How can I compare amortization metrics from the platform to AWS?

Products

• CloudHealth

Issue/Introduction

Amortization is a helpful way to view the month to month operational cost mainly associated to upfront payments made for reservations.  This documentation is to help reveal some of the nuances to these reports and help diagnose why the platform reporting may not show metrics that customers are expecting.  

 

Confirm Total Overall Costs Line Up

This is the most important step in the process as it not only confirms that all cost data is being collected correctly but that information provides confidences in the metrics.  This should be a quick process by following these steps:

• Pull the grand total of all costs for the time period in question (generally it's easier to limit scope to a specific month if the customer is stating an issue that spans many)
• Reference that same data set within CloudHealth with all filters and categorizations removed

The totals should line up. This is good news because it shows that all cost data is captured and the conversation is no longer about missing or added cost, but categorization.

 

Understand How Amortization Is Calculated

Once totals are confirmed to match up the next step is to understand what the customer is comparing to CloudHealth amortization metrics.  Before looking at the data, it's important to understand the different ways that amortization can be calculated.

 

Amortization Calculation Methods

The main point to keep in mind while you work on amortization metrics is that there is two different ways to calculate the number:

• By Purchase:  This is a simple calculation that takes the total prepay amount, divides it by the timeframe of the reservation, then applies those equal cost chunks to each month, for instance.  An example is say $1200 is spent on 1-year reservations.  The monthly amortized amount would be $1200 divided by 12 months, or $100 amortized cost per month.  Many companies refer to amortization metrics this way.

• By Usage:  This is a much more complex calculation that takes into account where reservation coverage took place as well as accounting for the cost of any reservation that were not fully utilized and applying those costs appropriately.  The benefit of this method of amortization calculation is it can be considered more accurate since it takes into account "no upfront" reservation coverage as well.  CloudHealth amortization metrics by default utilize this method of calculation which is generally where a lot of the confusion in comparing amortization metrics comes in.

Manually created "By Purchase" spreadsheets will likely not match up to the platform as CloudHealth presents amortization values "By Usage".  

 

Amortization Timeframes

This pertains to the duration of the reservations that were purchased.  AWS provides two timeframes for reservations:

• 1-Year 
• 3-Year

CloudHealth will take into account all active reservations regardless of whether they are 1 or 3-year and amortize appropriately based on where the reservation coverage took place.

 

Review the Amortization Comparison

The next step is to obtain a detailed breakdown of the amortization numbers that the customer is comparing to CloudHealth.  

 

Review All Comparison Information

One of the most common ways to compare amortization metrics is by comparing to a spreadsheet with manual calculations. 

 

Items to look out for:

• Be sure that you have all filter and categorization details provided - This is important to try and build a true apples to apples comparison but due to potentially different calculation methods, this may not match up to CloudHealth even with matching filters and categorization.
• Note the timeframe that the calculations cover - This is important as "By Purchase" calculations may only be amortizing purchases made in the past 12 months whereas CloudHealth will reflect active 3-year 36 month amortization metrics as well

 

Line Up Total Amortization Metrics Without Any Additional Manipulation

There is a way to line up overall amortization metrics, regardless of calculation type, by looking at the overall monthly totals without any categorization.  The way to view this number in CloudHealth is to navigate to the REPORTS > COST > AMORTIZATION and remove the category type:

The cost that appears under "Amortized Cost" will be the overall total with prepays filtered out if you are viewing from the "Amortization" report (the Cost History report will NOT automatically remove prepays so keep that in mind when comparing data).  This metric can be used to compare the overall total for accounts or specific consolidated billing accounts.  These totals still may not match so it's important to review the timeframe being considered in the comparison calculations.  

NOTE CloudHealth is amortizing cost for ALL active reservations which includes any 3-year reservations made in the past.  Manual calculations may only be considering a 12-month amortization timeframe which will most likely not match up with CloudHealth.

 

You can illustrate that 3-year reservations are still active and accounted for in CloudHealth by doing the following:

• Navigating to ASSETS > AWS > EC2> RESERVATIONS (this assumes that the customer has reservations in EC2 which is usually the case)
• Pulling in the "Purchase Date" column from the "Edit Columns" option at the top of the screen
• Filtering to "Status = Active" in the Smart Filters then click "Run Report"
• Click the "Purchase Date" column header to so that the information is sorted oldest to newest

You can see below that there are reservations in this example that were purchased back in 2016 that are still active and may not be considered in the amortization metrics manually calculated by a customer:

 

With all of the above information and noting that raw un-amortized totals all match up, the resolution to these issues boils down to the difference between "By Purchase" and "By Usage" amortization calculations.