Starting your Cloud Financial Management journey: Cost planning

This is a blog series that was devised to help you get started building a successful CFM plan for your business using the 4 AWS CFM principles as our roadmap: See, Save, Plan, and Run. This is the third blog in our 4-part series, wherein we’ll be covering how you can Plan for the future and anticipate your costs on AWS. Understanding your current costs is the first step to beginning to plan for the future. So, in case you missed it, check out the See blog in this series and make sure you’ve got the tools and data necessary to understand your current run rate.

You’ll want to consider the following areas when mapping out the next (months, year, etc.):

1. Keep an open line of communication between the technical and business stakeholders in your organization; it’s the cornerstone to planning accurately. The more information your technical teams can provide, the more accurate your projections will be.
2. Your forecast and planning exercise will need to consider two different cases: existing workloads and net-new workloads (migrations). Each one has unique considerations to factor into your planning exercise.

Forecasting and planning for existing workloads

1. Work with your technical stakeholders to understand any upcoming initiatives that will impact run rate, spend, or usage patterns and the timelines involved:

• Using more performant offerings such as AWS Graviton Processor, and similar modernization activities, which can bring down cost and change run rate.
• Changing the makeup of your compute portfolio by transitioning workloads to serverless or containers frameworks can change your Amazon EC2 usage patterns. Make sure you’re factoring in any projects and the time they’ll take to complete.
• Moving infrastructure into a full production workload as this could lead to more static cost.

2. Factor in cost optimization initiatives:

• Encouraging all business units to adopt Amazon S3 Intelligent-Tiering or use more Amazon S3 Glacier Deep Archive? Make sure you consider the associated cost reduction in your forecast! (You can use your current usage data and the AWS Pricing Calculator to estimate cost after optimization.)

3. Anticipate and plan for upcoming subscription renewals, especially if your organization uses a purchase option that includes an upfront payment:

• All Upfront or Partial Upfront Savings Plan or Reserved Instance payments can be significant! Remember to include them in your plan for the year/month/etc., if you have an upcoming renewal.

4. Consider organic growth on the platform:

• Take a retroactive look at your spend and usage patterns using tools like AWS Cost Explorer, AWS Cost and Usage Reports, or AWS Cloud Intelligence Dashboard to determine if your workloads are growing on AWS. Work with your technical stakeholders to understand whether or not they anticipate these growth patterns will slow, accelerate, or continue.

Forecasting and planning for net-new workloads

1. Work with your technical teams to understand what the workload will look like when it’s on AWS and the timelines involved:

• Are you planning on a lift and shift? Or rearchitecting as you go? If you don’t know where to start, you may want to build a cost comparison model.

2. AWS Pricing Calculator is your new best friend:

• The Pricing Calculator is a web-based planning tool that you can use to create estimates for your AWS use cases. You can use it to model your solutions before building them, explore the AWS service price points, and review the calculations behind your estimates. That way you can build, save, and iterate on pricing estimates for your anticipated workload.
• If you’ve never used the Pricing Calculator before, you can use the Well- Architected Lab to help you get started.

3. Make sure and consider a few key steps to support success and management of costs during a migration or modernization initiative, including:

• defining success metrics
• improving cost visibility and predictability
• optimize early to save time and money

4. Once you’ve worked with your technical stakeholders, evaluated your existing run rate, and built a map of what the future will look like, it’s time to make sure to set up mechanisms to make sure you stay on track!

• Create and configure AWS Budgets and Budget Alerts that are meaningful to your business. You can trigger budgets on a daily, monthly, quarterly, or annual cadence, and configure them based on all the filters you know and love in Cost Explorer.
• If you’d like to take your Budgets implementation to the next level, check out Budgets Reports for configurable, portfolio-wide reporting, push notifications, and more!

Like every part of CFM, planning is an iterative and ongoing process. After your first planning exercise, make sure to determine the cadence you plan to revisit and revitalize your forecast as you progress on your AWS journey.

Bonus tips: If you’re anticipating growth on AWS, whether it’s due to a migration, peak event, or expansion of your business, make sure you’re ready!

• Confirm that you have a defined account strategy that will support your growth
• Anticipate and request limit increases if needed, especially for newly created AWS accounts
• Consider your capacity needs and provision On Demand Capacity Reservations (ODCRs), if necessary
• Develop a cost monitoring and optimization strategy that fits your needs (more on this when we tackle ‘Run’ next week!)
• Work with your AWS account team, if applicable

📚Explore this blog series to improve your cloud cost forecasting