COST02-BP01 Develop policies based on your organization requirements - Cost Optimization Pillar

COST02-BP01 Develop policies based on your organization requirements

This best practice was updated with new guidance on July 13th, 2023.

Develop policies that define how resources are managed by your organization and inspect them periodically. Policies should cover the cost aspects of resources and workloads, including creation, modification, and decommissioning over a resource’s lifetime.

Level of risk exposed if this best practice is not established: High

Implementation guidance

Understanding your organization’s costs and drivers is critical for managing your cost and usage effectively and identifying cost reduction opportunities. Organizations typically operate multiple workloads run by multiple teams. These teams can be in different organization units, each with its own revenue stream. The capability to attribute resource costs to the workloads, individual organization, or product owners drives efficient usage behaviour and helps reduce waste. Accurate cost and usage monitoring helps you understand how optimized a workload is, as well as how profitable organization units and products are. This knowledge allows for more informed decision making about where to allocate resources within your organization. Awareness of usage at all levels in the organization is key to driving change, as change in usage drives changes in cost. Consider taking a multi-faceted approach to becoming aware of your usage and expenditures.

The first step in performing governance is to use your organization’s requirements to develop policies for your cloud usage. These policies define how your organization uses the cloud and how resources are managed. Policies should cover all aspects of resources and workloads that relate to cost or usage, including creation, modification, and decommissioning over a resource’s lifetime. Verify that policies and procedures are followed and implemented for any change in a cloud environment. During your IT change management meetings, raise questions to find out the cost impact of planned changes, whether increasing or decreasing, the business justification, and the expected outcome.

Policies should be simple so that they are easily understood and can be implemented effectively throughout the organization. Policies also need to be easy to follow and interpret (so they are used) and specific (no misinterpretation between teams). Moreover, they need to be inspected periodically (like our mechanisms) and updated as customers business conditions or priorities change, which would make the policy outdated.

Start with broad, high-level policies, such as which geographic Region to use or times of the day that resources should be running. Gradually refine the policies for the various organizational units and workloads. Common policies include which services and features can be used (for example, lower performance storage in test and development environments), which types of resources can be used by different groups (for example, the largest size of resource in a development account is medium) and how long these resources will be in use (whether temporary, short term, or for a specific period of time).

Policy example

The following is a sample policy you can review to create your own cloud governance policies, which focus on cost optimization. Make sure you adjust policy based on your organization’s requirements and your stakeholders’ requests.

  • Policy name: Define a clear policy name, such as Resource Optimization and Cost Reduction Policy.

  • Purpose: Explain why this policy should be used and what is the expected outcome. The objective of this policy is to verify that there is a minimum cost required to deploy and run the desired workload to meet business requirements.

  • Scope: Clearly define who should use this policy and when it should be used, such as DevOps X Team to use this policy in us-east customers for X environment (production or non-production).

Policy statement

  1. Select us-east-1or multiple us-east regions based on your workload’s environment and business requirement (development, user acceptance testing, pre-production, or production).

  2. Schedule Amazon EC2 and Amazon RDS instances to run between six in the morning and eight at night (Eastern Standard Time (EST)).

  3. Stop all unused Amazon EC2 instances after eight hours and unused Amazon RDS instances after 24 hours of inactivity.

  4. Terminate all unused Amazon EC2 instances after 24 hours of inactivity in non-production environments. Remind Amazon EC2 instance owner (based on tags) to review their stopped Amazon EC2 instances in production and inform them that their Amazon EC2 instances will be terminated within 72 hours if they are not in use.

  5. Use generic instance family and size such as m5.large and then resize the instance based on CPU and memory utilization using AWS Compute Optimizer.

  6. Prioritize using auto scaling to dynamically adjust the number of running instances based on traffic.

  7. Use spot instances for non-critical workloads.

  8. Review capacity requirements to commit saving plans or reserved instances for predictable workloads and inform Cloud Financial Management Team.

  9. Use Amazon S3 lifecycle policies to move infrequently accessed data to cheaper storage tiers. If no retention policy defined, use Amazon S3 Intelligent Tiering to move objects to archived tier automatically.

  10. Monitor resource utilization and set alarms to trigger scaling events using Amazon CloudWatch.

  11. For each AWS account, use AWS Budgets to set cost and usage budgets for your account based on cost center and business units.

  12. Using AWS Budgets to set cost and usage budgets for your account can help you stay on top of your spending and avoid unexpected bills, allowing you to better control your costs.

Procedure: Provide detailed procedures for implementing this policy or refer to other documents that describe how to implement each policy statement. This section should provide step-by-step instructions for carrying out the policy requirements.

To implement this policy, you can use various third-party tools or AWS Config rules to check for compliance with the policy statement and trigger automated remediation actions using AWS Lambda functions. You can also use AWS Organizations to enforce the policy. Additionally, you should regularly review your resource usage and adjust the policy as necessary to verify that it continues to meet your business needs.

Implementation steps

  • Meet with stakeholders: To develop policies, ask stakeholders (cloud business office, engineers, or functional decision makers for policy enforcement) within your organization to specify their requirements and document them. Take an iterative approach by starting broadly and continually refine down to the smallest units at each step. Team members include those with direct interest in the workload, such as organization units or application owners, as well as supporting groups, such as security and finance teams.

  • Get confirmation: Make sure teams agree on policies who can access and deploy to the AWS Cloud. Make sure they follow your organization’s policies and confirm that their resource creations align with the agreed policies and procedures.

  • Create onboarding training sessions: Ask new organization members to complete onboarding training courses to create cost awareness and organization requirements. They may assume different policies from their previous experience or not think of them at all.

  • Define locations for your workload: Define where your workload operates, including the country and the area within the country. This information is used for mapping to AWS Regions and Availability Zones.

  • Define and group services and resources: Define the services that the workloads require. For each service, specify the types, the size, and the number of resources required. Define groups for the resources by function, such as application servers or database storage. Resources can belong to multiple groups.

  • Define and group the users by function: Define the users that interact with the workload, focusing on what they do and how they use the workload, not on who they are or their position in the organization. Group similar users or functions together. You can use the AWS managed policies as a guide.

  • Define the actions: Using the locations, resources, and users identified previously, define the actions that are required by each to achieve the workload outcomes over its life time (development, operation, and decommission). Identify the actions based on the groups, not the individual elements in the groups, in each location. Start broadly with read or write, then refine down to specific actions to each service.

  • Define the review period: Workloads and organizational requirements can change over time. Define the workload review schedule to ensure it remains aligned with organizational priorities.

  • Document the policies: Verify the policies that have been defined are accessible as required by your organization. These policies are used to implement, maintain, and audit access of your environments.


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