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FinOps Foundation Insights

The Great Debate: Optimize Usage or Rates First?

Date: February 5, 2024 Video: 26 minutes

Key Insight

AWS Cost Optimization Hub deduplicates competing recommendations from AWS cost optimization tools, so practitioners can optimize usage and rates simultaneously, and trust that the savings number they see is achievable.


Cost Optimization Hub: Cost Optimization Hub pulls recommendations from all AWS cost optimization products together and deduplicates competing recommendations, so customers can optimize usage and rates simultaneously, and trust that the savings number they see is achievable.

The FinOps community debates whether usage or rate optimization should be addressed first. Rick recommends doing a little bit of each in increments:

Getting Engineers to Act: Trust is the key when trying to get engineers to act on rightsizing recommendations for their workloads, so Rick shares that recommendations from Compute Optimizer (which feed into Cost Optimization Hub) are not simply trying to optimize cost; the algorithm recommends an instance offering the highest performance for a workload at the lowest possible cost.

To improve the rightsizing recommendations, Rick recommends turning on memory metrics from CloudWatch or a third-party tool. Without memory data, Compute Optimizer will never recommend an instance that downsizes memory capacity. Giving the engine memory data opens the field of possible instances that it can recommend.

KPI: Effective Savings Rate: Effective Savings Rate (ESR) is a helpful key performance indicator (KPI) but Rick thinks it doesn’t tell the whole story. He recommends using it in conjunction with a usage-based KPI like 30-day rolling average CPU, so you can understand not just your spend, but the capacity you’re getting for your spend.

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