Achieve Total Cost of Operation Benefits Using Cloud Computing

  • All teams can help manage costs, and cost optimization should be everyone’s responsibility.
  • By moving to the consumption-based model of the cloud you can increase innovation within the organization.
  • By using dashboards, you can quickly highlight spending habits across your teams.

A core reason organizations adopt a cloud IT infrastructure is to save money. The traditional approach of analyzing Total Cost of Ownership no longer applies when you move to the cloud. Cloud services provide the opportunity for you to use only what you need and pay only for what you use. We refer to this new paradigm as the Total Cost of Operation. You can use Total Cost of Operation (TCO) analysis methodologies to compare the costs of owning a traditional data center with the costs of operating your environment using AWS Cloud services.

To get started, it is critical to understand how to measure value, improve the economics of a migration project, manage migration costs and expectations through large-scale IT transformations, and optimize the cost of operation.

AWS helps lower customer costs through its “pay only for what you use” pricing model. To get started, it is critical to understand how to measure value, improve the economics of a migration project, manage migration costs and expectations through large-scale IT transformations, and optimize the cost of operation.

Create a Culture of Cost Management

All teams can help manage costs, and cost optimization should be everyone’s responsibility. There are many variables that affect cost, with different levers that can be pulled to drive operational excellence. By using resources like the AWS Trusted Advisor dashboard and the AWS Billing Cost Explorer tool, you can get real-time feedback on costs and usage that puts you on the road to operational excellence.

  • Put data in the hands of everyone – This reduces the feedback loop between the information/data and the action that is required to correct usage and sizing issues.
  • Enact policies and evangelize – Define and implement best practices to drive operational excellence.
  • Spend time training – Educate staff on the items that affect cost and the steps they can take to eliminate waste.
  • Create incentives for good behavior – Have friendly competitions across teams to encourage cost efficiencies throughout the organization.

Although everyone shares the ownership of cost optimization, someone should be tasked with cost optimization as a primary responsibility. Typically, this is someone from either the finance or IT department who is responsible for ensuring that cost controls are monitored so that business goals can be met. The “cost optimization engineer” makes sure that the organization is positioned to derive optimal value out of the decision to adopt AWS.

Driving Cost Optimization

By moving to the consumption-based model of the cloud you can increase innovation within the organization. However, one of the biggest challenges of the consumption-based model is the lack of predictability.

You need to balance agility and innovation against cost. As multiple teams spin up instances to test new ideas, it is important to control and optimize AWS spending as cloud usage increases.

You need to balance agility and innovation against cost. As multiple teams spin up instances to test new ideas, it is important to control and optimize AWS spending as cloud usage increases. Don’t target cost savings as the end goal. Instead, optimize spending by focusing on business growth opportunities that can result from innovative ideas. The following table contrasts the traditional funding model against the cloud funding model.

Give stakeholders access to your spending fundamentals. The data is there. Share it. By using dashboards, you can quickly highlight spending habits across your teams.

  • Actively manage workloads. Turn services on and off as needed rather than running them 24/7.
  • Eliminate surprises. Provide visibility into costs by making dashboard review a daily habit.
  • Make cost optimization a joint effort. Have “spenders” (those spinning up resources) work closely with “watchers” (finance and leadership who can track to business goals).
  • Allocate charges (or show departmental usage) to organizations actually using services. This provides insight into each group’s impact on business goals.
  • Savings. Know who uses services and how they use services. To select the best rate, evaluate pricing options that best meet the workload.
  • Tie spending to business metrics. Determine what gets measured, track usage, and identify areas for improvement.
  • Use innovative approaches to optimize spend. Consider policies such as “default off” for test and dev environments as opposed to 24/7 or even “on during business hours.”

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