January 19, 2024

What is Cloud Cost Observability?

10 min read

What is Cloud Cost Observability?
What is Cloud Cost Observability?
What is Cloud Cost Observability?

What is Cloud Cost Observability? Breaking it down to the basics

With the growing need to gain better understanding of costs in cloud computing, cloud cost observability has become an indispensable asset for organizations striving to leverage the power of the cloud without succumbing to its complexity in costs. This multifaceted approach encompasses:

Insight into cloud spending

By leveraging cloud cost observability platforms, businesses gain a profound understanding of their cloud expenditures. These platforms are instrumental in breaking down costs across various services and resources, rendering them transparent and manageable.

Real-time tracking with cloud cost visibility

Organizations attain the ability to scrutinize their cloud spending as it occurs. This immediate insight ensures that business leaders can make swift, data-driven decisions aimed at enhancing cost efficiency.

Tools for effective cloud cost management

Platforms designed for managing cloud costs provide an array of functionalities. These include meticulous monitoring, stringent control over expenses, and an intelligent allocation of resources — all contributing to enhanced fiscal prudence and optimized resource distribution.

Cloud computing has dramatically accelerated business transformation by offering scalable resources over the internet, and simplifying technology development. Its escalating popularity is attributed to its flexibility, efficiency, and strategic value.

The emergence of cloud cost observability is a direct response to this paradigm shift; it's a practice that not only preserves but also amplifies these benefits by empowering organizations to manage and optimize their cloud-related expenses effectively.

Cloud cost observability can be considered as cost visibility plus layers that give you a complete picture of all costs associated with the multiple aspects of cloud infrastructure. Additionally, it juxtaposes recommendations, alerts, benchmarking and governance policies to ensure streamlined and continuous monitoring, analysis and optimization of the cloud.

  1. Cloud Cost Visibility

    When dealing with costs in cloud computing, cloud cost visibility is essential for businesses to comprehend and govern their cloud spending. C-suite leaders and IT executives require clear insights into their investments to steer the company towards financial efficiency and productivity. This clarity begins with granular reporting.

    1. Granular Reporting

      The Importance of Granular Reporting

      Granular reporting serves as the microscope through which businesses inspect their cloud expenditures. This level of detail allows organizations to:

      • Break down costs by individual resources or services

      • Detect patterns in usage that could indicate inefficiencies

      • Align spending with budgetary goals and business objectives

      Granular Insights Through Tagging

      To achieve a high level of detail in reporting, a unified tagging strategy is paramount. Here are the steps and benefits of implementing such a strategy:

      • Consistency Across Services: Apply a standard set of tags across all cloud resources to ensure uniformity in reporting.

      • Easier Identification: Use tags to categorize resources by department, project, or any other relevant dimension.

      • Enhanced Automation: With standardized tags, automate reports generation for different stakeholders, tailoring information to their needs.

      "Unified tagging not only simplifies data aggregation but also fuels sophisticated analytical tools that sift through complex datasets, providing actionable insights to decision-makers."
      Examples in Action

      Consider a scenario where an organization uses multiple instances across various projects.

      Without granular reporting and tagging:

      “It's challenging to identify which project is driving up costs. Difficulties arise in determining whether expenses are justified by associated revenue or productivity gains.”

      With granular reporting enabled by tagging:

      “Each instance is tagged with project-specific information. Reports reveal which projects have higher-than-expected costs. Teams can analyze these reports to make informed decisions about resource allocation.”

      In essence, granular reporting equipped with a robust tagging strategy provides a clear map of cloud expenditures — illuminating pathways toward more strategic spending and operational excellence.

      Leveraging Tools for Enhanced Reporting

      There are advanced cloud cost observability tools designed to extract detailed reports effortlessly. These platforms offer features like:

      • Customizable dashboards tailored to the unique metrics each business cares about

      • Automated alerts when expenditures exceed predefined thresholds

      • Predictive analytics that help forecast future spending based on historical data

      By adopting such tools, companies not only visualize costs but also predict trends and adapt proactively.

      Granularity: The Pathway to Informed Decisions

      It's not just about collecting data; it's about distilling it into meaningful insights that drive decision-making. Granular reporting ensures that even the minutest cost components are examined — leading to well-informed strategic choices across all levels of an organization.

      This deep dive into cloud spending facilitates discussions among stakeholders about resource utilization, operational planning, and ultimately financial prudence — conversations pivotal for sustaining growth in the competitive landscape of cloud computing.

    2. Centralized Dashboard

      In the age of digital transformation, it's important for C-suite leaders and IT executives to be able to see costs in detail. A centralized dashboard can do this by showing cloud costs in real-time and helping decision-makers make better choices.

      Benefits of a Centralized Dashboard

      Here are some advantages of using a centralized dashboard for cloud cost visibility:

      • Single Comprehensive View: See all your cloud costs and usage in one place. This makes it easy to keep track of spending and resource usage across different services and platforms.

      • Identification of Cost Anomalies: Spot any unexpected increases in usage or costs quickly. This proactive approach helps you manage costs before they become a problem.

      • Real-Time Insights: Get up-to-date information on your cloud costs. This helps you manage resources effectively and make decisions that align with your goals.

      • Cost-Saving Opportunities: Track, monitor, and analyze your cloud spending easily. This visibility allows you to find ways to save money and use resources efficiently.

      Amnic, for example, offers a centralized dashboard that can be tailored to individual user preferences. This customization makes it easier for users to navigate the system, understand their data, extract reports based on parameters that matter the most to them and get valuable insights effortlessly.

  2. Cloud Cost Management

    The process of cloud cost observability doesn't end with gaining visibility. The next step involves Cloud Cost Management - a practice that focuses on analyzing cost data, understanding cloud bills, and implementing financial strategies.

    Analyzing Spend Across Multiple Cloud Providers

    In today's multi-cloud environment, organizations often use services from multiple cloud providers. This diversity offers numerous benefits but can also lead to complexity in tracking and managing costs. A centralized cost management tool can help businesses analyze their spend across different providers systematically, and consequently, identify areas where cost-saving opportunities might exist.

    • Analyzing Spend: By consolidating cost data from various sources in a single place, businesses can perform detailed analysis to understand where their cloud dollars are going.

    • Identifying Opportunities: Detailed analysis helps pinpoint areas of inefficiency or overspending, thus revealing potential opportunities for cost savings.

    Simplified Data Visualization and Real-Time Monitoring

    Traditional spreadsheets or manual tracking methods are often inadequate for the dynamic nature of the cloud environment. Simplified data visualization tools can provide real-time insights into the current state of your cloud expenses.

    • Simplified Data Visualization: Using graphical representations of data simplifies complex information, making it easier to interpret and understand.

    • Real-Time Monitoring: With real-time updates, businesses can detect anomalies or spikes in costs promptly and take immediate corrective actions.

    Empowering the FinOps Team

    Cloud cost management is not just about tracking spending; it's about understanding where and how that spending is happening. It's about uncovering the nuances of cloud bills and applying the principles of unit economics.

    • Understanding Cloud Bills: Each line item on a cloud bill represents a specific resource usage or service cost. Understanding these details can reveal areas of inefficiency or overspending.

    • Unit Economics: This involves evaluating the cost and revenue associated with each unit of service or product, providing insights into the cost-effectiveness of individual resources.

    The complexity of cloud billing models and the dynamic nature of cloud infrastructure necessitate observability in cloud cost management. A dedicated platform can offer this level of insight, enabling organizations to make informed decisions for optimizing their cloud costs.

    Utilizing Cloud Cost Management Tools

    There are numerous tools available that can aid in managing and optimizing cloud costs. These tools offer features such as detailed reporting, budget alerts, and predictive analytics.

    • Managing Spending: Tools allow tracking and analyzing spending across different services and resources.

    • Optimizing Costs: By identifying inefficiencies or overspending areas, these tools provide recommendations for cost optimizations based on performance metrics.

    In essence, effective cloud cost management is about gaining control over your cloud expenditure. It requires understanding the intricacies of your cloud bills, analyzing unit economics, and leveraging the right tools to optimize spending.

  3. Cloud Cost Optimization

    When businesses use the cloud, they gain flexibility and scalability but also face the challenge of managing complex cost structures. To effectively reduce cloud costs, it is essential to achieve cloud cost visibility. This involves understanding how resources such as containers, VMs, storage, compute, memory, and network components contribute to the overall expenses.

    Insights into Usage and Spending Patterns

    By analyzing usage and spending patterns, organizations can uncover inefficiencies within their infrastructure. For example:

    • Examining the deployment of containers can reveal if there are idle instances accruing charges or if container sizes are mismatched with workload demands.

    • An assessment of VM utilization can show if businesses are overspending on over-provisioned machines.

    These insights help identify areas where optimization is possible.

    Identifying Underutilized Resources

    In the context of AWS resources, it's common to find underutilized EC2 instances or excess EBS volumes. By pinpointing these areas, companies can take steps to right-size their infrastructure, ensuring they only pay for what they need.

    Utilize Cloud Cost Observability Platforms

    Platforms like Amnic provide an integrated view across different cloud services and offer tools that help in breaking down cloud spend. Such platforms enable a more proactive approach by setting up alerts for unusual activity or cost spikes. They also facilitate scenario planning to understand the financial impact of changes before they are implemented.

    Resource Allocation Based on Actual Usage Patterns

    Resource allocation should match actual usage rather than speculative needs. Implementing auto-scaling for compute resources ensures that applications have sufficient capacity during peak times while scaling down during quieter periods to save costs. Here are some strategies that can be easily identified using a cloud cost observability platform.

    1. Infrastructure Costs Optimization
      AWS Cost Optimization Strategies
      • Employ Reserved Instances and Savings Plans for predictable workloads.

      • Use Amazon EC2 Spot Instances for flexible workloads that can tolerate interruptions.

      • Optimize storage by choosing the right S3 storage class and regularly cleaning up unused volumes.

      • Automate policies to stop or hibernate idle instances outside business hours.

      GCP Cost Optimization Strategies
      • Take advantage of committed use discounts for sustained use of resources.

      • Use Preemptible VMs for short-lived but high-throughput workloads.

      • Analyze and manage costs with GCP's cost management tools like BigQuery and Cloud Billing Reports.

      Azure Cost Optimization Best Practices
      • Utilize Azure Reserved Virtual Machine Instances for consistent workloads.

      • Implement Azure Hybrid Benefit where applicable for existing Windows Server licenses.

      • Monitor and manage with tools like Azure Cost Management + Billing for insights into consumption patterns.

      Specific Techniques with Examples

      In AWS, a common technique is leveraging a mix of On-Demand and Spot Instances. For instance, a web service could run its baseline load on On-Demand Instances while handling spikes in traffic with Spot Instances, achieving cost savings up to 90% compared to On-Demand pricing.

      With Azure, one might find that using B-series burstable virtual machines is a cost-effective option for workloads that do not require continuous full CPU performance but occasionally need to burst to handle higher workloads.

      For GCP users, employing custom machine types allows precise tailoring of computing resources to workload requirements rather than using predefined machine types with potentially unutilized capacity.

      Applying these strategies requires constant monitoring and adjustment as workloads and business needs evolve. This is a classic instance where Cloud cost observability platforms can play a pivotal role in this ongoing process by providing the necessary analytics and reporting capabilities needed for informed decision-making.

      Cost observability brings teams closer to these optimization practices across different cloud providers, and businesses can ensure they are not only meeting their computational needs but doing so in the most cost-effective manner possible.

Six Core Tenets of Successful Cloud Cost Observability

Complete Understanding of Your Cloud Cost Ecosystem

Leading companies have a precise grasp of their cloud expenditures and their origins. Product and engineering teams meticulously monitor cloud costs across all resources and provide regular reports. Finance and leadership teams use a summarized version of these figures to track the cost of goods sold (COGS) and minimize unnecessary expenses as the customer base expands.

Assigned Responsibility for Specific Cloud Spend

Who is accountable for each dollar spent on cloud infrastructure? Efficient businesses delegate detailed responsibility for cloud expenditures to engineers, teams, product lines, departments, and business units. This approach provides visibility into the performance of product lines based not only on revenue but also on their costs to the business. Leadership can then identify opportunities to reassign engineers to more successful projects and focus on areas that can drive revenue and enhance operational efficiency.

Dedicated Tracking of Optimization Opportunities

A robust product team should include a dedicated function for tracking cost optimization opportunities. This person or team reports on potential savings that could reduce cloud expenditures and ensures that compute or storage resources are not wasted unnecessarily.

Take Action with an Optimization Framework and Roadmap

Implementing a cloud cost optimization framework integrates optimization opportunities into your team’s product roadmap. This allows continuous improvement of infrastructure for scalability and cost-effectiveness without hindering new product innovation. Taking action is crucial, as it involves the team dedicating time and effort to optimize elements like Kubernetes cluster memory usage or AWS compute resources, resulting in positive customer experiences at a lower cloud expense.

Aligned with Your Team’s Budgeting and Forecasting Process

As you monitor cloud costs and optimize your infrastructure, you achieve more reliable financial budgets and forecasts. Anomalous cloud spending becomes less frequent, and your applications continue to operate smoothly. Finance and leadership teams can allocate resources more effectively across the entire business, not just the engineering team. This leads to quicker development of new features, reduced waste in cloud spending, and more opportunities for hiring, sales, and business growth.

Continuous Collaboration and Improvement

Leadership, finance, DevOps, and product teams must work harmoniously within your cloud cost observability framework. Successful organizations recognize this and find ways to eliminate silos, fostering collaboration across teams. This often involves tracking costs in a way that aligns with the terminology and priorities of other business units. While product and engineering teams focus on detailed cloud costs to optimize infrastructure over time, they must also be able to report higher-level expenditures to finance and leadership teams.

Implementing the right cloud cost observability tool

When selecting a cloud cost observability platform, the focus should be on achieving a meaningful return on investment (ROI). The ideal solution provides tangible value by identifying opportunities to reduce costs and by improving operational efficiency. Here are key features to consider:

  1. Real-time Anomaly Detection
    • A robust platform should offer comprehensive anomaly detection capabilities.

    • This feature helps pinpoint unusual spikes in spending, which could indicate inefficiencies or errors.

    • By identifying these anomalies swiftly, businesses can take corrective action to prevent budget overruns.

  2. Proactive Recommendations and Alerts
    • Select tools that deliver proactive recommendations for cost optimization.

    • Automated alerts keep teams informed about potential overspending and encourage immediate adjustments.

    • These features help maintain control over cloud expenditures, ensuring they align with budgetary goals.

  3. ROI Driven Outcomes
    • Assess platforms based on their ability to demonstrate clear ROI.

    • The goal is to see direct cost savings and efficiency improvements as a result of the investment in the tool.

    • An ROI driven approach ensures that the costs associated with the platform are justified by significant financial benefits.

  4. Tangible Value Through Insightful Reporting
    • Look for platforms that clarify your cloud spending through detailed reporting.

    • Insights gained should illuminate paths towards cost reduction and better resource management.

    • It's essential that the data provided translates into actionable strategies for optimizing cloud investments.

  5. Informed Decision-Making
    • A comprehensive cloud cost management tool does more than track expenses; it empowers informed decision-making.

    • Beyond mere observation, it should analyze spending patterns and provide guidance on how to adjust resources effectively.

  6. Actionable Insights for Cost Savings
    • Choose a platform that goes further than monitoring; it must offer insights that lead to real savings.

    • Through analysis of cloud usage data, businesses can uncover inefficiencies and recalibrate their use of cloud resources.

By prioritizing these features in a cloud cost observability tool, organizations can ensure they are equipped to not only monitor but also manage and optimize their cloud expenses efficiently. The right tool will become an invaluable part of an organization's cloud strategy, contributing directly to its financial health and operational success.

The Future of Cloud Cost Observability

In the evolving landscape of cloud computing, the Cloud Cost Observability Platform is anticipated to play a pivotal role in enabling businesses to manage their cloud costs effectively. As organizations continue their migration to the cloud, visibility into spending becomes crucial for maintaining control over budgets and optimizing resource allocation.

Why Cloud Cost Observability Matters

The rapid ascent of public cloud adoption underscores the importance of a robust cloud cost observability platform. With a multitude of services and resources on offer, managing costs in a public cloud environment can be complex. Here, platforms like Amnic come into the picture, offering an innovative approach to cloud cost observability.

Amnic offers:

  • An integrated view of multi-cloud and multi-SaaS expenses

  • Alert systems for anomaly detection

  • Granular views for understanding unit economics

Using such a sophisticated platform empowers organizations with real-time insights into their cloud costs and aids in making informed decisions.

The Rise of FinOps

Emerging trends point towards an increased focus on cloud cost management and observability. For instance, FinOps practices, which blend financial accountability with operations, are being widely adopted. Specialized tools and platforms designed to support these practices are also gaining traction.

FinOps brings together technology, business and finance professionals with the aim of providing better visibility into cloud costs, enabling faster decision-making and promoting a culture of financial accountability. This trend highlights the growing recognition of the need for effective cost management in the dynamic world of cloud computing.

The Power of Specialized Tools

Specialized tools facilitate detailed tracking and analysis of cloud expenditures, providing insights that go beyond what traditional monitoring tools offer. They allow for real-time tracking, anomaly detection, budgeting forecasting, smart tagging attribution - all aimed at maximizing resource efficiency and minimizing unnecessary spending.

Amnic's cloud cost observability platform is a great option for businesses looking to implement a solution in their organization. Using Amnic, teams are equipped to measure, monitor, and rightsize their cloud spends in real-time, creating a continual cycle of optimization.

What sets Amnic apart is its ability to provide an agile view into cloud costs. Here are some quick notes that makes Amnic stand out compared to other products in the ecosystem: 

  • Multi cloud, Multi SaaS : Amnic allows teams to bring multiple cloud platforms and SaaS products under the same view, eliminating the need to toggle between different products. 

  • Built on cloud best practices: By aligning infrastructure based on industry best practices, Amnic guides businesses to reduce their cloud bills by up to 50% within the first month.

  • Save time and resources: Amnic provides views and analytics out of the box that would take FinOps/DevOps teams hours to build and deliver. This puts teams in hotseat, allowing them to focus on higher value tasks as opposed to slicing and dicing views and information 

  • Scaling for unit economics: Beta features on Amnic allow select customers to view their costs at a team, resource, project and feature level delivering unit economics at its truest sense 

Moreover, Amnic's true strength lies in its system to identify alerts and anomalies without teams having to set thresholds. It identifies deviant costs based on industry benchmarks and enables swift grassroots-level corrections.

Incorporating Cloud Cost Observability Into Your Strategy

Incorporating cloud cost observability into your overall cloud strategy is not just an option but a necessity in today's digital world. Leverage available tools and best practices to drive savings without compromising performance or security.

It's also worth mentioning that while cloud cost observability is a powerful approach, it doesn't exist in isolation. Other cost optimization strategies, such as rightsizing resources and leveraging serverless architecture where applicable, should be part of the overall plan.

Get started on your cloud cost observability journey today with Amnic. Visit www.amnic.com or try Amnic for free at app.amnic.com.

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