AWS cloud financial management, sometimes simply referred to as FinOps, is a strategic approach to managing and optimizing your cloud costs. It involves using a DevOps-like approach to understand the financial implications of your cloud operations, helping organizations make informed decisions that maximize their savings and ROI.
Cloud computing resources can be spun up or down in seconds, leading to fluctuating costs that can be challenging to predict and manage. AWS cloud financial management is designed to help you navigate the complexities of cloud economics by providing visibility into your cloud spend and helping you understand and allocate costs accurately.
In this primer to cloud financial management for AWS, we look at the key components of Cloud FinOps, discuss its many benefits, and compare the tools and platforms available for engineering, finance, and business teams trying to automate elements of their approach to cloud financial management.
Understanding AWS cloud financial management
Imagine an organization called TechFlow—a digital startup that relies heavily on cloud service providers like AWS. TechFlow uses a variety of AWS services, from Amazon Elastic Compute Cloud (EC2) instances for its web servers to Simple Storage Service (S3) storage to Lambda for serverless computing.
As the business grows, so does its cloud environment, usage, and costs. As cloud costs rise, the finance team struggles to understand how to control and track all of the moving parts. This is where it helps to understand how AWS cloud financial management can help.
Cloud financial management, also called cloud financial operations, is a strategic approach to managing and optimizing cloud resources and costs. It involves fundamental components like:
- Cost visibility: This involves using tools like AWS Cost Explorer to understand where your money is going. Usually, this would mean identifying which services cost the most and which departments or projects drive those costs.
- Cost allocation: AWS provides tagging capabilities that allow you to assign costs to specific departments, projects, or other cost centers. For example, TechFlow could tag each EC2 instance with the project or department that it belongs to.
- Cost optimization: This could involve rightsizing your instances to match your actual usage, purchasing Reserved Instances or Savings Plans for predictable workloads, or taking advantage of spot instances for flexible workloads. For TechFlow, this could mean analyzing their EC2 usage patterns and purchasing AWS Reserved Instances for their steady-state workloads.
- Cost forecasting and budgeting: This can help you budget for your cloud costs and avoid surprises. For instance, this could involve using AWS Cost Forecast to predict their future costs and setting up AWS Budgets to alert them when they’re likely to exceed their budget.
- Governance and compliance: This involves setting up policies and procedures to control your cloud costs and ensure compliance with your organization’s financial policies. For instance, TechFlow could set up IAM policies to control who can spin up new resources and implement a process for reviewing and approving large cloud expenditures.
By implementing cloud financial management best practices within their AWS operations, organizations can gain control over their cloud costs, make more informed decisions about cloud usage, and ensure cloud investments drive more value for their business.
Key benefits of cloud financial management
Implementing cloud financial management best practices not only improves KPIs like Effective Savings Rate (a true measure of the ROI you’re receiving from your cloud spend) but also supports smarter decision-making, improves operational efficiency, and enforces greater organizational accountability.
Let’s explore these benefits to see how cloud financial optimization can drive business value.
Cost optimization and control
One of the greatest benefits of cloud financial management is cloud cost optimization and control. By understanding your cloud usage patterns, teams know where and how to implement rightsizing, what and how many reserved instances to purchase, and whether or not using spot instances is a good idea. Combined, these cost optimization activities can significantly reduce your cloud costs, now and on an ongoing basis.
Additionally, within cloud financial management, it is recommended that cloud teams set up policies and procedures to control who can spin up new resources and services, preventing unnecessary costs.
Increased financial visibility and accountability
Adopting cloud financial management will increase financial visibility and accountability across your engineering, finance, and business teams. By tagging resources and using tools like AWS Cost Explorer, you can see exactly where your money is going, drilling down to the region, resource, service, application, and more. This helps you understand your costs on a granular, single-user level and helps enforce accountability for cloud usage across departments and projects.
Improved budgeting and forecasting
With cloud financial management, you can forecast future costs based on your current usage and trends, leading to improved budgeting and forecasting. This helps you avoid surprises and ensures you have the budget to support your cloud operations.
Enhanced resource allocation and utilization
Finally, cloud financial management can lead to enhanced resource allocation and utilization. By understanding your cloud usage patterns, you can allocate resources more effectively, ensuring you’re not overprovisioning or underutilizing resources. This saves money and ensures your cloud operations are running efficiently.
5 powerful cloud financial management tools
Cloud financial management can be complex. Fortunately, there are powerful tools available that can simplify the process. These tools provide a range of features to help you gain visibility into your AWS cloud computing costs, optimize your cloud usage, and manage your cloud budget effectively.
Below, we’ll take a closer look at five of the most powerful tools available to your business.
ProsperOps is an autonomous cloud platform that optimizes AWS savings. It offers a fully autonomous cost optimization service for AWS that maximizes your savings while minimizing commitment risk with zero ongoing effort.
Schedule your demo today to see how 3 out of 4 customers see at least a 50% increase in savings!
- Fully autonomous savings outcomes: ProsperOps automatically manages and optimizes your AWS compute commitments to help you save more money, reduce risk, and automate your cloud rate optimization.
- Real-time coverage adaptation: The platform adapts in real-time to changes in your cloud usage, ensuring that your discount coverage is always optimized.
- Higher coverage, less risk, more savings: ProsperOps aims to maintain high discount coverage with perfect utilization, leading to more savings and less risk.
- Intuitive dashboard: ProsperOps provides an intuitive dashboard with essential FinOps insights, helping you understand your cloud costs and savings at a glance.
2. AWS Cost Explorer
AWS Cost Explorer is a tool provided by AWS that lets you view and analyze your costs and usage. It has an easy-to-use interface that helps you visualize, understand, and manage your AWS costs and usage over time.
- Ad-hoc cost analysis: AWS Cost Explorer allows you to perform ad-hoc cost analysis, helping you understand your costs in detail.
- Default and custom reports: The tool provides default and custom reports, giving you flexibility in how you analyze your costs.
- Programmatic / API access: AWS Cost Explorer provides programmatic access, allowing you to integrate cost data with your own systems or applications.
- Rightsizing recommendations: The tool provides rightsizing recommendations, helping you optimize your instance usage.
- RI/SP recommendations: AWS Cost Explorer also provides recommendations for Reserved Instances and Savings Plans, helping you save money on your predictable workloads.
Kubecost is a cost-monitoring and management tool for Kubernetes. It provides a comprehensive view of all in-cluster and out-of-cluster cloud spend, enabling accurate showback, chargeback, monitoring, and alerting.
- Cost allocation: Kubecost allows you to see allocated spend across all native Kubernetes concepts, providing transparent, accurate cost data reconciled with your actual cloud bill.
- Unified cost monitoring: The tool provides unified cost monitoring across any major cloud provider or on-prem Kubernetes environment.
- Optimization insights: Kubecost provides optimization insights, helping you identify savings opportunities.
- Alerts and governance: The tool provides alerts and governance features, helping you control your cloud costs and ensure compliance with your financial policies.
CloudZero is a cloud cost intelligence platform that provides visibility into your Kubernetes (k8s) cloud spend, cloud cost allocation, and cloud cost management.
- Visibility that drives action: CloudZero offers comprehensive visibility into your cloud spend, helping you understand where your money is going. It allocates your spend with tags, metadata, telemetry, and more.
- Optimization opportunities: The platform allows you to go beyond discounting to identify inefficient architecture and drive cost savings.
- Measure and control unit costs: CloudZero aligns cost to your business, so you can explain why it’s changing—and whether it’s healthy or not.
- Empower engineers to take action: CloudZero helps engineers see the cost impact of their work, detect overruns, and debug cost issues—triggering automatic alerts during abnormal spend events.
5. AWS Well-Architected
AWS Well-Architected is a set of best practices and strategies provided by AWS to help you optimize your cloud costs. It includes the Cloud Intelligence Dashboards that provide insights into your cloud spend.
- Cost optimization best practices: AWS Well-Architected provides a set of best practices and strategies to help you optimize your cloud costs.
- Cloud intelligence dashboards: The Cloud Intelligence Dashboards provide insights into your cloud spend, helping you understand where your money is going and how to optimize your costs.
- Resource optimization: The platform provides recommendations for optimizing your resource usage, helping you get the most out of your cloud investments.
- Cost forecasting: AWS Well-Architected also provides cost forecasting features, helping you predict future costs and budget accordingly.
Automatically reduce AWS costs with ProsperOps
When it comes to automating your AWS cost management process, you have a few options. Among these tools and platforms, ProsperOps is a fully-automated cloud financial management solution created specifically for AWS.
ProsperOps provides key features such as fully autonomous savings outcomes, real-time coverage adaptation, higher coverage with less risk, and an intuitive dashboard for essential insights.
Want to learn more about how ProsperOps can help reduce cloud costs at your organization by 50% or more? Schedule a free demo with our sales team today!