Undertaking a FinOps strategy can make a significant difference to the expenses associated with usage of cloud-based platforms and services.
Rafi Katanasho, APAC Chief Technology Officer, Dynatrace, says by taking the time to carefully plan the approach and obtaining buy-in from all teams, an organisation can expect to achieve sizable business benefits.
With cloud computing now a firmly entrenched element within the IT infrastructures of many firms, attention is shifting to finding ways to lower its cost.
According to a recent survey by infrastructure specialist CloudZero, almost half (49%) of organisations consider their cloud spend to be too high. For this reason, growing numbers are examining the concept of FinOps.
FinOps is a public cloud management approach that aims to control costs. It provides IT, DevOps, CloudOps, finance and business teams with continuous cost optimisation tools and accurate costings of cloud resource usage.
It should be noted, however, that FinOps isn’t only about reducing costs. The approach aims to support the best cloud spend that maximises the value of all necessary computing resources.
The key principles of FinOps
To ensure the best results are achieved, it’s important for an organisation to establish and adhere to a range of key FinOps principles. These include:
- Cross-team visibility: It’s important to ensure all teams within an organisation have granular visibility into cloud usage and spending in real time. Costs should also be mapped to business units for better reporting and budget allocation.
- Usage ownership: Continuous, automated policy-based compliance should be established for all teams throughout all cloud platforms. This helps to prevent overprovisioning, underutilisation and hidden costs.
- A FinOps culture: Senior management should work to create optimisation strategies with realistic goals for each team across the organisation. Also, benchmarks should be included for stakeholders together with best practices that support the organisation’s anticipated growth.
Rising importance
Experience shows that the value of FinOps lies in its potential to help organisations achieve smart, cost-efficient cloud spending.
Unfortunately, however, a recent study by from McKinsey & Company found that enterprises often don’t develop at-scale FinOps capabilities until their spending on cloud resources reaches $US100 million a year. This clearly means that many are waiting far too long to adopt the strategy.
Indeed, taking a wait-and-see approach can actually end up being more costly. It involves a greater effort to transition teams from a datacenter approach to a cost-effective cloud consumption mentality.
The McKinsey study also found many FinOps teams focus largely on operational tasks and contract management. High-impact strategic cloud initiatives, however, may add more value.
Such initiatives can include the introduction of the concept of cloud-unit economics. This involves assessing the cost of every transaction in the cloud on a per-unit basis to reveal the business value of the current cloud spend.
FinOps teams can also undertake consumption forecasting. This involves taking steps to evaluate and predict future cloud spend based on existing usage rates.
The teams can also undertake behavioural change management strategies. This involves establishing a FinOps culture that supports buy-in from all stakeholders, as well as metrics that all teams understand and use.
Achieving maximum benefits
As well as optimising cloud usage and reducing costs, an effective FinOps strategy can provide a range of other business benefits. These include Driving business innovation by freeing resources for new projects and enabling trust and increased collaboration among teams.
A FinOps strategy can also help to prevent cloud sprawl and overprovisioning of cloud resources while also improving financial responsibility of teams and the organisation as a whole. Increasingly important is its ability to support enterprise endeavours by optimising digital architectures as well as providing the insights to support reducing carbon footprint and contributing to ESG programs.
Overcoming challenges
While it delivers significant benefits, undertaking a FinOps strategy can also create some challenges. Some that need to be addressed include:
A misalignment between technology and finance teams: Engineers focus on cloud computing, innovation, and moving workloads to the cloud, while finance teams focus on minimising costs. FinOps requires both teams to work together to develop goals for cloud utilisation.
A lack of motivation for taking action: Developers need the freedom to ‘fail fast’ and take risks without worrying about cloud costs to improve continuous integration and continuous delivery processes. Sharing cloud spend and creating important cost-efficient solutions are key to achieving companywide initiatives.
Misallocation of shared costs: Unallocated shared costs can hinder the transparency and accounting accuracy of cloud spending. Identification and correct allocation of shared costs is therefore critical.
Increased waste and unused resources: Any cloud workloads that exceed agreed-upon capacity or leave unused resources increase cloud waste. Adopting observability and monitoring tools can effectively detect and eliminate unused resources to prevent waste.
Undertaking a FinOps strategy can make a significant difference to the expenses associated with usage of cloud-based platforms and services. By taking the time to carefully plan the approach and obtaining buy-in from all teams, an organisation can expect to achieve sizable business benefits.
