5 min to readFinOps Services

5 steps for a comprehensive, sustainable tagging strategy

Candace DuboisFinOps Senior Consultant

Does your organization struggle to manage cloud computing costs and interpret your usage?

Part of a practical FinOps framework includes making the most of your Inform phase, which starts with tagging. Without tagging, you will be unable to manage costs or create a showback or chargeback culture effectively, and your cloud computing costs will remain not only unmanageable, but you will also lack the ability to hold cloud spenders accountable.

Tagging data can improve automation, resource management, and security compliance.

At SoftwareONE, we have outlined five steps to implement, improve and maintain your tagging strategy to untangle your cloud spend.

What is cloud tagging, and why is it critical to FinOps?

A tag is a label assigned to a cloud resource containing a key and a value.




Cost center: 1015.25568

Cost center


Application: Customer Portal


Customer Portal

Environment: DEV



Assigning a tag to each cloud resource helps you quickly and easily identify groupings like a workload, Business Unit, or application. This simplifies your cloud spend practice, making it easier to allocate, budget, forecast, and create a culture of accountability.

Organizations utilizing a tagging strategy find them beneficial for:

  • Resource management. Tags can allow an organization to group resources outside the provider account structure and quickly control user access using identifiable tags.
  • Automation. Tags can identify resources for automation activities like power consumption or opting in or out of automated activities.
  • Security. Tags will help identify sensitive data, pinpoint data for retention, and indicate workloads that must adhere to compliance requirements.
  • Cost reporting. Tags can identify cost centers, business units, applications, infrastructure teams, management hierarchy, customers, or projects. This proves highly effective when supporting a chargeback or showback model.
  • Cost savings. Tags could identify temporary workloads like sandboxes or temporary development environments and can be used in conjunction with automation to decommission temporary workloads.

How to implement an effective cloud tagging strategy

A successful cloud tagging strategy will group and identify resources by the critical data points to your organization. The first step is ascertaining how you will assign costs by workload, subscription, business unit (BU), or other designations. You will also work to determine how usage trends should be isolated. These tags are the key to driving data into key performance indicators (KPIs) that will help you measure your desired business outcomes.

Creating your own hierarchy by way of tags allows you to view costs and usage by groupings that are not native to your organization. You can view combined profit and loss (P&L) and group them by geography, management teams, and other options. This process will help you drive accountability and metrics. By planning your tagging accordingly, you can report at levels that differ from your corporate financial structure.

SoftwareONE takes a unique approach with every organization when establishing a cloud tagging strategy. In our tagging strategy workshop, we explore how each enterprise is structured, how they want to measure and allocate cloud spend, and how they want to report on usage. This workshop will expand on the five steps below to help your company define its own tagging strategy.

5 best practices for creating a successful tagging strategy

Because tagging is fundamental to the FinOps Inform phase, SoftwareONE recommends every organization apply the following five best practices for implementing tagging and long-term maintenance and management.

1. Collaborate with your colleagues

One of the keys to a successful FinOps practice is collaboration, and collaboration regarding tags is no exception. Enhance your existing reporting with tags that meet the reporting needs of your report consumers: finance, procurement, engineering, and executives.

Discuss with them what type of data is essential to them and the details around how the tags should be applied and reported upon. These partners may not even realize they can benefit from the data, so it is essential to discuss their current cloud challenges to see how tagging can help.

2. Define tagging categories and ownership

Organizing your tags into categories will help with maintenance and accountability. There are many ways you can group. You can group by type of tag (technical, business, financial, automation, security), or you can group by persona (finance, procurement, c-suite, IT, and security).

Determine the groupings that best fit your ability to maintain the validity of the applied tags. Many will find it easy to have a finance contact, for example, be the responsible party for all the finance tags.

Ownership of the category will be important in understanding the use case for the tag, who is the consumer of the tag, and whether the tag is still relevant when considering future maintenance and updating. A tag that is required to track a special project may not be necessary for the future, so by determining ownership, there is a contact who is available to answer questions later.

3. Develop a process for applying tags and measuring compliance

The goal is to build the entire strategy, but you can start applying tags immediately to realize the benefits faster. Once you determine what tags are needed and who is the tag or category owner, you can begin using your tags immediately.

Tags are not retroactive, so the sooner you tag, the sooner you can start seeing the progress in your reporting. To do this, determine what tags to apply and how the first set of tags will be put in, whether that is manual, by policy, by script, or by other means.

Once you have applied that first iteration of tags, have reports in place to measure compliance and a communication strategy to notify responsible parties if remediation or correction is needed.

4. Create your comprehensive strategy

A strategy that outlines all the components of tagging is necessary. It is not enough to know how and what to tag. It would help if you also planned for the eventual maintenance and upkeep of the tags.

Some items to consider when building the overall strategy:

  • What is to be tagged
  • Tag groupings
  • How to measure compliance
  • Key metrics for tagging
  • Communications surrounding tagging issues to responsible parties
  • Defined process for applying tags
  • Defined process for remediation
  • Configure and instruct on the use of a tag dictionary (see “build a tag dictionary” below)

5. Build a tag dictionary

A tagging dictionary provides a reference for anyone to see available tags, description, contact person, format, and whether they are mandatory or optional. While this is documented in the tagging strategy, think of the tag dictionary as a quick reference guide.

There are many cases where tags may serve a minimal purpose or only affect a few resources. Therefore, you may want to allow users to create their own custom tags (tags not previously identified). If so, having them contribute their tags to the tagging dictionary helps expose these tags for compliance and accountability. It will also help anyone unfamiliar with these tags understand their application and use.

It is important to post this dictionary in a collaborative environment like Microsoft Teams and make it accessible to all cloud partners.

Simplify cloud tagging with the right approach

Begin your FinOps journey with SoftwareOne’s FinOps Discovery. Discover how to recognize gaps in your current cloud management strategy, gain expert insights from our certified specialists, and continue to scale your cloud financial management. You can benefit from an average of 25% or more savings in cloud spend when you mature your cloud financial management strategy for long-term success.

How to jumpstart your FinOps practice with the 5 Cs of FinOps

Get your FREE FinOps eBook to learn how to bring accountability to your cloud spend and drive maximum value from every dollar you invest in the cloud.

How to jumpstart your FinOps practice with the 5 Cs of FinOps

Get your FREE FinOps eBook to learn how to bring accountability to your cloud spend and drive maximum value from every dollar you invest in the cloud.


Candace Dubois
FinOps Senior Consultant