Governance - Cost Optimization Pillar


In order to manage your costs in the cloud, you must manage your usage through the governance areas below:

Develop Organizational Policies: 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 decommission over the resource’s lifetime.

Policies should be simple so that they are easily understood and can be implemented effectively throughout the organization. Start with broad, high-level policies, such as which geographic Region usage is allowed in, 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/development environments), and which types of resources can be used by different groups (for example, the largest size of resource in a development account is medium).

Develop goals and targets: Develop cost and usage goals and targets for your organization. Goals provide guidance and direction to your organization on expected outcomes. Targets provide specific measurable outcomes to be achieved. An example of a goal is: platform usage should increase significantly, with only a minor (non-linear) increase in cost. An example target is: a 20% increase in platform usage, with less than a 5% increase in costs. Another common goal is that workloads need to be more efficient every 6 months. The accompanying target would be that the cost per output of the workload needs to decrease by 5% every 6 months.

A common goal for cloud workloads is to increase workload efficiency, which is to decrease the cost per business outcome of the workload over time. It is recommended to implement this goal for all workloads, and also set a target such as a 5% increase in efficiency every 6-12 months. This can be achieved in the cloud through building capability in cost optimization, and through the release of new services and service features.

Account structure: AWS has a one-parent-to-many-children account structure that is commonly known as a management account (the parent, formerly payer) account-member (the child, formerly linked) account. A best practice is to always have at least one management account with one member account, regardless of your organization size or usage. All workload resources should reside only within member accounts.

There is no one-size-fits-all answer for how many AWS accounts you should have. Assess your current and future operational and cost models to ensure that the structure of your AWS accounts reflects your organization’s goals. Some companies create multiple AWS accounts for business reasons, for example:

  • Administrative and/or fiscal and billing isolation is required between organization units, cost centers, or specific workloads.

  • AWS service limits are set to be specific to particular workloads.

  • There is a requirement for isolation and separation between workloads and resources.

Within AWS Organizations, consolidated billing creates the construct between one or more member accounts and the management account. Member accounts allow you to isolate and distinguish your cost and usage by groups. A common practice is to have separate member accounts for each organization unit (such as finance, marketing, and sales), or for each environment lifecycle (such as development, testing and production), or for each workload (workload a, b, and c), and then aggregate these linked accounts using consolidated billing.

Consolidated billing allows you to consolidate payment for multiple member AWS accounts under a single management account, while still providing visibility for each linked account’s activity. As costs and usage are aggregated in the management account, this allows you to maximize your service volume discounts, and maximize the use of your commitment discounts (Savings Plans and Reserved Instances) to achieve the highest discounts.

AWS Control Tower can quickly set up and configure multiple AWS accounts, ensuring that governance is aligned with your organization’s requirements.

Organizational Groups and Roles: After you develop policies, you can create logical groups and roles of users within your organization. This allows you to assign permissions and control usage. Begin with high-level groupings of people, typically this aligns with organizational units and job roles (for example, systems administrator in the IT Department, or Financial controller). The groups join people that do similar tasks and need similar access. Roles define what a group must do. For example, a systems administrator in IT requires access to create all resources, but an analytics team member only needs to create analytics resources.

Controls — Notifications: A common first step in implementing cost controls is to setup notifications when cost or usage events occur outside of the policies. This enables you to act quickly and verify if corrective action is required, without restricting or negatively impacting workloads or new activity. After you know the workload and environment limits, you can enforce governance. In AWS, notifications are conducted with AWS Budgets, which allows you to define a monthly budget for your AWS costs, usage, and commitment discounts (Savings Plans and Reserved Instances). You can create budgets at an aggregate cost level (for example, all costs), or at a more granular level where you include only specific dimensions such as linked accounts, services, tags, or Availability Zones. You can also attach email notifications to your budgets, which will trigger when current or forecasted costs or usage exceeds a defined percentage threshold.

Controls — Enforcement: As a second step, you can enforce governance policies in AWS through AWS Identity and Access Management (IAM), and AWS Organizations Service Control Policies (SCP). IAM allows you to securely manage access to AWS services and resources. Using IAM, you can control who can create and manage AWS resources, the type of resources that can be created, and where they can be created. This minimizes the creation of resources that are not required. Use the roles and groups created previously, and assign IAM policies to enforce the correct usage. SCP offers central control over the maximum available permissions for all accounts in your organization, ensuring that your accounts stay within your access control guidelines. SCPs are available only in an organization that has all features enabled, and you can configure the SCPs to either deny or allow actions for member accounts by default. Refer to the Well-Architected Security Pillar whitepaper for more details on implementing access management.

Controls — Service Quotas: Governance can also be implemented through management of Service Quotas. By ensuring Service Quotas are set with minimum overhead and accurately maintained, you can minimize resource creation outside of your organization’s requirements. To achieve this, you must understand how quickly your requirements can change, understand projects in progress (both creation and decommission of resources) and factor in how fast quota changes can be implemented. Service Quotas can be used to increase your quotas when required.

AWS Cost Management services are integrated with the AWS Identity and Access Management (IAM) service. You use the IAM service in conjunction with Cost Management services to control access to your financial data and to the AWS tools in the billing console.

Track workload lifecycle: Ensure that you track the entire lifecycle of the workload. This ensures that when workloads or workload components are no longer required, they can be decommissioned or modified. This is especially useful when you release new services or features. The existing workloads and components may appear to be in use, but should be decommissioned to redirect customers to the new service. Notice previous stages of workloads — after a workload is in production, previous environments can be decommissioned or greatly reduced in capacity until they are required again.

AWS provides a number of management and governance services you can use for entity lifecycle tracking. You can use AWS Config or AWS Systems Manager to provide a detailed inventory of your AWS resources and configuration. It is recommended that you integrate with your existing project or asset management systems to keep track of active projects and products within your organization. Combining your current system with the rich set of events and metrics provided by AWS allows you to build a view of significant lifecycle events and proactively manage resources to reduce unnecessary costs.

Refer to the Well-Architected Operational Excellence Pillar whitepaper for more details on implementing entity lifecycle tracking.