COST07-BP03 Select third-party agreements with cost-efficient terms
Cost efficient agreements and terms ensure the cost of these services scales with the benefits they provide. Select agreements and pricing that scale when they provide additional benefits to your organization.
Level of risk exposed if this best practice is not established: Medium
Implementation guidance
There are multiple products on the market that can help you manage costs in your cloud environments. They may have some differences in terms of features that depend on customer requirements, such as some focusing on cost governance or cost visibility and others on cost optimization. One key factor for effective cost optimization and governance is using the right tool with necessary features and the right pricing model. These products have different pricing models. Some charge you a certain percentage of your monthly bill, while others charge a percentage of your realized savings. Ideally, you should pay only for what you need.
When you use third-party solutions or services in the cloud, it's important that the pricing structures are aligned to your desired outcomes. Pricing should scale with the outcomes and value it provides. For example, in software that takes a percentage of savings it provides, the more you save (outcome), the more it charges. License agreements where you pay more as your expenses increase might not always be in your best interest for optimizing costs. However, if the vendor offers clear benefits for all parts of your bill, this scaling fee might be justified.
For example, a solution that provides recommendations for Amazon EC2 and charges a percentage of your entire bill can become more expensive if you use other services that provide no benefit. Another example is a managed service that is charged at a percentage of the cost of managed resources. A larger instance size may not necessarily require more management effort, but can be charged more. Verify that these service pricing arrangements include a cost optimization program or features in their service to drive efficiency.
Customers may find these products on the market more advanced or easier to use. You need to consider the cost of these products and think about potential cost optimization outcomes in the long term.
Implementation steps
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Analyze third-party agreements and terms: Review the pricing in third party agreements. Perform modeling for different levels of your usage, and factor in new costs such as new service usage, or increases in current services due to workload growth. Decide if the additional costs provide the required benefits to your business.
Resources
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