COST01-BP01 Establish ownership of cost optimization
Create a team (Cloud Business Office, Cloud Center of Excellence, or FinOps team) that is responsible for establishing and maintaining cost awareness across your organization. The owner of cost optimization can be an individual or a team (requires people from finance, technology, and business teams) that understands the entire organization and cloud finance.
Level of risk exposed if this best practice is not established: High
Implementation guidance
This is the introduction of a Cloud Business Office (CBO) or Cloud Center of Excellence (CCOE) function or team that is responsible for establishing and maintaining a culture of cost awareness in cloud computing. This function can be an existing individual, a team within your organization, or a new team of key finance, technology, and organization stakeholders from across the organization.
The function (individual or team) prioritizes and spends the required percentage of their time on cost management and cost optimization activities. For a small organization, the function might spend a smaller percentage of time compared to a full-time function for a larger enterprise.
The function requires a multi-disciplinary approach, with capabilities in project management, data science, financial analysis, and software or infrastructure development. They can improve workload efficiency by running cost optimizations within three different ownerships:
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Centralized: Through designated teams such as FinOps team, Cloud Financial Management (CFM) team, Cloud Business Office (CBO), or Cloud Center of Excellence (CCoE), customers can design and implement governance mechanisms and drive best practices company-wide.
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Decentralized: Influencing technology teams to run cost optimizations.
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Hybrid: Combination of both centralized and decentralized teams can work together to run cost optimizations.
The function may be measured against their ability to run and deliver against cost optimization goals (for example, workload efficiency metrics).
You must secure executive sponsorship for this function, which is a key success factor. The sponsor is regarded as a champion for cost efficient cloud consumption, and provides escalation support for the team to ensure that cost optimization activities are treated with the level of priority defined by the organization. Otherwise, guidance can be ignored and cost saving opportunities will not be prioritized. Together, the sponsor and team help your organization consume the cloud efficiently and deliver business value.
If you have the Business, Enterprise-On-Ramp or Enterprise support plan
Implementation steps
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Define key members: All relevant parts of your organization must contribute and be interested in cost management. Common teams within organizations typically include: finance, application or product owners, management, and technical teams (DevOps). Some are engaged full time (finance or technical), while others are engaged periodically as required. Individuals or teams performing CFM need the following set of skills:
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Software development: in the case where scripts and automation are being built out.
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Infrastructure engineering: to deploy scripts, automate processes, and understand how services or resources are provisioned.
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Operations acumen: CFM is about operating on the cloud efficiently by measuring, monitoring, modifying, planning, and scaling efficient use of the cloud.
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Define goals and metrics: The function needs to deliver value to the organization in different ways. These goals are defined and continually evolve as the organization evolves. Common activities include: creating and running education programs on cost optimization across the organization, developing organization-wide standards, such as monitoring and reporting for cost optimization, and setting workload goals on optimization. This function also needs to regularly report to the organization on their cost optimization capability.
You can define value- or cost-based key performance indicators (KPIs). When you define the KPIs, you can calculate expected cost in terms of efficiency and expected business outcome. Value-based KPIs tie cost and usage metrics to business value drivers and help rationalize changes in AWS spend. The first step to deriving value-based KPIs is working together, cross-organizationally, to select and agree upon a standard set of KPIs.
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Establish regular cadence: The group (finance, technology and business teams) should come together regularly to review their goals and metrics. A typical cadence involves reviewing the state of the organization, reviewing any programs currently running, and reviewing overall financial and optimization metrics. Afterwards, key workloads are reported on in greater detail.
During these regular reviews, you can review workload efficiency (cost) and business outcome. For example, a 20% cost increase for a workload may align with increased customer usage. In this case, this 20% cost increase can be interpreted as an investment. These regular cadence calls can help teams to identify value KPIs that provide meaning to the entire organization.
Resources
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