Shared Cloud Costs

Shared cloud costs are the parts of the cloud bill that do not belong to a single owner. A Kubernetes cluster that runs dozens of applications, a data platform used by many teams, a network connecting all environments, an enterprise support plan and a security service applied across every account are all examples. These costs are real and often large, but they cannot be assigned to one team simply by looking at account or tags. They need rules that divide them fairly among the teams that benefit.

How shared costs are handled has a big effect on how fair and useful cloud cost reports are. If they are ignored, teams see only part of their true cost. If they are divided arbitrarily, teams dispute the numbers and lose trust in the data. For IT financial management, allocating shared cloud costs is the cloud equivalent of allocating shared IT services and overhead, and the same principles of fairness, transparency and simplicity apply.

Definition of Shared Cloud Costs

Shared cloud costs are charges for cloud resources or services that are used by, or benefit, multiple cost owners. They contrast with direct costs, which can be attributed to a single owner through account structure or tags.

Allocating them is part of cloud cost allocation and is one of the more difficult tasks in a FinOps practice, often addressed once direct costs are well allocated.

Common Types

Shared platforms include container orchestration clusters, data warehouses and data lakes, and shared databases or messaging systems used by many applications. Their costs depend on how much each consumer uses them.

Shared infrastructure includes networking, such as transit gateways, VPN connections and data transfer between environments, along with logging, monitoring and security tools deployed across all accounts.

Shared commercial costs include enterprise support plans, which providers often charge as a percentage of total spending, and commitment discounts purchased centrally that benefit many teams.

Allocation Approaches

Usage-based allocation divides costs according to measured consumption, such as CPU and memory requested by each container, data scanned by each team's queries or traffic sent by each application. It is usually the fairest but needs detailed usage data.

Proportional allocation divides costs according to each team's share of direct spending. It is simple and often used for support fees and some infrastructure costs, though it may not reflect actual use.

Even or fixed allocation divides costs equally or by agreed percentages. It is the easiest to apply but the least accurate, and it is generally used only for small costs or as a temporary measure.

Importance of Shared Cloud Costs in IT Financial Management

Shared costs can represent a large share of the cloud bill, especially in organizations that run many applications on shared platforms. Leaving them unallocated understates each team's true cost.

Handling them well builds trust in cost data. Disputes about allocation often focus on shared costs, since direct costs are usually clear.

Teams accept cost reports more readily when they can see how shared costs were divided and why. Publishing the rules and the underlying usage data allows anyone to check the calculation.

True Cost of Products

To understand the full cost of a product or service, including cloud unit economics, shared costs must be included. A product that appears inexpensive based on direct costs alone may be among the most expensive once its share of shared platforms is added.

Including shared costs also makes comparisons between teams fair, since teams that use shared platforms heavily are not shown as cheaper than those running their own infrastructure.

This complete view is necessary for accurate showback, chargeback and business cases.

Incentives and Behavior

Allocation rules create incentives. Usage-based rules encourage teams to use shared platforms efficiently, for example by reducing oversized resource requests in a Kubernetes cluster. Proportional or fixed rules give teams little reason to reduce their use.

Rules that seem unfair can lead teams to build their own infrastructure to avoid shared charges, which may increase total costs.

These are the same considerations that apply to overhead allocation and shared services in traditional IT finance.