Define guidelines for provisioning of cloud resources

Before we dive into cost control in the provisioning of resources, we need to understand how resource provisioning works in the public cloud. There are lots of different ways to do this, but for this chapter, we will stick with the native provisioning tools that cloud providers offer.

There are basically two types of provisioning:

• Self-provisioning
• Dynamic

Typically, we start with self-provisioning through the portal or web interface of a cloud provider. The customer chooses the resources that are needed in the portal. After confirmation that these resources may be deployed in the cloud environment, the resources are spun up and made available for usage by the provider.

The resources are billed by hour or minute unless there is a contract for reserved instances. Reserved instances are contracted for a longer period—1, 3, or 5 years. The customer is guaranteed availability, capacity, and usage...

Define cost policies for provisioning

In the previous section we learned how to provision resources to clouds. This chapter is about keeping control of costs while provisioning the resources. Let's start with saying that the sky is the limit in these clouds, but unfortunately, most companies do have limits to their budgets. So, we will need to set principles and guidelines and what divisions or developers are allowed to consume in the cloud environments, to avoid budgets being overrun.

Using the Azure pricing calculator

It's easy to get an overview of what a VM would cost us in Azure: the pricing overview on https://azure.microsoft.com/en-us/pricing/calculator/ is a very handy tool for this and, like all the other calculators and estimation tools that we will explore, completely free of charge to use.

If we open the page, we can look at the Virtual Machines tab, as shown in the following screenshot:

Figure 10.4 – The Virtual Machines...

Understanding account hierarchy

It's important to understand from what level enterprise management wants to see costs. Enterprises usually want a full overview of the total spend; hence we need to make sure that they can view that total spend from the top level all the way down to subscriptions that are owned by specific business divisions or even DevOps teams. These divisions or teams might have a full mandate to run their own subscriptions, but at the top level, the enterprise will want to see the costs that these units are accruing at the end of the day.

This starts with the setup of the tenants, the subscriptions, and the accounts in public cloud platforms. This has to be set up following a specific hierarchy. The good news for financial controllers is that these structures in the public cloud closely follow the rules of the Chart of Accounts (COA) hierarchy that is used for financial reporting. This hierarchy has one top level. There can be many accounts...

Understanding license agreements

License agreements are complicated, but in essence, there are three types of agreements to start using services in the public cloud:

• Consumption-based: This is often referred to as the pay-as-you-go model. The enterprise only pays for the actual usage in the public cloud, without any upfront commitment. Cloud providers issue a monthly invoice with the actual consumption of resources. These resources—for example, virtual machines, database instances, and storage units—are charged against the rates that are published on the public portals of the providers.
• Commitment-based: For most enterprises, this is the preferred model. In this case, the enterprise commits to the usage of a specific amount of resources in the cloud for a longer period of time, typically 1, 3, or 5 years. Now, public clouds such as Azure, AWS, and Google Cloud Platform were invented to enable maximum flexibility and agility. If we allow enterprises to have...

Define tagging standards

The major benefit of cloud provisioning is that an organization doesn't need to make large investments in on-premises infrastructure. In the public cloud, it can deploy, and scale resources whenever needed and pay for these resources as long the organization uses it. If it doesn't use the resources, it will not receive an invoice—unless a company has contracted reserved instances.

Another advantage of cloud provisioning is the agility and speed of deployment. Developers can easily deploy resources, within a few minutes. But that's a budget risk at the same time. With on-premises investments, a company knows exactly what the costs will be over a certain period: the investment itself and depreciation are a given. The cloud works differently, but an organization needs to be able to forecast the costs and control them.

A way to do this is by tagging resources. Tags allow a company to organize the resources in its cloud environment in a logical...

Validate and manage billing

It's very likely that a multi-cloud strategy will place several migrated systems into multiple different public clouds. With that, we are generating costs for pay-per-use instances and services, reserved instances for which companies have longer-term obligations, and licenses. Invoices will arrive from different providers. How do we keep track of all that?

Let's have a look first at billing in the major cloud platforms being discussed in this book: Azure, AWS, GCP, Alibaba Cloud and OCI. These platforms share the same billing approach: as soon as services are consumed on the platform, charges will begin to accrue to which the CSPs can send invoices. Typically, this is referred to as the billing account. We will be using the cost or billing dashboards from the clouds to view costs and invoices.

Using cost management and billing in Azure

Azure billing has three types of billing:

• Microsoft Online Services program: Every user...

Validating invoices

Validating invoices has nothing to do with checking whether a cloud provider has charged us the correct amounts. Cloud providers have fully automated this process, so you may rest assured that if you or your company uses a resource in their cloud, it will show up in the bill. Validating invoices is about checking whether invoiced costs correspond with the forecasted usage of your company. Are you on budget or are you overspending? Are there resources on the bill that you aren't using anymore? And if so, why didn't you delete these resources?

Some key decisions will need to be made. These decisions are the same for all clouds covered:

• Will the organization use one or multiple billing accounts? If you want a project manager to be able to validate the costs for a specific project or in a particular environment, then he or she should be granted access to view these costs. As we have seen in the previous section, we can set these privileges granularly in...

Summary

This chapter started with a brief overview of the principles for FinOps: financial operations in cloud or cloud financial management. We studied how we can provision resources to the various clouds and next learned how we can track costs that are related to these resources. Before we can track resources, view the associated costs, and validate invoices, we must understand how cost management works in the clouds. We discussed the cost tools in Azure, AWS, GCP, Alibaba Cloud and OCI. All these providers offer comprehensive toolsets to provision and identify resources from their respective management consoles. However, we must understand some generic principles such as license agreements and tagging.

In this chapter we discussed the foundation of FinOps. In the next chapter we will elaborate on how organizations can implement and develop cloud financial management including the set-up of a FinOps practice, using the FinOps Maturity Model.

Questions

1. If we want to run a trial period in a public cloud, what type of agreement would fit our needs?
2. Cloud providers use different technology to provision resources. What technology do both Alibaba Cloud and OCI use?
3. What is the discount program for large accounts in AWS called?
4. Rate false or true: pricing calculators of cloud providers are free to use.