Mastering Multi Cloud Cost Management
According to a recent study by Gartner, nearly half of organizations with cloud workloads expect to be engaged with three or more public cloud Infrastructure-as-a-Service providers by the end of 2020. As companies increase the number of cloud platforms they use, so they increase the challenge of managing their cloud expenditure.
Effective tagging is an integral part of meeting this challenge, but on its own it’s unlikely to be enough to guide you through the maze. With that in mind, here is a six-step guide to mastering costs in the multicloud.
1. Divide your overall workload into its component parts e.g. projects, products, services
Your first challenge is to work out what exactly it is you need to track. Usually the most pragmatic approach to doing this is to start at a top level, e.g. a project and then divide it up into its component parts going into as much depth as you feel is relevant. In principle, you usually want more detail rather than less, especially since tags are not applied to reports/bills retrospectively, but equally you want to avoid a situation where you’re basically drowning in tags. In other words, apply common sense and remember you can always adjust later.
Remember to document this process thoroughly. You really want to capture not just what you decided, but why you decided it. This could be very useful when it comes to updating tags, which often needs to be done on a fairly regular basis. Capturing your thought process can not only help new staff to get up-to-speed quickly but also help refresh the memories of people who actually were there but have been focusing on other matters since the last meeting.
This could also be a good time to get agreement on who pays for what, although, in some cases, that may only be possible once people get a proper look at the bill(s).
2. Develop a consistent tagging strategy you can use across cloud providers
The previous exercise should show you what you want tagged, your next task is to check the tagging rules of each provider you use and develop a set of tags which you can use on all of them. This means working to the most restrictive specification. Again, try to use consistent terminology and document everything. You should literally be able to take someone who doesn’t know anything about your business, give them a bill and a list of tags and have them work it out without any difficulty whatsoever.
Pro-tip, check very thoroughly to ensure that you have completely eliminated any duplicate tags. If you want to track the same component across different billing items (e.g. projects, products and/or services), then create a tag for each billing item. It’s fine if they’re similar, even if they’re almost identical, but they must never be completely identical.
3. Make sure you keep on top of each cloud provider’s pricing model(s)
All service providers change their prices from time to time, but cloud vendors tend to do so more often than most. This means that you need to make an active effort to keep on top of their pricing model(s) and to understand what they mean for your multi-cloud strategy.
4. As far as possible, normalize billing terms and cycles
Normalizing billing terms can be more of a challenge than it might sound. For example, if you’re using one cloud regularly for predictable workload and another on an ad hoc basis for tasks which can be scheduled with a high degree of flexibility, then common sense would suggest that the most cost-effective approach would be to go for volume/prepayment discounts on the former and aim to use the best spot prices on the latter.
What you can do is use your knowledge of each cloud provider’s pricing model(s) to see what the price would have been if you had used an alternative service. You can also look at what the price would have been had you used a different service and/or pricing option with the same provider.
Normalizing billing cycles is mostly a convenience. The main advantage is that you get the current financial and usage data for all providers at the same time and hence can easily consolidate it and analyse it all at once as opposed to having to do it piecemeal over the course of a month.
If you’ve developed an effective tagging system, you should both be able to see which component part of which billed item is generating which costs and be able to consolidate these costs back to the highest-level item, e.g. your project, product or service, to understand the full cost of the item.
6. Make sure that the right costs are charged to the right cost centers
This involves getting agreement on who pays for what and then developing a process to convert the information from the tags into charging information for your internal billing system (and possibly an external billing system as well).