Understanding AWS Organizations consolidated billing and allocation of costs

Amazon Web Services (AWS) Organizations offers a range of tools to manage and govern your environments across multiple AWS accounts. One of the powerful features of AWS Organizations is consolidated billing, which simplifies the billing process for organizations with multiple AWS accounts by enabling them to receive a single bill for all accounts within their organization.

Consolidated Billing in AWS Organizations

Consolidated billing is a feature that allows you to combine the usage from all accounts in your organization and to leverage volume pricing discounts. Each AWS account in an organization operates independently, but AWS consolidates their usage to make sure you can maximize your savings.

Benefits of Consolidated Billing Include:

• Aggregated Volume Discounts: All accounts in an organization contribute to the total usage, potentially qualifying the organization for volume discount tiers on services such as Amazon S3 and EC2 instances.
• Combined Free Tier Usage: Each AWS account receives the benefits of the AWS Free Tier. When accounts are part of an organization, their usage is combined, offering a higher limit compared to a single standalone account.
• Simplified Payment Method: A single payment method is used for all the accounts in your organization which simplifies the management of your AWS accounts.
• Detailed Cost Reports: Organizations can access detailed cost reports that make it easier to track how much each account spends.

How it Works:

When you enable consolidated billing, you designate one account within the organization to be the management account (formerly known as “master account”). The management account is responsible for paying all charges that are incurred by the member accounts. Member accounts are the other accounts in the organization that are linked to the management account.

Allocation of Costs

In an organization with multiple accounts, it’s crucial to understand not just the total cost, but also how those costs are distributed among the accounts. Properly allocating costs can help with budgeting, forecasting, and managing resources efficiently across the organization.

Methods of Cost Allocation Include:

• Tags: You can tag resources with custom key-value pairs to categorize and track your AWS costs. By using cost allocation tags, you can break down your AWS bill according to the tags you’ve defined, such as project, environment, or department.
• Cost Explorer: AWS Cost Explorer is a tool that allows you to visualize and manage your AWS costs and usage over time. It can provide insights into your spending patterns and help you to understand cost drivers and trends.
• AWS Budgets: AWS Budgets allows you to set custom budgets that alert you when your costs or usage exceed (or are forecasted to exceed) your budgeted amount. Budgets can be created at the account level or for specific tags.

Example of Cost Allocation Using Tags:

Suppose you have an organization with multiple AWS accounts for various departments like R&D, Marketing, and HR. You’ve tagged all R&D-related resources with the key Department and value R&D. At the end of the month, you use the Cost Explorer to filter by the tag Department: R&D to see the total cost incurred by the R&D department.

Generating a Cost and Usage Report:

To gain detailed insights into the costs and usage of your AWS accounts, you can set up the AWS Cost and Usage Report (CUR). The report includes hourly and daily line items for each service used by an account and its associated tags, allowing for in-depth analysis of costs and usage.

Here’s a simplified example of what a section of the CUR might look like:

In this table, the costs are broken down by an account, service, usage type, department, and the actual cost incurred.

Managing Costs Across Multiple Accounts

Cost management across multiple accounts within an organization hinges on effectively setting up and understanding consolidated billing, cost allocation techniques, and utilizing the tools AWS provides to analyze and report on cost data. The AWS Certified Cloud Practitioner exam will expect you to understand these concepts and how they can be leveraged to control and manage costs at the scale of an enterprise.

By mastering consolidated billing, cost allocation methods, and reporting tools, organizations can ensure they make informed decisions regarding their cloud expenditure, providing transparency and predictability of AWS costs.