COST03-BP03 Identify cost attribution categories
| This best practice was updated with new guidance on July 13th, 2023. |
Identify organization categories such as business units, departments, or projects that could be used to allocate cost within your organization to the internal consuming entities so that spend accountability can be enforced and consumption behaviors can be driven effectively.
Level of risk exposed if this best practice is not established: High
Implementation guidance
The process of categorizing costs is crucial in budgeting, accounting, financial reporting, decision making, benchmarking, and project management. By classifying and categorizing expenses, teams can gain a better understanding of the types of costs they will incur throughout their cloud journey, helping teams make informed decisions and manage budgets effectively.
Cloud spend accountability establishes a strong incentive for disciplined demand and cost management. The result is significantly greater cloud cost savings for organizations that allocate most of their cloud spend to consuming business units or teams.
Work with your finance team and other relevant stakeholders to understand the requirements of how costs must be allocated within your organization. Workload costs must be allocated throughout the entire lifecycle, including development, testing, production, and decommissioning. Understand how the costs incurred for learning, staff development, and idea creation are attributed in the organization. This can be helpful to correctly allocate accounts used for this purpose to training and development budgets, instead of generic IT cost budgets.
After defining your cost attribution categories with your stakeholders in your organization,
use AWS Cost Categories
As an example, the following diagram shows you how can you group your costs and usage information in your organization such as having multiple teams (cost category) having multiple environments (rules) and each environment having multiple resources or assets (dimensions).
Cost and usage organization chart.
Implementation steps
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Define your organization categories: Meet with stakeholders to define categories that reflect your organization's structure and requirements. These will directly map to the structure of existing financial categories, such as business unit, budget, cost center, or department. Look at the outcomes the cloud delivers for your business, such as training or education, as these are also organization categories. Multiple categories can be assigned to a resource, and a resource can be in multiple different categories, so define as many categories as needed.
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Define your functional categories: Meet with stakeholders to define categories that reflect the functions that you have within your business. This may be the workload or application names, and the type of environment, such as production, testing, or development. Multiple categories can be assigned to a resource, and a resource can be in multiple different categories, so define as many categories as needed so that you can manage your costs within the categorized structure using AWS Cost Categories.
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Define AWS Cost Categories: You can create cost categories to organize your cost and usage information. Use AWS Cost Categories
to map your AWS costs and usage into meaningful categories. With cost categories, you can organize your costs using a rule-based engine. The rules that you configure organize your costs into categories. Within these rules, you can filter with using multiple dimensions for each category such as specific AWS accounts, specific AWS services, or specific charge types. You can then use these categories across multiple products in the AWS Billing and Cost Management console. This includes AWS Cost Explorer, AWS Budgets, AWS Cost and Usage Report, and AWS Cost Anomaly Detection. You can create groupings of costs using cost categories as well. After you create the cost categories (allowing up to 24 hours after creating a cost category for your usage records to be updated with values), they appear in AWS Cost Explorer , AWS Budgets, AWS Cost and Usage Report, and AWS Cost Anomaly Detection . For example, create cost categories for your business units (DevOps Team), and under each category create multiple rules (rules for each sub category) with multiple dimensions (AWS accounts, cost allocation tags, services or charge type) based on your defined groupings. In AWS Cost Explorer and AWS Budgets, a cost category appears as an additional billing dimension. You can use this to filter for the specific cost category value, or group by the cost category.
Resources
Related documents:
Related examples:
