What Is The Purpose Of Cost Allocation Tags in AWS? It's All About Money! 🏷️

What Is The Purpose Of Cost Allocation Tags in AWS? The purpose of cost allocation tags in AWS (Amazon Web Services) is to track and allocate costs to resources and services (for example, EC2 instances, RDS, S3, ELB, and VPC) for accurate cost accounting and management.

What is the purpose of cost allocation tags TOC

AWS Cost Allocation Tags are metadata labels that you can apply to your AWS resources and services to categorize them based on attributes such as project, department, or environment.

By using AWS Cost Allocation Tags, you can gain better visibility into your AWS costs and usage, and make more informed decisions about resource allocation and cost optimization — this subject is discussed in more detail in the article entitled AWS Cost Allocation Tags: Lower AWS Billing Cost Now!.

AWS Cost Allocation Tags can be used with many AWS services such as EC2, S3, RDS, and more.

You can view and analyze your AWS costs based on AWS Cost Allocation Tags using AWS Cost Explorer or by using the AWS Cost and Usage Reports.

By properly implementing AWS Cost Allocation Tags, you can achieve the following benefits:

Improve Cost Visibility

You can understand your AWS costs and usage by project, department, or other categories to make informed decisions about your spending.

Accurately Allocate Costs

You can allocate costs to specific resources or teams based on their usage of AWS services, and create more accurate cost allocation reporting documents and invoices.

Optimize Costs

You can identify opportunities to optimize your AWS costs based on your AWS resource usage patterns and AWS services.

The image below includes two pointers to AWS Cost Allocation Tag key and values assigned to an AWS EC2 instance.

AWS New EC2 Experience EC2 Dashboard Instances with a running instance and a pointer to the two assigned cost allocation tags: one for costCenter and the other for department.
EC2 Dashboard Instances with a running instance that has two AWS Cost Allocation Tags assigned.

Below we can see the AWS Cost Explorer with a filter by tag with the costCenter and department cost allocation tags.

AWS Cost Management Cost Explorer with a pointer to the costCenter tag.
AWS Cost Management filter by costCenter or department AWS Cost Allocation Tags

In the next section we’ll take a look at a fictitious case study about Company X and how AWS Cost Allocation Tags were used to gained better visibility into its AWS costs and usage and to ultimately save money.

How Company X Improved Its Cost Management with AWS Cost Allocation Tags

The following is a fictitious case study about how Company X was able to improve the business’ cost management by using AWS Cost Allocation Tags.

Executive Summary

Company X is a growing startup that provides software solutions to small businesses.

As the business expanded its operations on AWS, it faced the challenge of managing its ever increasing AWS costs.

Company X needed a solution to track and allocate costs to resources and services accurately, and gain better insight into its AWS cost and usage.

Solution: Use AWS Cost Allocation Tags

Company X implemented AWS Cost Allocation Tags to track cost and allocate these expenses to its AWS resources and services accurately.

Company X applied cost allocation tags to its EC2 instances, RDS instances, and S3 buckets, categorizing them by project, department, and environment.

By using AWS Cost Allocation Tags, Company X could identify which resources and services were driving the majority of its AWS costs and make informed decisions about resource allocation and cost optimization.

Results

By implementing AWS Cost Allocation Tags, Company X gained better visibility into its AWS billing and cost management and resource usage.

The business was able to identify which departments and projects were consuming the most AWS resources and AWS services and make more informed decisions pertaining to cost optimization.

By analyzing its monthly spend based on AWS Cost Allocation Tags, Company X identified opportunities to optimize its AWS costs by resizing underutilized resources and choosing the right instance types for its workloads.

As a result, Company X reduced its AWS costs by 20% and improved its cost management practices.

Article Conclusion

This is a supporting information for two other articles I’ve written — if you’re interested, please see the post onΒ AWS Cost Allocation Tags: Lower AWS Billing Cost Now!.

Article References

ThosPFuller

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