28th February 2024

AWS FinOps: Best Practices for AWS Cost Management

As many businesses migrate their operations to the cloud, effective cloud cost management and spending optimization are becoming their growing concern. In this context, companies should consider adopting FinOps practices for expense optimization and promoting financial accountability and control.

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AWS FinOps: Best Practices for AWS Cost Management
Financial management

As many businesses migrate their operations to the cloud, effective cloud cost management and spending optimization are becoming their growing concern. In this context, companies should consider adopting FinOps practices for expense optimization and promoting financial accountability and control.

As a leading cloud service provider, AWS offers an extensive selection of tools and services that can significantly improve how companies manage and optimize their cloud costs. In this article, our AWS consultants share the best practices for cost management in the AWS ecosystem guided by FinOps principles.

FinOps and its importance for cloud cost management

FinOps, or Financial Operations, is a strategic approach and financial management practice that creates a culture of cloud cost transparency and optimization in an organization. FinOps promotes collaboration between finance, operations, and development teams, enabling them to make informed decisions about cloud spending.

The FinOps framework is centered around several core principles that guide organizations in managing their cloud spending, which are:

  • Collaboration across teams
  • Value-driven decision-making
  • Ownership and accountability,
  • Data accessibility
  • Continuous optimization
  • Transparency in cloud spending

By adhering to these principles, organizations can reduce cloud spending, enhance operational efficiency, and drive strategic value from their cloud investments.

Best practices for implementing FinOps in AWS

AWS FinOps is a set of proprietary tools and practices to help organizations using AWS hosting or services to get full visibility into their expenses, make well-informed decisions about cloud investments, optimize resource utilization, and effectively manage cloud expenditures.

Implement tools for expense and resource usage monitoring

Companies need to meticulously monitor their spending to keep cloud expenses under control and promote responsible usage of resources within the AWS cloud environment. Fortunately, AWS provides tools designed to provide insights into cloud expenditure and cloud usage.

AWS Cost Explorer is an essential solution in the AWS FinOps toolkit. It provides an intuitive interface where users can visualize, understand, and monitor their AWS costs and usage data through custom reports. Cost Explorer also lets you view historical data, forecast future expenses, and identify trends for better cost-saving decisions. With the help of Cost Explorer, organizations can drill down into the specifics of their AWS expenditure, categorize spending by service, location, or AWS resources, and uncover opportunities for cost optimization.

Keep an accurate budget

AWS Budgets is another essential tool for monitoring AWS spending and improving financial planning. It allows organizations to set custom budgets and get real-time alerts via email or SMS when their costs or usage approach or exceed predefined thresholds. AWS Budgets can be configured for various use cases, including cost control or usage optimization, helping departments and project teams stay within their financial limits. Thus, by setting and monitoring their AWS budgets, organizations can avoid overspending and encourage teams to take ownership of cloud costs.

Implement resources tagging

Tagging AWS resources, such as project codes, environment types, or business units, with relevant metadata facilitates a more granular tracking of cloud costs. Assigning cost allocation tags allows organizations to monitor the costs and usage of their AWS resources, as well as perform chargebacks or showbacks using the detailed cost data from tagged resources, and make informed decisions about resource utilization. Organizations can use the AWS Management Console to manage tags, as well as use tags in conjunction with tools like AWS Cost Explorer and AWS Budgets to enhance cost management and accountability for their cloud expenditure. Effective tagging ensures that every dollar spent in the cloud can be traced, helping teams manage their resources more responsibly and align their spending with strategic business goals.

Strategize financial planning and forecasting

Amazon Forecast applies machine learning to provide predictive cost analysis, offering a long-term cloud spending projection. By analyzing historical cost and usage data, Amazon Forecast can predict future spending trends, helping organizations anticipate upcoming expenses and plan for them. This predictive capability is highly valuable for long-term financial planning, as it allows companies to identify potential cost spikes or opportunities for savings before they occur. With Amazon Forecast, businesses can refine their cloud budgeting strategies based on accurate spending predictions and allocate resources more efficiently.

Optimize resource utilization

Another tool available with AWS is Trusted Advisor, which acts as a personal cloud consultant by guiding organizations through maximizing resource efficiency and utilization. This tool provides insights into potential monthly savings together with cost optimization recommendations for underutilized resources. In addition to cost optimization, Amazon Trusted Advisor generates recommendations in such categories as application security, fault tolerance, and performance.

Set up automatic scaling of AWS resources

AWS Auto Scaling ensures that you have the right number of resources available to handle your application’s workload, automatically adjusting them to maintain steady, predictable performance at the lowest possible cost. It can scale resources, such as Amazon EC2 instances, Amazon ECS containers, Amazon DynamoDB tables and indexes, and Amazon Aurora Replicas, across multiple services in response to real-time demand, ensuring optimal performance without manual intervention.

By dynamically adjusting resource levels, AWS Auto Scaling helps organizations avoid over-provisioning — which leads to higher costs, and under-provisioning — which can degrade performance and user experience. This tool is essential for organizations looking to automate their scalability and ensure they only pay for the resources they need and when they need them.

Aim for continuous cost optimization

The AWS Well-Architected Framework provides a comprehensive set of guidelines for designing reliable, secure, efficient, and cost-effective systems for the cloud. The Cost Optimization pillar, one of the pillars of the AWS Well-Architectured Framework, helps organizations avoid unnecessary expenses. Businesses can identify significant cost-saving opportunities by following the pillar’s best practices, such as choosing appropriate pricing models, monitoring usage, and eliminating idle resources.

The framework also encourages companies to conduct regular workload reviews to identify areas where costs can be reduced without compromising performance or security. This proactive approach to architecture design and maintenance is crucial for long-term cost efficiency in the cloud.

Final thoughts

AWS provides a comprehensive suite of tools for enhanced control over cloud spending, effective management of cloud resources, and creating a culture of continuous improvement and financial accountability. By implementing FinOps principles for cloud financial management in AWS, businesses can adapt to the changing technology environment, optimize their cloud investments, and achieve sustainable growth in the long term.

Categories: Articles, Finance/Wealth Management

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