With different teams having different cloud requirements and ever-running AWS billing, it becomes highly crucial to establish accountability for efficient financial management. That’s where cloud cost allocation comes into play. It helps you not only to establish accountability but also to ensure that none of your AWS spending is getting wasted either through underutilized or idle resources.

This blog will help you understand what cloud cost allocation is and why it is an unavoidable aspect of your business. Read through!

What Is Cloud Cost Allocation?

Cloud cost allocation is the process of distributing the expenses associated with using cloud services among different departments, teams, projects, or customers within an organization with the use of structural hierarchies, tags, and labels. It involves identifying and assigning the costs incurred for using various cloud resources such as computing, storage, networking, and other services to specific users or groups of users. 

Why Allocating 100% Of The Cloud Cost Is Crucial?

Why Allocating 100% Of The Cloud Cost Is Crucial

Allocating 100% of the cloud cost is crucial because it provides a complete and accurate picture of an organization’s cloud spending and, especially, who is using what! When the cloud costs are not allocated correctly, it can result in inaccurate budgeting, overspending, or underutilization of resources, leading to financial waste and decreased efficiency.

Here are the reasons why cloud cost allocation is essential:

  • Financial Transparency: Cloud cost allocation provides greater financial transparency into cloud usage by accurately identifying and assigning costs to specific projects, departments, environments, or users.
  • Accountability: With cloud cost allocation, costs are clearly attributed to responsible owners, increasing accountability and promoting financial responsibility.
  • Cost Awareness: Cloud cost allocation enables organizations to implement chargeback or showback models, allowing departments or projects to be charged or shown the specific cloud resources they consume, which promotes cost awareness and greater financial responsibility.
  • Cost Optimization: By tracking and allocating costs to specific users, departments, or projects, organizations can identify areas where they can optimize their spending and make informed decisions about resource allocation and utilization, ultimately leading to significant cost savings.

Ways To Allocate Cloud Cost – Showback And Chargeback!

There are two primary ways to allocate cloud costs: Showback and Chargeback.

Ways To Allocate Cloud Cost - Showback And Chargeback
  • Showback is a method of cost allocation where the cost of cloud resources is reported and displayed to users, departments, or projects, but the costs are not actually charged to them. This provides transparency and awareness of the cost of cloud usage, enabling users to understand the financial impact of their actions and make informed decisions about resource utilization.
  • Chargeback, on the other hand, is a method of cost allocation where the actual cost of cloud resources is charged back to users, departments, or projects based on their actual usage. This method enables organizations to assign the costs of cloud resources to the specific users, departments, or projects responsible for incurring them, promoting financial responsibility and accountability.

Both Showback and Chargeback can be effective in managing cloud costs, depending on the needs and goals of the organization. Showback can be helpful in promoting transparency and cost awareness, while Chargeback can incentivize users to make more cost-effective decisions and enable organizations to manage their budgets better.

For a detailed differentiation between the both, you can check out: Chargeback Vs. Showback: The Ultimate Guide!

How Can nOps Help You Add Business Context On Every Dollar Of Your AWS Spend?

How Can nOps Help You Add Business Context On Every Dollar Of Your AWS Spend
How Can nOps Help You Add Business Context On Every Dollar Of Your AWS Spend

nOps Business Contexts gives AWS users the unparalleled ability to access and allocate every dollar of their cloud spend in real time.

What is it?

nOps Business Contexts is a cloud management platform that simplifies AWS infrastructure management by providing visual insights into cloud usage, cost optimization, and cloud cost accountability. To be precise, it helps you allocate every single dollar of AWS spend by handling untagged and miss-tagged resources.

What problems does it solve?

It streamlines Chargeback and Showback tagging by providing you with a centralized platform to create and manage all of your chargeback tags in one place. 

Showback - Creation Modal

nOps helps you combine inconsistent tags for an informed decision. Plus, it’s a lot easier to distribute shared costs proportionately as nOps Business Contexts allocates costs effectively by distributing them using fixed percentages or proportionate weightage that consider varying usage among teams or services.

Your team focuses on innovation, while nOps runs optimization on auto-pilot to help you track, analyze and optimize accordingly! Our customers can benefit in two key ways: 

  • First, pay less for what you use without the financial risk. 
  • Second, use less by automatically pausing idle resources. 

Let us help you save! Sign up for nOps today.