AWS Case Study: Netflix’s Automated Tagging Strategy for Cost Optimization

Demonstrated AWS series for tagging resources

Netflix Production Workloads across AWS Infrastructure

Introduction

In the dynamic world of cloud computing, managing costs and resource utilization efficiently is a critical requirement for companies operating at scale. Netflix, a global leader in streaming services, operates one of the largest and most complex cloud infrastructures in the world. As Netflix’s infrastructure grew in size and complexity, so did the challenges associated with cost management and visibility into resource consumption.

To address this, Netflix developed an automated tagging strategy to control costs and gain better visibility into their cloud resource usage. This case study explores how Netflix implemented this strategy and the key benefits it provided to the organization.

Challenges Faced by Netflix

Netflix operates entirely on Amazon Web Services (AWS), which enables the company to scale its services dynamically based on demand. However, with such an extensive cloud infrastructure, Netflix faced several challenges related to cost management and resource visibility:

1. Complex Infrastructure: With thousands of EC2 instances, numerous services, and regions, managing costs became increasingly challenging.

2. Lack of Visibility: Engineering teams struggled to track costs and resource consumption for each department and project.

3. Inefficient Resource Allocation: The lack of a standardized resource tagging strategy led to difficulties in identifying underutilized resources.

To overcome these challenges, Netflix aimed to improve the visibility, accountability, and efficiency of its cloud infrastructure using an automated tagging strategy.

Why Tagging Matters in AWS

Tagging is a key feature in AWS that allows users to assign metadata to resources. Tags consist of key-value pairs and can be used to identify, categorize, and organize resources based on user-defined attributes. For example, Netflix’s tags include keys such as:

• Environment: Identifies the environment (e.g., development, staging, production).

• Application: Indicates the application or service that owns the resource (e.g., app=streaming).

• Owner: Specifies the team or individual responsible for the resource.

• Cost Center: Maps the resource to a specific cost center for billing and budgeting purposes.

Effective tagging helps organizations allocate costs, enforce security policies, and manage resources efficiently. For a large-scale organization like Netflix, automated tagging became essential to achieve the desired level of granularity in resource management.

Netflix’s Approach to Automated Tagging

Netflix adopted an automated tagging strategy to streamline cost allocation and resource management. The company utilized several AWS services and custom-built automation tools to achieve this:

1. Tagging Policy and Standardization Netflix established a standardized tagging policy that all engineering teams were required to follow. This policy outlined the following rules:

   • Every resource created must have specific tags, such as “Environment”, “Application”, “Owner”, and “Cost Center”.

   • Each tag key and value had a defined naming convention to ensure consistency across the organization.

   By enforcing this policy, Netflix ensured that every resource could be easily identified, categorized, and tracked.

2. Automation with AWS Lambda and Custom Scripts Netflix used AWS Lambda functions to automate the tagging of newly created resources. When a new EC2 instance, RDS database, or other AWS service was created, a Lambda function would automatically apply the required tags based on predefined policies.

   Here’s an example of a Lambda function for automated tagging:

   import boto3
   
   def lambda_handler(event, context):
       ec2 = boto3.client('ec2')
       instances = ec2.describe_instances()
   
       for reservation in instances['Reservations']:
           for instance in reservation['Instances']:
               # Check if the instance already has tags
               existing_tags = instance.get('Tags', [])
               has_required_tags = all(
                   tag['Key'] in ['Environment', 'Application', 'Owner', 'Cost Center'] for tag in existing_tags
               )
   
               if not has_required_tags:
                   # Apply tags based on organizational policies
                   ec2.create_tags(
                       Resources=[instance['InstanceId']],
                       Tags=[
                           {'Key': 'Environment', 'Value': 'Production'},
                           {'Key': 'Application', 'Value': 'Streaming'},
                           {'Key': 'Owner', 'Value': 'Engineering Team A'},
                           {'Key': 'Cost Center', 'Value': 'CC1234'}
                       ]
                   )
   

   This function automatically assigns standard tags to every EC2 instance based on Netflix’s organizational policy.

3. Enforcement with AWS Config and Policies To ensure that resources remained compliant with Netflix’s tagging policy, the company leveraged AWS Config. AWS Config is a service that monitors the configuration of AWS resources and checks for compliance with predefined rules.

   Netflix used AWS Config rules to enforce the following:

   • Every resource must have the required tags.

   • Resource tags must follow the company’s standardized naming conventions.

   In case a non-compliant resource was detected, AWS Config triggered a Lambda function to either notify the engineering team or automatically apply the missing tags.

4. Cost Allocation and Reporting Netflix used the detailed tagging information to create cost allocation reports. By categorizing resources based on applications, departments, and environments, the finance team gained granular visibility into cloud spending. This enabled better budgeting and cost forecasting.

   AWS Cost Explorer was used to visualize costs across different teams, environments, and services. Netflix also built custom dashboards to provide stakeholders with insights into resource consumption and spending trends.

Benefits of Netflix’s Automated Tagging Strategy

By implementing an automated tagging strategy, Netflix achieved several key benefits:

1. Improved Cost Visibility: The standardized tags allowed Netflix to track costs at a granular level. Engineering teams could identify which resources were driving costs and allocate budgets accordingly.

2. Better Accountability: By tagging resources with owner information, Netflix ensured that every resource had an accountable owner. This encouraged teams to review and manage their resources efficiently.

3. Efficient Resource Allocation: The tagging strategy enabled Netflix to identify underutilized resources and terminate them, leading to significant cost savings.

4. Streamlined Auditing and Compliance: AWS Config and custom scripts helped Netflix enforce tagging policies and monitor compliance in real-time. This reduced the manual effort required for audits.

Real-World Impact and Example

One notable example of the impact of Netflix’s tagging strategy was during a peak traffic period. Netflix engineers identified that certain EC2 instances were running at full capacity, while others were underutilized. By using tags to filter resources based on application and environment, the team was able to reassign workloads efficiently, leading to a 30% reduction in EC2 spending during that period.

Additionally, Netflix’s tagging strategy enabled the finance team to prepare accurate cost forecasts for upcoming product launches and feature releases. This level of insight into cloud spending allowed Netflix to optimize its infrastructure proactively.

Key Takeaways for Implementing Tagging Strategies

The success of Netflix’s automated tagging strategy offers valuable lessons for organizations looking to implement similar solutions:

1. Define a Clear Tagging Policy: Establish a clear and comprehensive tagging policy that outlines the required tags, naming conventions, and rules for resource tagging.

2. Automate Tagging Wherever Possible: Use AWS Lambda functions or custom scripts to automate the tagging process and ensure compliance with organizational policies.

3. Leverage AWS Config for Enforcement: Utilize AWS Config to enforce tagging policies and detect non-compliant resources in real-time.

4. Use Tagging for Cost Allocation: Categorize resources based on tags to gain better visibility into costs and create cost allocation reports.

5. Continuously Monitor and Refine: Regularly review and update the tagging strategy to ensure it aligns with evolving business needs and cloud environments.

Conclusion

Netflix’s automated tagging strategy serves as a powerful example of how organizations can improve cost visibility and resource management in the cloud. By standardizing tags, automating the tagging process, and leveraging AWS tools for enforcement, Netflix was able to allocate costs accurately, hold teams accountable, and optimize resource utilization.

If you’re looking to implement a similar strategy in your organization, consider establishing a clear tagging policy, automating the tagging process, and continuously monitoring compliance. By doing so, you can gain better visibility into cloud spending, improve resource efficiency, and achieve cost savings in the long run.

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