Perform cost modeling

Performing cost modeling is vital to ensure that your resource selection aligns with both business needs and budgetary constraints. By accurately forecasting costs and usage under different scenarios, organizations can reduce waste and select the most cost-effective combinations of resource type, size, and number.

Best Practices

Conduct Comprehensive Cost Modeling

• Identify all organizational requirements, including specific business objectives, current resource commitments, and performance constraints to tailor your cost modeling.
• Utilize tools such as AWS Pricing Calculator or third-party modeling tools to accurately estimate costs for various resource types and sizes based on your workload needs.
• Benchmark your workload on selected resource sizes under different conditions (e.g., peak vs. off-peak loads) to understand cost implications and performance trade-offs.
• Regularly revisit and update your cost modeling as business requirements evolve or as new resource types and pricing options become available to ensure continued optimization.
• Perform sensitivity analysis to understand how changes in workloads or resource usage can impact costs, allowing you to proactively adjust resource sizes and types.

Implement Monitoring and Alerts

• Set up monitoring tools like AWS CloudWatch to track usage metrics and costs in real-time.
• Establish alerts for when costs exceed predefined thresholds or when resource utilization drops below optimal levels, prompting a review of resource allocation.
• Analyze cost data regularly to identify trends and areas for further cost savings by optimizing resource size and utilization.

Leverage Auto Scaling and Spot Instances

• Utilize AWS Auto Scaling to automatically adjust resource capacity based on actual workload demand, ensuring you are not over-provisioning resources.
• Consider using Spot Instances for non-critical workloads to take advantage of lower pricing while managing potential interruption, further optimizing overall costs.

Questions to ask your team

• Have you effectively identified your organization’s business needs and existing commitments?
• What methods do you use to perform cost modeling of your workloads?
• How often do you benchmark your workloads under different predicted loads?
• Have you compared costs across different resource sizes and types to identify optimal solutions?
• Are there any tools or frameworks you utilize for your cost modeling activities?

Who should be doing this?

Cloud Architect

• Analyze business requirements to determine appropriate resource needs.
• Select optimal resource types and sizes based on workload requirements.
• Conduct cost modeling to project expenses under various scenarios.
• Benchmark workloads to evaluate performance and cost efficiency.

Financial Analyst

• Gather data on existing commitments and analyze financial requirements.
• Develop cost models to predict expenses for different resource configurations.
• Perform cost-benefit analyses to support decision-making processes.
• Collaborate with technical teams to ensure alignment of financial goals with technical capabilities.

DevOps Engineer

• Implement and monitor resource configurations based on cost optimization strategies.
• Adjust resource sizes and types as needed based on performance and cost metrics.
• Collaborate with the cloud architect to ensure best practices for resource utilization are followed.
• Provide feedback on resource performance to inform future cost modeling efforts.

What evidence shows this is happening in your organization?

• Cost Modeling Template: A structured spreadsheet template that organizations can use to input workload requirements, resource types, sizes, and estimated costs, facilitating the modeling of different scenarios to understand cost implications.
• Cost Optimization Report: A comprehensive report summarizing findings from cost modeling activities, including benchmarks of resource performance under various loads, comparisons of cost-efficiency across different configurations, and recommendations for optimal resource selections.
• Cost Modeling Policies: A set of organizational policies guiding teams on how to approach cost modeling for resource selection, including practices for forecasting costs, assessing business workloads, and documenting financial considerations.
• Cost Analysis Dashboard: An interactive dashboard that visualizes key metrics related to cost modeling; showing resource usage, cost trends, and optimization opportunities in real-time to aid decision-making.
• Best Practices Guide for Cost Modeling: A guide detailing the best practices for performing cost modeling, including methodologies for benchmarking workload performance and tips for calculating total cost of ownership for various resource configurations.

Cloud Services

AWS

• AWS Cost Explorer: Provides detailed insights into your cost and usage patterns, enabling you to visualize, understand, and manage your AWS costs effectively.
• AWS Budgets: Allows you to set custom cost and usage budgets that alert you when you exceed your thresholds, helping you keep track of your spending.
• AWS Pricing Calculator: Helps you estimate the cost of using AWS resources so you can make informed decisions on resource selection.

Azure

• Azure Cost Management + Billing: Provides tools for tracking and controlling your Azure spending, helping you analyze costs and optimize your resource usage.
• Azure Pricing Calculator: Allows you to generate estimates for the costs of your Azure resources based on your specific needs and configurations.
• Azure Advisor: Provides recommendations for optimizing your Azure resources, including cost-saving suggestions based on your usage patterns.

Google Cloud Platform

• Google Cloud Pricing Calculator: Enables you to estimate the cost of using Google Cloud services based on your predicted usage, helping you make informed choices.
• Google Cloud Billing Reports: Offers insights into your cloud spending and usage, allowing you to analyze trends and optimize costs effectively.
• Google Cloud Operations Suite: Provides monitoring and logging capabilities that can help identify resource inefficiencies and reduce costs.

Question: How do you meet cost targets when you select resource type, size and number?
Pillar: Cost Optimization (Code: COST)