4 questions to consider when starting your CFM journey

When starting your CFM practice, it’s easy to feel overwhelmed, or like you’re already behind the curve. You’re not alone.  To help, we’ve answered the top 4 questions we hear from customers when they’re first getting started so you can kickstart your Cloud Financial Management journey with confidence.

Is there a particular order that you should implement the Cloud Financial Management principles?  

No, it’s not linear. It’s about what’s most important relative to where you are right now. What issue is causing you trouble? Start there. Figure out what problem you’re having and then align against the right principle. For example, customers can come through with questions about Savings Plans. They aren’t sure what to do first. They ask: “Should I buy Savings Plans? Should I do right sizing and make sure that everything is ready to go for the long term?” And the answer is… it depends. You should look to simplify implementation and maximize impact by asking yourself, what can you actually do today?

In one example, a company that had 500 accounts with multi-tier architectures, bought a Savings Plan in a small amount (that they could attribute to a steady workload) to look at potential cost savings. While this purchase was a blip in the big picture, it presented a clear picture, nonetheless. It let them see what it looked like in their AWS Cost and Usage Report (CUR), what kind of resource the Savings Plan covered, and what recommendations could be made to management regarding upfront purchases to cover the workload and save. In this case, the savings led to cost visibility, which led to planning, wherein they used the AWS Pricing Calculator to estimate what additional purchases might look like in the long run. And then this fed into managing and tracking spend across their budget.

This is one example of one customer. The CFM principles of See, Save, Run, and Plan are all vital to ensuring your cloud cost management strategy is comprehensively effective and scalable. But, you get to decide how to apply them. Optimizing can lead to saving, as much as saving can lead to optimizing. Start with a clear understanding of what your business priorities are in the future, and then decide what you can do to support them now.

How should I create a budget for my account If I don’t know what I’m spending?

This, too, really does depend on use case. We generally recommend using the auto-adjusting budgets feature in AWS Budgets, which dynamically sets your budget amount based on historical cost or usage over a time range that you specify. This reduces the guesswork in setting a budget limit and keeps you updated as your spend patterns change. Six months is a good starting point, particularly if you don’t have any previous context. So, if you don’t know what your budget will look like going forward, then you can take the average and compare it to what you were previously spending. This will give you a better sense of what guardrails you need to put in place, and how high your thresholds need to be at the same time.

The other thing with budgets is that once you start setting and reviewing them regularly, you get better. The earlier you start, the better you’re going to be six months down the line. So, if you put things off waiting for perfection, you end up losing the valuable learning experience of looking at your budget on a regular basis.

We also see anomaly detection as a necessary complement to budgeting. You can set multiple alerts per month with AWS Cost Anomaly Detection (CAD), so you get the improved planning and cost control of Budgets, alongside anomaly detection and root cause analysis. One thing to mention, is that even if it’s not a priority and you can’t monitor CAD, we suggest you at least turn it on. That way, if you ever see a spike, change, or dip, it’ll be available to use as a valuable investigation/analysis tool.

Any advice on how I can use automation to better manage and control spend?

First off, think of automation as a way to prevent cost shock while instilling organizational cost awareness. We were just talking about setting up Budgets and Cost Anomaly Detection alerts.

With these tools activated, your business leaders don’t have to be hands-on in the console. Automated emails can be set up, allowing them to see where they are on a daily basis. Another way to get this type of automated visibility is through the Amazon QuickSight dashboards. It gets updated on a daily basis and is customizable, so you can decide what data is most important to see based on your business needs.

Infrastructure as code is also a key part of Run. Building using automated methods means you lower the risk of idle resources, increases speed to change when it comes to rightsizing resource and generally speeds up deployments as you can re-use scripts across an organization. Having re-usable scripts also means you can implement best practices seamlessly. For example, having required tags as a parameter, using gp3 for EBS and using Graviton for managed services.

What do you think is the best tool to get started to help visualize your cost?

The fastest and simplest way to get started seeing your costs is with Cost Explorer. You’ll see a running theme across these CFM pillars: you have the power to decide what, where, and how you use the tools available to you. However, we recommend starting with visual tools that don’t require deep technical proficiency.

Sometimes the hardest part about cost visibility isn’t the data source, it’s getting used to the terminology, and the multitude of options there are to visualize data. You want to make sure to create a baseline of understanding with the tools you’re using to enable organizational cost allocation and cost ownership. Cost Explorer is ideal for this when you’re just starting out. When you or someone in your business requires deeper understanding and analysis, we suggest looking at your CUR. For instance, if a customer notices an abnormal spike in Amazon EKS spend over the past few weeks, they can run a query in their CUR to analyze the spend. Then, if you want to build and visualize customized analysis and control who has access to this data, you can use Quicksight dashboards.

Every time you use a tool for a specific use case, you are building a learning library of experience that can help establish proficiency and best practice, evidenced by reports that can be saved, shared, and updated to reflect current data. You can then build upon your previous work instead of having to start over from square one every time.

Conclusion

Make sure you know what your business priorities are and what’s expected of you to support them. No matter where you begin, each pillar leads into another, until you’ve eventually created a CFM practice that maximizes the achievable business value of operating in the cloud.

📺WATCH: We take you through each of the four AWS CFM principles: See, Save, Plan, and Run using an example optimization (using Graviton) to shed light on the framework for how you should think about each CFM pillar and layer tooling into your strategy.