Is your cloud spending rising at an alarming rate? Is your IT unable to identify ownership of cloud costs? Don’t worry, it’s not just you. The cloud offers scalable services to optimize resources but most businesses are unaware of how much they overspend. So much so that according to Gartner, more than 30% of the monthly expenditure on cloud services will remain unused, through 2022. So cutting costs is the answer right? Wrong. If there’s insufficient cloud capacity or it becomes unavailable for whatever reason, your business suffers. So what is the answer? FinOps, of course!
What is FinOps?
FinOps is an attempt to optimize an organization’s ability to understand cloud costs and make tradeoffs. It combines systems, best practices, and culture to drive change at every level of an organization. The goal is to bring accountability to the cloud operating model and to enable teams to make informed trade-offs between speed, cost, and quality. FinOps makes use of best practices in procurement and real-time data, to track spending and achieve efficient cloud costs while balancing performance and availability of services.
FinOps, when implemented the right way, gives businesses cost transparency on individual Business KPIs. Controlling departments can allocate ownership of cloud spends and optimize for cloud management, pricing, and discounting. No more siloed procurement teams, instead, FinOps teams can use accurate forecasts to assess cloud costs and usage to support product teams. We’ve had tremendous success while implementing FinOps for Vorwerk, where we achieved a 6-figure reduction in cloud costs within the first 6 months and a 7-figure reduction within 10 months.
How does FinOps work?
The FinOps Foundation advocates an iterative approach to managing cloud costs. From our experience, we have broken it down into three main steps: Inform, Optimize, and Operate.
The first step is all about informing the organization, its teams, and members. It’s important that they identify as stakeholders in the FinOps process and understand the value of gaining visibility on allocation, benchmarks, budgeting, and forecasting. Reliable and real-time decision-making, is vital to cloud financial management. Your business and financial partners also need to be reassured that FinOps increases ROI by better utilization of budget and correctly predicting expenses. While cost management is interesting to organizations of all sizes, keeping different teams in the loop can be challenging for siloed enterprises, with numerous business units. Digital transformation usually proves to be invaluable to such enterprises.
Once organizations and teams are informed, the next thing to do is to optimize their cloud footprint. While the on-demand pricing model provides the greatest flexibility, it is also the most expensive, cloud providers usually provide different options for optimization through commitments. Advance reservations, pre-planned commitments to the cloud capacity etc. usually facilitate discounts. We help businesses utilize these options by rightsizing capacity and optimizing spending.
Businesses need to constantly assess performance metrics and monitor cloud spends to understand if FinOps goals are being achieved. For this, we recommend measuring the speed, quality, and cost of cloud capacities and ensuring that they satisfy pre-defined governance criteria for cloud usage.
What are the Best FinOps Practices for Cloud Cost Management?
To identify the most relevant KPIs around business performance, Mindcurv conducts interviews with key stakeholders, including executive management, business/product owners, engineering, operations and infrastructure teams, finance & procurement departments. The motive is to determine who is spending on what. Transparency on cloud cost allocation and cost ownership can be achieved using invoice-driven infrastructure mapping. Analysis of the cost vs platform usage and cost per business service gives key insights on KPIs for cloud financial management. Mindcurv’s recommendations are based on a scoring system for effort vs cost savings. The cost optimization itself involves decommissioning abandoned and idle services, scheduled shutdowns, rightsizing number and capacity of services, negotiating discounts and pre-emptive commitments like reserved instances and saving plans and migrating, re-architecting and re-platforming wherever necessary. It is also important to set up compliance practices to achieve sustainability in the long term. Here’s a quick checklist that works for us:
- Determine which applications use what resources. This is critical for bigger platforms, where millions of users access hundreds of applications.
- Understand fully loaded costs. There is value in mapping spending to your business KPIs. This will help you come up with budgets and forecasts and pave the way for long-term compliance.
- Enable real-time decision-making throughout your IT practice by providing data to all stakeholders, identifying anomalies, and removing underutilized services.
- Use reserved instances and saving plans to cut costs. If you’re sure that you’ll need a certain computation capacity, reserving it in advance is usually far cheaper than on-demand procurement. Accurate analysis of your platform usage data is critical to achieving this.
- Purchase instances from marketplace listings. For example, AWS provides a service called instance marketplace to buy/sell reserved instances. Since these are surplus computation resources, you can save money if you keep a close eye on this.
- Align business vision and communication strategy with FinOps goals and hold continuous reviews on optimization opportunities.
- Create scorecards, metrics & KPIs, and benchmark internally and against peers