COST03-BP03 Identify cost attribution categories - AWS Well-Architected Framework

COST03-BP03 Identify cost attribution categories

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. Use those categories to enforce spend accountability, create cost awareness and drive effective consumption behaviors.

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 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. Moreover, allocating cloud spend helps organizations adopt more best practices of centralized cloud governance.

Work with your finance team and other relevant stakeholders to understand the requirements of how costs must be allocated within your organization during your regular cadence calls. 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 stakeholders in your organization, use AWS Cost Categories to group your cost and usage information into meaningful categories in the AWS Cloud, such as cost for a specific project, or AWS accounts for departments or business units. You can create custom categories and map your cost and usage information into these categories based on rules you define using various dimensions such as account, tag, service, or charge type. Once cost categories are set up, you can view your cost and usage information by these categories, which allows your organization to make better strategic and purchasing decisions. These categories are visible in AWS Cost Explorer, AWS Budgets, and AWS Cost and Usage Report as well.

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. 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, AWS services, or charge types. You can then use these categories across multiple products in the AWS Billing and Cost Management and Cost Management console. This includes AWS Cost Explorer, AWS Budgets, AWS Cost and Usage Report, and AWS Cost Anomaly Detection.

As an example, the following diagram displays how to group your costs and usage information in your organization by having multiple teams (cost category), multiple environments (rules), and each environment having multiple resources or assets (dimensions).

Flowchart detailing the relationship between cost and usage within an organization.

Cost and usage organization chart

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. 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.

Implementation steps

  • Define your organization categories: Meet with internal stakeholders and business units to define categories that reflect your organization's structure and requirements. These categories should 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.

  • Define your functional categories: Meet with internal stakeholders and business units 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.

  • Define AWS Cost Categories: Create cost categories to organize your cost and usage information with using AWS Cost Categories and map your AWS cost and usage into meaningful 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 so that you can manage your costs within the categorized structure using AWS Cost Categories.


Related documents:

Related examples: