more about Autoscaling best practices)

  5. Automated Purchasing

    Automation tools can automate the purchasing of cloud resources based on predefined policies. For example, businesses can set policies to purchase reserved instances when utilization rates exceed a certain threshold. This helps businesses optimize their cloud spending by taking advantage of cost-saving opportunities.

CloudKeeper helps you implement Workflow Automation using CloudKeeper Auto, an AI-powered automated RI Management platform. The solution automatically buys EC2 resources on-demand, at 3-year Reserved Instance pricing, the highest discount tier for reservations. Notably, the solution does not require any type of volume or term commitment from the user. 

Collaboration

Collaboration between IT, finance, and business teams is critical to successful cloud cost management. Here are some ways effective collaboration between IT, finance, and business teams can help with cloud FinOps:

  1. Aligning Cloud Usage with Business Goals

    Effective collaboration between IT, finance, and business teams can ensure that cloud usage is aligned with business goals. IT teams can work with business teams to understand their requirements, and finance teams can provide insights into the costs associated with those requirements. By collaborating effectively, businesses can ensure that they are using the cloud infrastructure in the most cost-effective way possible.

  2. Establishing Clear Governance Policies

    Effective collaboration between IT, finance, and business teams is essential for establishing clear governance policies. This involves defining roles and responsibilities, establishing policies for cloud usage, and ensuring that everyone is on the same page. This can help businesses reduce cloud costs by ensuring that resources are used efficiently and effectively.

  3. Sharing Insights and Data

    Effective collaboration between IT, finance, and business teams can help businesses gain insights into their cloud usage and identify areas for optimization. IT teams can provide data on usage patterns and costs, while finance teams can provide insights into budgeting and cost allocation. By sharing insights and data, businesses can identify areas for optimization and take action to reduce cloud costs.

  4. Conducting Regular Reviews

    Effective collaboration between IT, finance, and business teams is critical for conducting regular reviews of cloud usage and costs. By working together, teams can identify areas for optimization and make adjustments as needed. This can help businesses avoid unnecessary costs and ensure that they are getting the most value from their cloud FinOps initiatives.

  5. Establishing Effective Communication Channels

    Effective collaboration between IT, finance, and business teams requires effective communication channels. This involves establishing regular meetings, ensuring that everyone is kept up-to-date on changes in cloud usage and costs, and providing feedback on performance. By establishing effective communication channels, businesses can ensure that everyone is on the same page and working towards the same cloud cost management goals.

Conclusion

Automation plays a critical role in AWS cloud cost management. By leveraging automation tools, businesses can continuously monitor their cloud usage, identify cost optimization opportunities, and streamline their workflows. Tagging and cost allocation, alerts and notifications, workflow automation, and collaboration are all important FinOps best practices for cloud cost management. By following these best practices, businesses can effectively reduce cloud costs, improve financial transparency, and optimize their cloud FinOps strategies.

At CloudKeeper, we offer a comprehensive set of Cloud Cost Optimization solutions built on advanced technologies like AI, ML and Automation. Our solutions are designed to help accelerate your end-to-end FinOps strategies and save big on cloud costs.
To know how, book a free demo today!

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