Allocation is a critical practice that involves the classification & distribution of cloud costs based on resource usage. It works by tracking the consumption of cloud resources by different entities within an organization - be it a department, project, or business unit.

Once the usage is tracked, the associated costs are then assigned to these entities. This process ensures that each unit is accountable for its own cloud usage, and the costs are not just lumped together as a single organizational expense.

Allocation is like the flashlight in the complex labyrinth of cloud cost management. It illuminates the path, bringing clarity to where and how your cloud resources are being consumed. By assigning costs to specific business units, projects, or departments based on their actual usage, allocation provides a granular view of your cloud spending.

This visibility is not just about numbers; it's about understanding the story behind those numbers. It tells you which aspects of your business are driving your cloud costs and why. This data-backed insight is invaluable for strategic decision-making.

Imagine a tech company, TechCorp, that uses cloud services across different departments.

‍Without Cost Allocation - TechCorp would receive a single bill for all these services, making it difficult to understand which department is using what resources and how much they cost.

‍With Cost Allocation - The costs of compute instances would be allocated to the software development team, the costs of storage would be allocated to the marketing team, and the costs of databases would be allocated to the customer support team.This allows TechCorp to accurately track and manage its cloud costs. It can see which departments are driving the most costs and identify opportunities for cost optimization.