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Managing Shared Cost

Definition

A foundational Principle of FinOps is: “Everyone takes ownership for their cloud usage”. The true key to understanding total cost of ownership is built upon transparency and accuracy, but unallocated shared costs hinders both of these. Without appropriately splitting costs that are shared, engineers and product managers lack a complete picture of how much their products are really costing.

The goal of Cost Sharing can be full allocation; however it can also be the adoption of an informed ignore approach. The latter is where a business decision is explicitly made about shared platform services coming from a central budget versus a from a portion of each cost center’s budget.

Almost every organization has cloud costs that need to be segmented and allocated to business departments; the cost of running networking services, Support costs which benefit all Engineering teams or simply the cost of service resources from a cloud provider for which they do not (yet) support tagging/labelling.

As organizations increase their adoption of public cloud, without a strategy and processes in place to assign shared cloud resource costs to specific business owners, it becomes increasingly difficult to understand how to properly and fairly allocate costs, and to actually forecast and budget.


Maturity Assessment

WHERE ARE ORGANIZATIONS IN TERMS OF MATURITY

Crawl

29.6%

Walk

45.1%

Run

25.3%

Practitioners in the segment that were operating at a FinOps Run maturity indicated they employed a weighted cost sharing model or had developed a custom model for managing shared costs. Responses showed most practitioners had adopted strategies for managing shared cost with a relatively significant segment operating at a FinOps Crawl maturity indicating they use a fixed sharing model or did not manage shared costs

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Crawl

Walk

Run

 


Functional Activity

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

As someone in a Finance/FinOps role, I will…

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

As someone in an Executive role, I will…

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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

More organizations are tackling shared costs

In 2023, we saw more respondents weigh in on how they tackle Shared Costs, indicating that many practitioners are building competency here. Similar to 2022, the Proportional method continues to be the method most used by respondents. Compared to 2022, respondents who indicated they don’t split Shared Costs decreased by 29% as more organizations develop

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Related Domains

Featured Resources

Managing Shared Cloud Costs

Managing Shared Cloud Costs

How to Allocate Shared Services Costs with Google Cloud

How to Allocate Shared Services Costs with Google Cloud

Capability Assets