This whitepaper is for historical reference only. Some content might be outdated and some links might not be available.
# Cloud financial management
** Plan, measure, and optimize your cloud spend. **
Cloud-enabled transformations require operating model adjustments for builders, as well as finance and business stakeholders. [Cloud Financial Management](https://d1.awsstatic.com/executive-insights/en_US/ebook-aws-cloud-financial-management-guide.pdf) (CFM) is part of the new [cloud operating model](https://docs.aws.amazon.com/whitepapers/latest/building-cloud-operating-model/building-cloud-operating-model.html), and consists of cost management best practices spanning technology, people, and process that drive efficient business outcomes.
CFM best practices include [cloud cost planning](https://aws.amazon.com/aws-cost-management/strategic-IT-planning-and-evaluation/), [billing management and cost control](https://aws.amazon.com/aws-cost-management/manage-billing-and-control-cost/), [cost and usage reporting and allocation](https://aws.amazon.com/aws-cost-management/track-and-allocate-your-IT-costs/), as well as [optimization](https://aws.amazon.com/aws-cost-management/aws-cost-optimization/) that organizations use to implement financial governance over cloud and hybrid technology estates. The use of AWS CFM products and AWS Partner Network (APN) CFM solution offerings helps accelerate [cloud value realization](https://pages.awscloud.com/rs/112-TZM-766/images/hackett-group-the-business-value-of-migration-to-aws-012022.pdf), including IT cost reductions, staff productivity, operational resilience, and business agility.
## Start
Start with [Cloud Economics](https://aws.amazon.com/economics/) related upskilling for both technology (builders) and non-technology stakeholders, with a focus on understanding value creation opportunities along your cloud journey. Recommended courses and resources can be found in the [AWS Ramp-Up Guide for Cost Management](https://d1.awsstatic.com/training-and-certification/ramp-up_guides/Ramp-Up_Guide_Cost_Management.pdf). As part of the new operating model for cloud, clarify [financial roles and responsibilities](https://docs.aws.amazon.com/wellarchitected/latest/cost-optimization-pillar/finance-and-technology-partnership.html), and ensure that key stakeholders across your finance, business and technology organizations have a shared understanding of cloud costs.
+ **Plan** - The cost of migrations or new cloud native workloads are modeled using the [AWS Pricing Calculator](https://calculator.aws/#/) or information from AWS service-specific product pricing pages. For existing cloud spend, finance teams rely on historical spend and trend-based [forecasting](https://docs.aws.amazon.com/cost-management/latest/userguide/ce-forecast.html) to plan and set cloud budgets.
+ **Measure** – AWS account structures take into account workload architecture and deployment requirements and the benefits provided by AWS Organizations and [consolidated billing](https://docs.aws.amazon.com/awsaccountbilling/latest/aboutv2/consolidated-billing.html) (such as simplified billing, volume discounts and commitment discount sharing). [Cost allocation models](https://aws.amazon.com/blogs/aws-cloud-financial-management/how-to-design-your-aws-cost-allocation-strategy/) are implemented with account structures and [tagging schemas](https://docs.aws.amazon.com/general/latest/gr/aws_tagging.html) in mind. [Cost allocation tags](https://docs.aws.amazon.com/awsaccountbilling/latest/aboutv2/cost-alloc-tags.html) are applied to resources in order to perform [showbacks](https://en.wikipedia.org/wiki/IT_chargeback_and_showback) (such as cost reporting incurred by a business unit, product, or team). Cloud stakeholders use [AWS Cost Explorer](https://aws.amazon.com/aws-cost-management/aws-cost-explorer/) to report on cost and usage or an [APN CFM solution offering](https://aws.amazon.com/products/management-tools/partner-solutions/?partner-solutions-cards.sort-by=item.additionalFields.partnerNameLower&partner-solutions-cards.sort-order=asc&awsf.partner-solutions-filter-partner-type=*all&awsf.Filter%20Name%3A%20partner-solutions-filter-partner-use-case=*all&awsf.partner-solutions-filter-partner-location=*all) to accelerate the establishment of cost transparency.
+ **Optimize** – AWS spend is optimized using [Savings Plans](https://aws.amazon.com/savingsplans/) and [Reserved Instances](https://aws.amazon.com/aws-cost-management/aws-cost-optimization/reserved-instances/) that do not require cloud resource modifications and deliver immediate cost savings. Commitment [recommendations](https://docs.aws.amazon.com/savingsplans/latest/userguide/sp-recommendations.html) provided by AWS Cost Explorer guide these purchasing decision, typically performed by line of business stakeholders.
CFM best practices are implemented in a decentralized manner, with minimal oversight, governance, automation or programmatic management. Aggregate cloud spend is monitored using [AWS Budgets](https://aws.amazon.com/aws-cost-management/aws-budgets/) and [AWS Cost Anomaly Detection](https://aws.amazon.com/aws-cost-management/aws-cost-anomaly-detection/) in order to identify unexpected cloud budget overages before the monthly cloud bill is delivered. While this decentralization does not impede speed of innovation, cloud cost management may be performed inconsistently and its outcomes are not measured and therefore cannot be improved.
Continuously assess your CFM capabilities to identify opportunities to recognize initiatives that have improved efficiency and created value, as well as opportunities to improve.
## Advance
Upskill your technology (builders) and non-technology stakeholders and decision makers on Cloud Economics topics by completing the [AWS Cloud Financial Management for Builders](https://aws.amazon.com/training/classroom/aws-cloud-financial-management-for-builders/) and/or [AWS Cloud for Finance Professionals](https://aws.amazon.com/training/classroom/aws-cloud-for-finance-professionals/) curriculums. To learn what good CFM looks like, connect with industry peers and experts at [AWS Cloud Financial Management Peer Connect](https://aws.amazon.com/aws-cost-management/cfm-peer-connect/), and read about what distinguishes [top CFM performers from their peers.](https://pages.awscloud.com/rs/112-TZM-766/images/Cloud-Financial-Management-Maximizes-Business-Value-on-Amazon-Web-Services.pdf)
+ **Plan** – Organizations engage with the [AWS Migration Evaluator team](https://aws.amazon.com/migration-evaluator/), AWS Professional Services, or an [AWS Migration and Modernization Competency](https://aws.amazon.com/migration/partner-solutions/?blog-posts-cards.sort-by=item.additionalFields.createdDate&blog-posts-cards.sort-order=desc) partner to build a business case to quantify the cost reductions associated with moving to AWS. In some cases, organizations engage with the [AWS Cloud Economics team](https://aws.amazon.com/economics/) to build business cases that quantify the creation of [business value above and beyond cost savings](https://pages.awscloud.com/CVFWhitepaper_eBook.html). Finance stakeholders responsible for budgeting engage with their technology counterparts to review existing spend and cloud budgets, and solicit inputs that inform more dynamic technology forecasts and budgets.
+ **Measure** – A formal tagging schema is published with inputs from technology, finance, business and security stakeholders, requiring [user-defined tags](https://docs.aws.amazon.com/awsaccountbilling/latest/aboutv2/custom-tags.html) to be applied to cloud resources. [AWS Cost Categories](https://aws.amazon.com/aws-cost-management/aws-cost-categories/), [AWS Billing and Cost Management Conductor](https://aws.amazon.com/aws-cost-management/aws-billing-conductor/), and/or [AWS Application Cost Profiler](https://aws.amazon.com/aws-cost-management/aws-application-cost-profiler/) are used to perform showback-based cost allocations. Stakeholders with more nuanced cost reporting needs [query](https://docs.aws.amazon.com/cur/latest/userguide/cur-query-athena.html) the [AWS Cost and Usage Reports](https://docs.aws.amazon.com/cur/latest/userguide/what-is-cur.html) (CUR) using [Amazon Athena](https://aws.amazon.com/athena/). They also deploy and customize [Quick](https://aws.amazon.com/quicksight/) dashboards, including the [Cost Intelligence Dashboard](https://catalog.us-east-1.prod.workshops.aws/workshops/fd889151-38aa-4fe2-a29d-d5fa557197bb/en-US).
+ **Optimize** – AWS spend optimization takes place through individual teams that use recommendations provided by AWS Cost Explorer (such as [rightsizing recommendations](https://docs.aws.amazon.com/cost-management/latest/userguide/ce-rightsizing.html)), [AWS Compute Optimizer](https://aws.amazon.com/compute-optimizer/), [AWS Trusted Advisor](https://aws.amazon.com/premiumsupport/technology/trusted-advisor/), and [Amazon S3 Analytics](https://docs.aws.amazon.com/AmazonS3/latest/userguide/analytics-storage-class.html) to audit, identify, and suspend/delete unused resources; for example, unattached [Amazon Elastic Block Store](https://docs.aws.amazon.com/AWSEC2/latest/UserGuide/AmazonEBS.html) (Amazon EBS) volumes. [Engineering teams](https://aws.amazon.com/blogs/aws-cloud-financial-management/a-conversation-with-dudas-devops-team/) implement [resource-level optimizations](https://aws.amazon.com/blogs/aws-cloud-financial-management/key-ways-to-start-optimizing-your-aws-cloud-costs/) before commitments are purchased using a centralized purchasing model for the entire organization, increasing purchase accuracy and effectiveness.
Individual teams monitor their own spend through one or more AWS Budgets and AWS Cost Anomaly Detection monitors at the appropriate level of granularity for their needs (total spend by account, or service component). A [centralized function](https://aws.amazon.com/solutions/case-studies/microstrategy-cost-management/) owns the implementation of financial governance and outcome-based reporting (for example, cost savings, increased cloud efficiency, improved productivity) of CFM activities. These improve the consistency with which cloud cost is governed.
## Excel
+ **Plan** – Workload migration scoping includes quantifying both expected cloud costs and expected value creation (such as improvements to staff productivity, operational resilience, and business agility). Value is quantified using [third party benchmark data](https://pages.awscloud.com/rs/112-TZM-766/images/cloud-value-benchmarking-study-quantifies-cloud-adoption-benefits.pdf), or through an engagement with the AWS Cloud Economics team. New born-in-the cloud initiatives undergo cost modeling inclusive of [licensing](https://aws.amazon.com/windows/optimization-and-licensing-assessment/) to inform business profit and loss (P&L) statement. Cloud planning is part of the organization’s overall (cloud and hybrid) [technology financial planning](https://aws.amazon.com/aws-cost-management/strategic-IT-planning-and-evaluation/) process and cloud-service delivery model. Finance and technology stakeholders maintain an [ongoing business partnership](https://docs.aws.amazon.com/wellarchitected/latest/cost-optimization-pillar/finance-and-technology-partnership.html) responsible for developing driver-based technology forecasts with high accuracy, and establishing budgets.
+ **Measure** – AWS account lifecycles are governed using [AWS Organizations APIs](https://docs.aws.amazon.com/organizations/latest/APIReference/Welcome.html) and AWS Control Tower. A [tagging policy](https://docs.aws.amazon.com/organizations/latest/userguide/orgs_manage_policies_tag-policies.html) ensures user-defined tags are applied to cloud resources, and governance ensures non-compliant resources are remediated (for example, tagged, shutdown, or ended). Cost allocation models define how commitment purchases, shared resources (for example, containers, [AWS Support](https://aws.amazon.com/premiumsupport/?nc=sn&loc=0), or other shared resources charges) and untaggable spend is handled.
Finance team members, P&L owners and the organization’s auditors agree on a specific chargeback model for the attribution of cloud spend, which is incorporated into an overall technology cost allocation model inclusive of hybrid technology-related spend (such as infrastructure, labor, and licenses). Cloud stakeholders with cost reporting needs define and track [unit metrics](https://aws.amazon.com/blogs/aws-cloud-financial-management/unit-metric-the-touchstone-of-your-it-planning-and-evaluation/) to [measure cloud efficiency](https://aws.amazon.com/solutions/case-studies/lyft-cost-management/)—for example, cost per [Amazon Elastic Compute Cloud](https://aws.amazon.com/ec2/) (Amazon EC2) hour, and cost per business transaction—as cloud usage continues to grow.
Teams monitor spend using AWS Budgets or [AWS Cost Anomaly Detection](https://aws.amazon.com/aws-cost-management/aws-cost-anomaly-detection/) monitors, and ensure all variances and/or anomalies are actioned through a standard operating procedure including root cause identification, and remediation.
+ **Optimize** – Cloud workloads are Well-Architected and operated in the most cost-effective manner. Cost optimization takes place throughout the cloud development lifecycle, including upfront (during design and architecture stages), and during operation (using an audit-based approach). Cost is traded off against other requirements, and cost-aware architectures are built using Amazon EC2 Spot instances for fault-tolerant applications, [AWS Auto Scaling](https://aws.amazon.com/autoscaling/) for dynamic workloads, and storage tiering for workloads with heterogenous storage needs.
Workload deployments take into consideration [network related costs](https://aws.amazon.com/blogs/aws-cloud-financial-management/cost-allocation-blog-series-4-visualize-data-transfer-costs-with-cost-and-usage-reports-athena-and-quicksight/), and [optimize license usage](https://aws.amazon.com/license-manager/). Commitment lifecycles are managed using a centralized portfolio approach to maximize savings for the entire organization. Once products are running on the cloud, individual teams are responsible for identifying and remediating cloud waste associated with their workloads leveraging recommendations or information provided by AWS Cost Explorer (such as [rightsizing recommendations](https://docs.aws.amazon.com/cost-management/latest/userguide/ce-rightsizing.html)), AWS Compute Optimizer (to optimize Amazon EC2, Amazon EBS, and AWS Lambda usage), AWS Trusted Advisor, and Amazon S3 Analytics. Lifted-and-shifted workloads are modernized using [containers](https://aws.amazon.com/containers/), [serverless](https://aws.amazon.com/serverless/), [managed databases](https://aws.amazon.com/products/databases/), [managed analytics](https://aws.amazon.com/big-data/datalakes-and-analytics/), or new cloud resources such as [AWS Graviton](https://aws.amazon.com/ec2/graviton/).
There exists a programmatic approach for CFM, consisting of centralized responsibilities managed by [a single threaded owner](https://docs.aws.amazon.com/wellarchitected/latest/framework/cost-cfm.html) (for example, an individual, Cloud Operations team, [Cloud Business Office](https://aws.amazon.com/blogs/enterprise-strategy/creating-the-cloud-business-office/), [CFM or FinOps team](https://aws.amazon.com/solutions/case-studies/alert-logic-cost-management/), or [AWS Services Path Partner](https://aws.amazon.com/partners/services-tiers/)). The central function is also responsible for defining and completing a cost management tooling strategy (procurement versus build), defining and deploying [financial guardrails](https://aws.amazon.com/blogs/enterprise-strategy/unshadow-it/) in conjunction with organizational requirements, and implementing mechanisms to [drive organizational cost awareness](https://aws.amazon.com/solutions/case-studies/verisk-cost-management/). Executive sponsorship of the CFM program, and cost-related organizational goals ensure that technology teams prioritize cost alongside feature development, while maintaining agility.