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Cost Allocation (Metadata & Hierarchy)

Definition

Cost Allocation is the set of practices to divide up a consolidated invoice or bill among those who are responsible for its various component parts. In the context of FinOps this typically involves dividing up consolidated Cloud Service Provider invoices among various IT groups who use cloud within the organization.

FinOps, itself, is necessary due to the large quantity of billing and usage data provided by cloud providers, and the speed at which it is delivered. Cloud billing and usage data is aggregated into a few data sources, often with millions of lines of data, delivered multiple times per day. Cost Allocation can be a challenge to appropriately divide the total cloud bill among the many parts of an organization who are using it.

Cost Allocation is done through a combination of functional activities primarily focused around the use of a consistent hierarchy of accounts, projects, subscriptions, resource groups and other logical groupings of resources (and the naming of these hierarchical groupings); along with resource-level metadata – tags or labels – applied within the cloud service provider, or by a third party FinOps platform.

Maturity Assessment

WHERE ARE ORGANIZATIONS IN TERMS OF MATURITY

Crawl

56%

Walk

15.9%

Run

28.1%

Those at the highest maturity are allocating more than 90%, where those at Walk maturity are not far behind and allocation above 80% with the remaining cohort at Crawl.

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Crawl

Walk

Run


Functional Activity

As someone in a FinOps Practitioner role, I will…

As someone in a Business/Product role, I will…

As someone in a Finance role, I will…

As someone in an Engineering/Operations role, I will…

As someone in an Executive role, I will…

Measure(s) of Success & KPI

Measures of success are represented in the context of cloud costs and may include one or more key performance indicators ( KPI ), describe objectives with key results ( OKR ), and declare thresholds defining outliers or acceptable variance from forecasted trends.

Inputs

Related Data

2022

Cost Allocation (Metadata and Hierarchy)

The charts shows what respondents can allocate today, they aspire to allocate ~90%, something only ~21% of respondents are currently achieving.

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Related Domains

Featured Resources

Cloud Cost Allocation Guide

Cloud Cost Allocation Guide

Container Cost Allocation Labels and Dictionary

Container Cost Allocation Labels and Dictionary

How to Allocate Shared Services Costs with Google Cloud

How to Allocate Shared Services Costs with Google Cloud

FinOpsPod 06: Cloud Service Attribution, Tags & Labels... OH MY!

FinOpsPod 06: Cloud Service Attribution, Tags & Labels... OH MY!

Capability Assets