Using FinOps to Make it Rain Savings in the Cloud
Here’s how FinOps can help you manage cloud costs.
Implementing them may take work, but FinOps and purpose-built management tools can help companies realize major cloud savings. Craig Lowell of DoiT examines the initial steps and technology needed to enable your company to rein in cloud management and lower costs.
Gartner has estimated that over half of enterprise IT spending will shift to the public cloud by 2025, overtaking traditional IT spend. Further, analysts have projected cloud spending will exceed $1 trillion by 2026, topping all other IT markets. Yet, a survey by Couchbase shows inefficiencies – like management tools that fail to provide control and data being stored improperly – can add 35% to enterprise cloud costs, a nearly $9 million annual loss.
That said, it’s no wonder financial operations (FinOps) practices are on the rise. These can enable companies to maximize cloud value with collaborative, data-driven decision-making from finance, technology and business teams. However, the adoption of these practices does hold challenges. While it’s a great advantage to have input throughout a company, it poses hurdles when establishing effective FinOps practices. Simply determining who should be included in this process can raise questions and bring such initiatives to a crawl.
The following provides insight into FinOps practices and automation that can jump-start the process and deliver considerable cloud cost savings.
Who Should Care?
The first step for establishing best practices is to understand the personas in the company that will need to be involved. With FinOps touching business, IT and finance, department leaders should own strategy and ensure clear lines of communication on cloud spend.
On the business side, executives should be ready to evangelize the idea across the company, getting everyone involved moving in the same direction. The finance team is typically in the best position to ensure money is well spent, so they obviously need insight into the cloud budget and how it’s allocated and spent. IT typically oversees cloud provisioning and usage, so they should communicate the company’s needs to all teams and justify spending decisions.
These people, and the combined team, are responsible for bridging gaps that arise between departments. Moreover, they must cultivate and solidify a culture in which every team has a playbook with best practices for optimizing cloud spend and producing the greatest return on investment. Still, while getting the right people involved is essential, it’s just the first step in creating the right culture – which is equally important is defining clear goals.
See More: How to Prioritize Cost Optimization for Cloud Storage Investments
What’s Your Domain?
The FinOps Foundation breaks goals out by domains and capabilities. Capabilities address specific functions with tasks and processes designed to meet best practices. According to the FinOps Foundation, there are six FinOps domains:
- Understanding cloud usage and cost: This entails gathering information and measuring shared costs, forecasting your future usage and spend, and allocating costs to different teams or projects within the IT organization.
- Performance tracking and benchmarking: Utilizes historical data to map budgets and KPIs, continually measuring against them.
- Real-time decision-making: Provides information and data as close to real-time as possible and sets a decision and accountability structure within the FinOps team.
- Cloud rate optimization: Evaluate ways to lower costs and spend more efficiently, such as commitment-based discounts or spot instances.
- Cloud usage optimization: Focuses on demand-sustainability alignment, including workload right-sizing, general resource utilization and configuration.
- Organizational alignment: A responsibility of all stakeholders that ensures visibility into all domains and accuracy.
Several of these are likely already being done within your organization. Managing commitment-based discounts, for instance, is an activity most businesses are already doing to some extent. Yet, at the same time, it’s vital to such areas as performance tracking, organizational alignment and cloud rate optimization, as well as capabilities from managing anomalies to data analysis.
Are You Mature Enough?
Domains and capabilities should be evaluated through tools like the FinOps Maturity Model. This is based on a framework that enables companies to start small and increase scope and complexity as needed.
You begin by trying to work out cost allocation, and then you move on to cost allocation. Finally, actual processes must be in place, such as procedures that automatically kick in to remediate issues and take companies where they need to go.
Still, even the beginning stage can be difficult, especially for smaller companies that don’t have the tools or expertise to execute strategies. They also might be short on time and human resources. With this in mind, a company might not be in the best position to establish FinOps practices across their teams. Without sufficient time and money, they might not receive the return on investment they had hoped for. They could also pull resources away from where they’re needed most.
Simply put, you don’t want to pursue an initiative that costs more than it saves.
Where Do You Start?
The fastest means for building support and momentum is by producing quick wins with tangible results. This can build credibility within the wider organization while creating a foundation that supports future steps. One of the best ways to do this is by focusing on cost optimization. Compute usually accounts for more than half of a company’s cloud expenses. With that in mind, decreasing costs by even a small amount will show the approach holds promise.
Amazon Web Services (AWS), Google Cloud Platform (GCP) and other providers will discount lengthier commitments. However, taking advantage of their incentives does require significant effort. For instance, compute commitment is an older practice that entails reserving space in a data center, often at the expense of being able to create new instances. However, both clouds offer tiers of commitment with varying degrees of flexibility.
Managing a cloud commitment portfolio can be too taxing for a team, let alone a single employee. Tracking usage and following expirations is a year-round task, and there’s no guarantee your needs will match forecasts. If you provision too much, you could pay for unused instances. And if you underprovision, you could miss out on savings.
Ready To Make It Rain?
The secret to quick FinOps success lies in automation and purpose-built tools that yield big savings without much effort. These are created with the belief that cloud architects, DevOps and product teams will build products and create business growth and not spend their time immersed in spreadsheets to monitor commitments.
To understand how cloud resources are utilized, finance teams must link initiatives to a company’s broader business goals. It’s also imperative to identify the most critical cloud services and which teams and applications are the biggest drivers of success. Such tools do this and more while alleviating management pain via the flexibility of on-demand cloud compute coupled with commitment discounts.
Machine learning can accomplish this by analyzing ongoing compute spending and pinpointing workloads not covered by commitments. Tools can then apply the equivalent of a year discount to such workloads without tracking, precisely forecasting, or taking a risk purchasing commitments.
Cloud tech obviously covers more than compute. FinOps goes beyond just cost optimization. And being able to understand cloud scope, usage and costs requires the ability to allocate spend and implement showback to teams, services and applications. New tools deliver cost analytics reporting and access to attributions, taking companies beyond quick wins to establish a wider FinOps practice that will make it rain savings in the cloud.
Are you using FinOps or purpose-built management tools to reduce cloud costs? Share with us on Facebook, Twitter, and LinkedIn. We’d love to hear from you!
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