AWS Cost Allocation Tags: Implementation, Challenges, and Alternatives 

Are you tired of sifting through complex billing reports to understand where your Amazon Web Services (AWS) costs are going? If so, you're not alone. In fact, a whopping third of cloud computing goes to waste, according to a Tech Monitor survey. And with AWS holding the majority of the cloud market share, it's becoming increasingly important to manage your AWS spending.

One of the ways you can do this is through tagging. Whether you are a small business owner looking to gain visibility into your AWS spending or a large enterprise seeking more advanced capabilities, AWS cost allocation tags can help you gain a better understanding of your costs and make it easier to stay within budget. 

In this article, we will take a closer look at AWS cost allocation tags and also some of the best tools you can use to gather insights about your cloud spending. .

What are cost allocation tags in AWS?

AWS cost allocation tags are labels for classifying, organizing, and identifying your resources. These tags, which are key-value pairs, make it easier to manage them and track their usage. 

By assigning tags to your resources, you can track your overall AWS costs, either through Cost Explorer or through the AWS API.

There are two types of AWS cost allocation tags — AWS-generated tags and user-defined tags: 

• AWS-generated tags: These are system-defined "createdBy" tags that are automatically defined and assigned by AWS.
• User-defined AWS tags: User-defined tags are tags you create in AWS and attach to resources. You could create a tag called "Project" and assign it to all the resources associated with a particular project. This would make it easy to see how much each project costs you and ensure that the right team members are charged for their usage.

Using both types of cost allocation tags can help you better understand and manage your AWS costs. For instance, you might create a user-defined tag called "Department" to track which department is using a particular resource, and then use an AWS-generated tag to see when that resource was created and who owns it. This can give you a more detailed view of your AWS costs and help you make more informed decisions about managing your resources.

Step-by-step guide for implementing AWS cost allocation tags

Here is a step-by-step guide to implementing AWS cost allocation tags:

1. Open the AWS Management Console, navigate to the AWS Resource Group, and then the "Tags Editor" section.
2. Navigate to the resource that you want to tag. This could be an EC2 instance, an S3 bucket, or any other AWS resource that supports tagging. Then, select "Manage tags of selected resources". After this, click the "Add Tag" button to create a new tag.
3. In the "Key" field, enter a name for the tag. This will be the tag's identifier. It is used to reference the tag in reports and other tools.
4. In the "Value" field, enter a value for the tag. This value can be used to classify, organize, or identify the resources to which the tag will be applied.
5. Click the "Add tag" button to save the tag.
6. Repeat steps 2-5 to create any additional tags that you want to use for cost allocation.

Alternatively, you can:

1. Navigate to the resource that you want to tag. This could be an EC2 instance, an S3 bucket, or any other AWS resource that supports tagging.
2. Select the resource and click the "Tags" tab.
3. Repeat these steps for any additional resources that you want to tag.
4. Use the AWS Cost Explorer or another cost management tool to track and manage your costs by tag.

Alternatively, you can programmatically use the AWS API to create and apply tags to your resources. This is useful if you have a large number of resources or if you want to automate the tagging process. Refer to the AWS documentation for more information on using the API to manage tags. 

Challenges of AWS cost allocation tags

One of the challenges of using AWS cost allocation tags is that they must be applied to resources at the time of creation. It can be difficult and even impossible to add one later.

But effectively planning and implementing cost allocation tags is often time-consuming and requires expertise. Plus, if tags aren't applied consistently across your organization, you won't get a complete picture of costs and resource utilization.

It’s also important to note that  cost allocation tags only provide a broad overview of your costs. They can help you see how much you're spending on each resource type, but they don't give you answers to other pressing questions. Basically, if you have multiple teams or projects using the same AWS account, you won't be able to see exactly how much each team or project is costing you.

Cost allocation tags are not retroactive, and they only show costs incurred after they are applied. That means that historical data may not be accurately reflected in cost reports. If tags are deleted or changed, it can impact the accuracy of cost reports over time.

In essence, cost allocation tags are only useful for tracking costs within a single AWS account. If you have multiple AWS accounts, you'll need to use another method to track costs across your accounts. That can be difficult and time-consuming, especially if you have a lot of accounts.

Here are the technical challenges that make it difficult to achieve 100% accurate cost allocation using AWS tagging, especially in a multi-tenancy environment:

• Tag propagation: It can be challenging to ensure that all resources within an AWS account are correctly tagged, as tag information is not always propagated to all resources when created. For example, if you create an Amazon Elastic Compute Cloud (EC2) instance and specify a tag for it, the tag may not be applied to the associated Amazon Elastic Block Store (EBS) volume or Amazon Virtual Private Cloud (VPC) resources. As a result, it may be difficult to accurately track costs for individual or groups of resources.

• Tagging policies: For example, a business with multiple teams or departments using the same AWS account, such as EC2 instances or RDS databases, may be unable to accurately determine which of them has control of those resources due to the differing tagging policies for different teams. If these policies are not enforced consistently, it can be difficult for you to allocate costs accurately based on tags. The business could end up allocating too many or too few resources to different teams or departments. 

• Resource ownership: A business with shared resources (such as EC2 instances or RDS databases) may have difficulty determining which team or department is responsible for a particular resource. If the business is unable to apportion costs accurately to the appropriate team or department, you may incur higher charges. Businesses can avoid this challenge by implementing clear ownership policies for shared resources or by using a third-party cloud cost management system.

• Cost allocation reports: A business with a complex AWS environment may have difficulty using the AWS Cost and Usage Report (CUR) to accurately assign costs to specific teams or departments. This could lead to the business over- or under-allocating costs, resulting in inaccurate billing and potentially higher costs.

While AWS cost allocation tags can be quite valuable, they have limitations. If you want a more detailed view of your AWS costs, you should look at other options.

7 top tools for tracking AWS costs 

Here are some of the best tools for comprehensive cost monitoring and allocation on AWS:

1. Finout's Holistic cloud cost solution

Finout is a holistic cost management platform that serves as a single source of truth for all your cloud costs across AWS, GCP, Kubernetes, Datadog, and Snowflake. With its intuitive interface, you can quickly and easily see where your money goes, giving you the granular data you need to make informed decisions about your AWS usage.

If you are facing challenges with AWS tagging and are looking for alternatives, you should consider Finout. With Finout’s virtual tags feature, you can remap cost filters into tag values, allowing you to track your spending across different cloud platforms and billing origins. 

Virtual tags can also combine AWS tags, Kubernetes labels, and GCP namespaces into a single dashboard, making it easier to track expenses by development teams, features, and environments. Additionally, virtual tags can solve issues with wrongly tagging AWS services or using different names for tags.

One thing that sets Finout apart from other cloud cost monitoring tools in this regard is the fact teams can create customizable dashboards, reports, and notifications to suit their infrastructure needs. Using Finout, IT teams are easily aware of any unusual spending patterns or anomalies. That can help you catch any potential issues often and early.

Finout lets you dig deep into your cloud usage and actual cost per customer, feature, or team. This gives people the visibility they need to cut costs together and make better decisions. 

2. AWS Native monitoring tools

AWS provides native solutions that serve as an excellent first step for companies with relatively simple cloud billing requirements.

• AWS Cost Explorer: This is one of the most popular tools. It allows you to visualize and analyze your AWS costs and usage. With Cost Explorer, you can create custom reports and graphs to see how your AWS costs fluctuate and identify areas where you can optimize your cloud usage and reduce costs.
• AWS Budgets: This tool allows you to set up budgets for your AWS usage and receive alerts when your usage or costs exceed your defined thresholds. You can use AWS Budgets to track your costs by allocation tags, making it easy to see how much you spend on each project or business unit.
• AWS Trusted Advisor: AWS Trusted Advisor is another valuable tool for managing AWS costs. It can identify underutilized resources, such as Amazon Elastic Compute Cloud (EC2) instances or Amazon Elastic Block Store (EBS) volumes, and recommend ways to optimize their usage. Trusted Advisor can also help you identify unused or underutilized Amazon Simple Storage Service (S3) buckets and Amazon Relational Database Service (RDS) instances and suggest ways to optimize their usage.

On the whole, native AWS cost optimization tools can help you improve your cost awareness and visibility to make informed decisions about your AWS usage. However, as your organization grows and its AWS workloads become more complex, especially when you reach a certain level of spending across multiple accounts, you may want to consider upgrading to a more robust cost management solution to ensure that your costs don't spiral out of control.

3. Flexera

Flexera is a cloud management platform that offers various cost optimization capabilities, making it a valuable tool for managing private and public cloud platforms, bare metal, and virtual servers. With its unified view of cloud resources, Flexera allows users to easily identify the state of their workloads and automate repetitive tasks across cloud services, using its powerful orchestration engine.

One of the standout features of Flexera is its customizable interface, which allows users to drill down into data and uncover hidden insights. This feature, combined with its single pane of glass for multi-cloud management, makes it easy for users to forecast costs and expenses.

Flexera Cloud Cost Optimization (CCO) offers a powerful tool that helps businesses manage and automate AWS tagging.

With CCO, you can provision your cloud accounts, projects, subscriptions, or resource groups with mandatory tags from the start. You can also segment your cloud resources and costs based on metadata from third-party data sources, such as a CMDB, and get real-time cost visibility for various stakeholders.

But CCO doesn't stop there. It also offers automated remediation of tags and termination of non-compliant resources, as well as reports on any non-compliance issues. This helps ensure that your tagging policy is applied consistently and allocates costs accurately.

In addition to its tagging capabilities, CCO also offers budget alerts, cost optimization recommendations, and detailed cost and usage reports to help you better understand your cloud costs and make more informed decisions about optimizing and allocating them.

Additionally, Flexera is well-suited for building an integrated IT asset management system. It also comes with a cloud cost calculator for free forecasting and scenario modeling to help users better budget and plan across regions, instance types, reserved instances, and more. 

Despite all this, Flexera does have some drawbacks. Some users have reported longer resolution periods for issues that arise, and to top it off, API instability when integrating with multiple third-party tools. 

4. Apptio

Cloudability is a cloud cost management tool that helps customers gain visibility into their cloud spending to optimize it. With support for multi-cloud environments like AWS, GCP, and Azure, Cloudability provides cost savings recommendations, anomaly detection, budgeting, and forecasting to manage cloud budgets effectively. 

Using a traditional approach to cloud cost management, Cloudability is a good platform for tracking mostly high-level metrics like cost center costs rather than the granularity and details of your cloud costs. A concern with Cloudability is its less-than-friendly interface and inability to integrate seamlessly with other third-party tools.

With custom allocation rules and automatic tag application, you can ensure that all of your resources are correctly tagged, and your costs are accurately allocated. Besides that, the platform also provides detailed cost and usage reports that you can use to track and allocate costs to specific teams or departments.

Cloudability's Tag Explorer tool allows you to visually assess how you're using tags, identify untagged resources, and better understand your cloud costs. You can also map related tags into a Cloudability tag or dimension to ensure relevant and logical mapping from the cloud to your business or other logical constructs.

 The platform lags behind when it comes to drilling down into costs for idle and unallocated resources, and lacks visibility into how engineering changes affect these costs.

5. Cloud Checker

Cloudcheckr is a popular cost-monitoring tool for multi-cloud environments. It provides a range of customizable alerts and notification that allows you to maintain a close watch on your AWS costs. 

For example, you can set up alerts to notify you when your costs reach a certain threshold, or when specific resources are underutilized or overused. By doing so, you can take proactive steps to manage your costs and avoid surprises on your monthly AWS bill.

Using CloudCheckr's tag mapping feature, businesses can identify similar tags and merge them, enabling administrators to simplify reporting and track cloud usage by department, environment, or other factors. The platform also lets businesses assign percentages to tag maps to divide charges based on tag values, helping organizations split the costs of a single resource by percentage.

Additionally, Cloudcheckr offers a wealth of educational resources and support to help you get the most out of the tool. The platform also includes detailed documentation, webinars, and a dedicated support team to assist you with any questions or issues you may have.

6. ProsperOne

ProsperOps is a cloud management platform that offers cost optimization capabilities for AWS. It provides a comprehensive view of your AWS resources, allowing you to monitor and manage your costs efficiently. You can streamline and enable effective cloud cost allocation using its intelligent Showback feature.

One of the critical features of ProsperOps is its intelligent cost optimization engine, which automatically identifies and recommends actions to help you reduce your AWS costs. It includes identifying and recommending reserved instances and Savings Plans, pinpointing underutilized resources, and suggesting ways to optimize their usage.

But ProsperOps isn't just about saving money - it also offers a number of other benefits. Its integration with other tools and services makes it easy to manage your AWS costs within your existing workflow. Whether you use Terraform, Ansible, Datadog, or New Relic, ProsperOps can be easily integrated, allowing you to track and optimize your AWS costs in real time.

However, one potential downside of ProsperOps is that it's only focused on cost optimization for AWS, so if you use other cloud providers or want a more comprehensive cloud management platform, ProsperOps may not be the best fit for you. On top of that, ProsperOps requires a certain level of technical expertise to set up and use effectively, so it may not be the best choice for users with limited technical experience.

7. Spot by Netapp

Spot by NetApp is another cloud cost management tool that automates cloud cost optimization based on machine learning and automation. Geared typically towards large enterprises, it's designed to help engineering and finance teams optimize their cloud costs and gain visibility into their spending across multiple cloud platforms, including AWS, GCP, and Azure.

An important feature of Spot is automation. It helps to optimize cloud infrastructure, including container setups, and provides easy-to-implement optimization recommendations. Teams can save time and effort by automating tedious tasks and allowing them to focus on more important work.

Another advantage is Spot's ability to offer forecasted spend based on historical usage data, which can help teams plan and budget for their cloud expenses. However, in terms of replacing AWS cost allocation tags, Spot requires good tag management to get granular visibility into cloud costs, and costs are only visible on a daily basis. 

Besides, Spot's manual configurations can be time-consuming, and the API may need to be regularly updated, making pipeline integration more challenging.

Leave your cost allocation challenges behind with Finout

AWS cost allocation tags are essential for any organization that uses AWS to manage its cloud infrastructure. However, they're not easy to manage or implement manually, making it quite challenging to get accurate cloud cost reports. 

Finout is a standout cost management platform to consider. It offers a range of features, including multi-cloud cost optimization and visibility, customizable dashboard and notifications, historical reports, and comprehensive cloud cost optimization.

Book a demo with one of our specialists to get an overview of the platform.