Let’s face it—managing cloud costs can often feel like trying to herd cats: unpredictable and chaotic. But don’t worry, with the right forecasting strategies, you can improve this financial burden into a streamlined budgeting process. Whether you’re a seasoned cloud architect or a finance bod, forecasting AWS costs is crucial for staying ahead of the curve.
Why Should You Care About Forecasting Cloud Costs?
Before we dive into the “how,” let’s answer the question: why should you bother forecasting your AWS cloud costs?
- Avoid Financial Surprises: AWS pricing can fluctuate. Without forecasting, you’re setting yourself up for surprise spikes that can strain your budget. By forecasting, you can plan for the unexpected and minimize financial shock.
- Better Decision Making: Forecasting isn’t just about looking at numbers; it’s about making data-driven decisions. By knowing your expected cloud costs, you can align your resource allocation with business goals, whether scaling up or down.
- Optimize Your Cloud Resources: Understanding your usage trends can help you optimize your resource allocation. The right forecast will guide you in selecting the best instance types and sizes, reducing inefficiencies and cutting unnecessary costs.
How to Forecast AWS Cloud Costs Effectively
Now that we know why forecasting is important, let’s look at the steps you can take to forecast your AWS costs:
- Start with Historical Data
The foundation of any good forecast is historical data. Use tools like AWS Cost Explorer to analyze your previous usage and cost trends. Cost Explorer provides a detailed view of your AWS expenses, breaking them down by service, account, or linked resources. Here’s what you should look for:
- Usage patterns: Identify seasonal trends or recurring spikes in usage.
- Cost drivers: Determine which services or resource types consume the most budget.
- Anomalies: Unexpected spikes might signal misconfigured resources or areas in need of optimization.
By reviewing these trends, you’ll have a better understanding of how your usage translates into costs, helping you predict future expenses more accurately.
- Try Scenario Modelling
Forecasting isn’t just about historical data, it’s also about anticipating what’s coming next. Scenario modeling lets you simulate different business conditions and understand how they might impact your cloud costs. For instance, if you expect a traffic surge due to a marketing campaign, you can model how scaling your infrastructure will affect your AWS spending.
Tools like the AWS Pricing Calculator are great for this. You can plug in different configurations, such as resource types, instance sizes, and storage options, to simulate how different choices will affect your budget.
- Leverage Amazon Forecast for Advanced Predictions
If you need more advanced forecasting, Amazon Forecast can be helpful. This ML powered service takes your historical data and applies sophisticated algorithms to forecast future usage patterns and costs. Amazon Forecast helps you create time series predictions, offering more precise cost estimates as you plan for future growth.
When combined with tools like Amazon QuickSight, which helps with data visualization, Amazon Forecast enables you to not only forecast costs but also make data-backed decisions to optimize AWS usage and maximize savings.
Limitations of Forecasting
Forecasting does not come without its challenges. Here are a few hurdles you might encounter:
- Data Requirements: Amazon Forecast relies heavily on historical data to train its forecasting models, meaning its accuracy directly depends on the quality and completeness of the data you provide. If you have a new product or are expanding into a new market, you may not have sufficient data to rely on, leading to less reliable predictions.
- Lengthy Training Time: Training these models can be resource intensive and time consuming, particularly when handling large datasets. Even with scalable infrastructure, complex forecasting needs may still require significant processing time.
- Limited Customization: While Amazon Forecast offers several effective algorithms, its customization options are limited. If your organization needs specialized forecasting models, you may find the tool restrictive compared to more flexible options offered by some competitors.
- Interpretability: Amazon Forecast excels at accuracy, but it doesn’t always provide clear insights into how it arrived at certain predictions. This lack of transparency can make it difficult for teams to understand the underlying drivers of forecasted costs.
Who Does Cloud Cost Forecasting Help, and How?
Cloud cost forecasting isn’t just a finance or engineering task, it’s a process that benefits a variety of teams across an organization. Here’s how different departments get in on the action, and why they should care:
1. Finance Teams
Finance is often tasked with defending cloud costs to the higher ups, but without a clear understanding of how those numbers were calculated, it becomes a difficult task. Forecasting helps finance teams by:
- Providing a clear, traceable process for generating forecasts, so they can defend the numbers they report with confidence.
- Proactive communication: Finance can now anticipate cost changes, especially after events like marketing campaigns, and let the leadership team know what to expect before the bills start rolling in.
- Defending budget requests: With a solid forecast behind them, finance teams don’t have to say, “I dunno, the engineer gave it to me.” They can back up their numbers with data, making their jobs a lot easier.
2. Engineering Teams
Engineers focus on delivering features and improving systems, not managing cloud costs. Forecasting makes life easier for them by:
- Reducing the burden of constant cost tracking and constant questioning from finance. Engineers can focus on their core tasks while knowing that the cost aspect is being handled.
- Providing visibility into how their choices affect the cloud budget, empowering them to make informed decisions.
- Reducing fatigue: Engineers no longer have to deal with the endless “chasing” around cloud costs, improving relationships with other teams and making their work less stressful (we hope).
3. Procurement Teams
Procurement handles big, multi year deals that come with a lot of risk. If cloud costs aren’t accurately forecasted, those deals can quickly become problematic. Forecasting helps procurement by:
- Improving deal accuracy: When forecasts are based on reliable data, procurement can negotiate contracts that actually reflect real usage patterns and future needs.
- Mitigating risks: A more accurate forecast means fewer surprises in the middle of negotiations, reducing costly adjustments later on.
4. Operations and FinOps Teams
The FinOps team is the bridge between finance and engineering, and forecasting makes their job easier by:
- Improving communication: With accurate forecasts, FinOps can explain cost fluctuations in a way that makes sense to both engineers and finance teams, aligning everyone around the same goals.
- Building trust: Finance gains confidence in the forecast, allowing them to make decisions without second-guessing the data.
- Fostering collaboration: Forecasting helps everyone from finance to engineering to procurement get on the same page, improving cooperation and making the whole process more efficient.
5. Leadership and Executives
Finally, executives and leadership teams benefit from cloud cost forecasting by:
- Gaining better financial visibility: With clear, accurate forecasts, leadership can make informed decisions about scaling and budgeting without the risk of being blindsided by unexpected costs.
- Managing risk: Predictive forecasting helps executives anticipate cost overruns before they happen, enabling them to adjust course ahead of time.
Conclusion & next steps
Effective cloud cost forecasting isn’t just a “nice-to-have”; it’s a necessity. By using tools like AWS Cost Explorer, Pricing Calculator, and Amazon Forecast, you can forecast with accuracy, avoid budget blowouts, and optimize your AWS usage. Sure, there are challenges along the way—complex pricing models, data quality, and inter-team communication. But with the right strategies in place, you’ll be well on your way to making more informed financial decisions.
By forecasting ahead, you’ll save money and ensure your business can grow and scale without the constant worry of spiraling cloud costs. The inability to forecast perfectly often prevents cloud users from making commitments and they end up paying over the odds for cloud. With Strategic Blue, you can still save in the cloud without the need for precise forecasting. Don't let forecasting issues get in the way of making savings, and discover how much you could save here.