Creating a culture of cost management
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The document discusses creating a culture of cost management within organizations, emphasizing the need for widespread cost visibility and efficiency across teams. It outlines a five-stage cost management program that includes cost visibility, departmental allocation, efficiency improvements, savings through reserved instances, and tracking unit costs relative to business metrics. Recommendations include engaging stakeholders, employing best practices, and establishing a cost management group to achieve accountability.
Creating a culture of cost management
- 1. Creating a Culture of Cost Management in Your Organization J.R. Storment, Chief Customer Officer @ Cloudability jr@cloudability.com © 2014 Amazon.com, Inc. and its affiliates. All rights reserved. May not be copied, modified, or distributed in whole or in part without the express consent of Amazon.com, Inc.
- 2. A story of growth! 225 180 135 90 45 0 Dev/Test POC App #1 App #3 App #2 Exec team starts really caring Load test
- 3. Why does this need to be cultural?!
- 4. The cloud is no longer one person’s responsibility…! Engineers Finance Operations Capacity Execs
- 5. How do you build the culture?! • Put data in the hands of the people! • Enact policies and evangelize best practices! • Incentivize good behavior!
- 6. Rolling out a cost management program! • Stage I: Cost visibility for all (emails, alerts, dashboards) • Stage II: Allocating costs to departments (tags, linked accounts) • Stage III: Efficiently using only what you need (underutilized, rightsizing) • Stage IV: Saving by lowering hourly costs (Reserved and Spot Instances) • Stage V: Tying spending to the bottom line (unit cost)
- 7. Allocation Efficiency Visibility Savings Unit Cost
- 8. I. Cost visibility! Allocation Efficiency Visibility Savings Unit cost
- 9. Two types of people Incur costs Watch costs
- 10. Two types of people Incur costs Watch costs
- 11. Two types of people Incur costs Watch costs
- 12. Two types of people Incur costs Watch costs
- 13. Tips for cost visibility • Get each stakeholder the spending fundamentals daily • Let each teams see other teams’ spending habits • Create broadly available dashboards
- 15. Case study: Enterprise with 100s of apps! - Split the detailed billing reports into 750 different views broken down by BUs/applications/environments/etc.! - Daily spending updates ! 800 users get daily emails with just their spending! - Oversight for reporting and control! Execs/finance see the total spending in a simple weekly digest! "Our goal is to put control of AWS resources in each product team’s hands. We want to get out of the way but at the same time we still need oversight to stop overspending.”"
- 16. II. Allocation! Allocation Efficiency Savings Unit cost Visibility
- 17. First, get everyone involved ๏ Multiple major business units ๏ Lots of products or cost centers ๏ Thousands of shared AWS resources ๏ Distributed teams using AWS
- 18. Tools for splitting up resources! • Tags are highly flexible, but 100% coverage is difficult due to compliance • Linked accounts offer clean chargeback but limit reporting options
- 20. Pro-tips: Allocating costs! • Get consensus on the taxonomy (but let Finance drive)! • Define 2–3 mandatory tags like “project” or “environment”! • Consider a “tag or terminate” rule to enforce compliance!
- 21. Case study: The enterprise with 500 linked accounts, ! no oversight, hundreds of influencers! - Split the accounts based on product and environment! - SAP data as source of truth for grouping metadata: ! Cost center, product group, business unit, etc! - Chargeback aligned to finance’s view of the business, ! not just the operational linked account structure!
- 22. III. Efficiency! Allocation Efficiency Savings Unit cost Visibility
- 23. 168 hours in a week
- 24. 108 nights & weekends
- 25. Don’t run the cloud like a data center: ! 65% of the hours in a month ! are nights and weekends!
- 26. Three easy wins for Amazon EC2 efficiency…!
- 27. Turn off underutilized instances! Low CPU, low bandwidth, low disk I/O, >1 day old | This example: Save $1,682 per week
- 29. Find M1s that could be upgraded! 1. Newer instance families are faster & cheaper but have smaller SSDs 2. Look for instances that have Amazon Elastic Block Store (EBS) devices attached and low ephemeral disk access 3. Move M1 to M3 to save $0.03-$0.10 an hour Source: http://aws.amazon.com/ec2/pricing/
- 30. Get alerts when thresholds are crossed!
- 31. Tips for encouraging efficient behavior! • Automate weekly waste reporting to each team! • Gamify clean-up by creating a visible leaderboard! • Do a monthly whole-company waste review! For more check out: “MegaRun: Behind the 156,000 Core HPC Run”
- 32. Case study: High traffic site with decentralized ops! avg hourly node cost ($) x avg node uptime (%) x sq rt inverse of CPU util (%) x avg node running life (hrs) x avg daily unique nodes^1.3 Lots of developers using dev/test instances and forgetting to turn them off! Used Cloudability API data to normalize dev/test environment “health”! Developed an algorithm to determine health/sickness of any dev/test environment! Midge’s law!
- 33. IV. Savings! Allocation Efficiency Savings Unit cost Visibility
- 34. Spot vs. Reserved Instances?! Reservations require no engineering, ! enabling finance to autonomously reduce costs!
- 35. Don’t fear the reservation! • Prices drop, but not fast enough to erode savings! • With usage over 50% three-year RIs always won! Source: http://blog.cloudability.com/cloud-cost-war-shouldnt-stop-buying-reserved-instances/
- 36. Buy based on current hourly data! Don’t wait to buy reservations until you’ve completed the perfect analysis — you’ll waste more money than you save!
- 37. New Reserved Instance Model (as of 12/2/14)! - Dropped Lights and Mediums! - All Reservations now function as Heavy RIs! - Multiple ways to pay for them now (all, partial, no upfront)! - “Partial upfront” is the same as legacy Heavy RIs! - Math and economics essentially the same! For more, check out:! blog.cloudability.com!
- 38. Tips for reservation efficiency! • Appoint a person to own reservation purchases—! often a tech-minded finance person! • Start with an immediate small and uncontroversial buy! • Buy iteratively on a schedule that you hold sacred!
- 39. Case study: Buying for 12,500+ daily instances! 25th of the month:! Central team drives decisions with minimal input from teams! 26th of the month:! Modifications made each month ahead of purchase! 28th of the month:! Purchase based on the current month’s utilization data!
- 40. V. Unit cost! Efficiency Savings Allocation Unit cost Visibility
- 41. Why does unit cost matter? 225 180 135 90 45 0 Dev/Test POC App #1 App #3 App #2 Exec team starts really caring Hiccup
- 42. An increasing bill isn’t necessarily a bad thing 225 180 135 90 45 0 The bill still goes up! Exec team starts really caring Stage III Efficiency Stage IV RIs
- 43. @cloudability Unit cost is cost per X
- 44. @cloudability cost per subscriber cost per pageview cost per customer cost per api call
- 45. Focus on reducing unit cost, even as total cost grows 150 120 90 60 30 0 Unit cost Total cost
- 46. @cloudability Unit cost = total cost / business metric
- 47. @cloudability $1000 / 1000 customers = $1 unit cost
- 48. Case study: Scaled web business pushing unit cost ! • Product owners track unit cost daily tying spending to revenue! • Operations examines infrastructure changes in terms of unit cost impact! • Finance reports monthly & quarterly on margin impacts based on unit cost! • VPs set goals on unit cost and worry less about setting arbitrary total cost goals! Shortcut: Track your AWS bill as a percentage of revenue!
- 49. Getting started on your culture!
- 50. Things to do right after re:Invent! I. Visibility: Give stakeholders a daily view into spending! II. Allocation: Put together a taxonomy with your finance team and start splitting linked accounts and tagging! III. Efficiency: Look at underutilized instances (low CPU + BW + disk) and M1 to M3 candidates (disk access + attached storage)! IV. Hourly savings: Make an immediate small and uncontroversial RI buy! V. Unit cost: Determine your top-line business metric, divide costs by them!
- 51. Start a cost management group ! to share best practices within your company ! and encourage accountability !
- 52. Start a free14-day trial! at cloudability.com!