24th January, 2024
9 Min read
Book a Demo
Cloud computing has transformed more than individual app architectures: it’s granted both start-ups and market leaders an equal platform for innovation. New products are no longer dependent upon complex revenue-draining in-house server stacks. Instead, cloud-native disruptors such as Uber and Airbnb have been able to harness the once-unthinkable degrees of agility, scalability, and cost-efficiency that are now granted by cloud resources.
While cloud providers operate within a deeply competitive market, the day-to-day demands of highly complex workloads have driven non-stop increases in deployment costs. Alongside the unique complexities of everyday operations, there’s an overarching issue of price transparency that can hobble even the best-intentioned cost optimization project. And while cloud cost opacity muddles real-time cost data, a lack of standardized pricing structure can make cloud forecasting a shot in the dark.
Reduce your AWS costs by over 50%
Discover your Cloud Saving Potential – Answer just 5 simple questions. AppsFlyer, Playtika, Lufthansa, IBM, top leading companies are already using our FinOps services.
This article will explain how FinOps, or Financial DevOps, comes into play, and which key FinOps capabilities can help organizations successfully manage cloud costs.
How Can FinOps Help?
Aiming to optimize performance, cost, and speed, FinOps takes back cloud spend from opaque cloud providers: this cost focus can then begin to benefit the front-line staff and teams that make the day-to-day decisions.
Successfully implementing FinOps and managing cloud costs is contingent upon an organization’s level of maturity in these areas. The FinOps Foundation, an organization dedicated to promoting best practices in cloud financial management, emphasizes that organizations need to assess their current practices against a maturity model. The initial stage, for example, places a focus on visibility into cloud spend. The guiding focus in this stage is to build some basic cost allocation mechanisms. As organizations progress, however, this focus shifts toward more sophisticated FinOps capabilities like automated cost optimization and predictive analytics. You’re welcome to learn more about the FinOps foundation here.
Ultimately, effective FinOps implementation is not just about tools and processes; it’s about fostering a culture where finance and technology teams collaborate closely. This collaboration ensures that cloud investments align with business objectives and deliver maximum value. As cloud computing continues to evolve, mastering FinOps will be crucial for businesses seeking to optimize their cloud investments while maintaining agility and innovation.
Understanding FinOps Domains
Due to the range of FinOps tools and approaches, it can be hard to know where to start. The fact that FinOps is a journey can also leave cloud financial leaders fumbling in the dark shortly after getting started. As one of the key challenges of implementing cloud FinOps, knowing what step is next requires an understanding of FinOps domains.
Real-Time Data
Within early FinOps domains, up-to-date data is king. This is partly due to the speed at which cloud usage changes: the individual choices made by engineers and architects now hold direct sway over weekly cost data. As such, organizations need tools and processes that provide real-time visibility into cloud spending. This enables them to quickly identify areas of overuse or inefficiency and adjust accordingly. Real-time decision-making is a foundational piece in avoiding cost overruns and ensuring that cloud resources are being utilized in the most cost-effective manner.
Cloud Rate Optimization
One step beyond cost visibility, cloud optimization focuses on taking advantage of the most cost-effective pricing models offered by cloud service providers. This includes strategies like reserved instances, where committing to a certain level of usage over a specified period can lead to significant cost savings. It also involves understanding and utilizing various discount mechanisms, such as volume discounts or custom pricing agreements. Effective rate optimization requires a deep understanding of both the pricing structures of cloud providers and the specific usage patterns of the organization.
Cloud Usage Optimization
Digging slightly deeper into the day-to-day realities of your cloud resources, optimizing their usage entails
identifying underutilized resources, such as idle or oversized virtual machines, and either scaling them down or turning them off. It also includes implementing best practices for resource allocation and deployment. Engineers and architects should be supported in this endeavor via policies and training, which leads to the final domain of FinOps success.
Organizational Alignment
The final stage of FinOps maturity is the alignment of financial, operational, and technical aspects of cloud computing. This means ensuring that all departments and teams are working towards the same objectives with a clear understanding of the financial implications of cloud usage. It involves fostering a culture of cost awareness and accountability across all levels of the organization. Effective organizational alignment ensures that cloud strategies and decisions are made in a way that supports both the technical and financial goals of the business.
How FinOps Capabilities Contribute to Successful Cloud Cost Management
Achieving consistent cost management demands a multifaceted approach – due to this, it can be hard to visualize exactly what FinOps is all about. Each of the following FinOps capabilities plays an important role in defining, attributing, and wrangling the decisions that contribute to cost. With each of these, your FinOps projects can avoid the fluff and confusion, and start seeing real change – no matter their FinOps maturity.
How to Achieve Real-Time Cost Insight
Data Ingestion & Normalization
Cloud billing and usage data, when aggregated, produces overwhelming quantities of data. Exported to a spreadsheet, the majority of this data is essentially useless for manual cost insights. This can make expanding beyond the realm of pure cost data – as FinOps demands – seem impossible. Automated FinOps tools can take not only the individual pieces of data from your cloud provider, but further include cloud billing details, how much and how the cloud is used, cloud performance metrics, data from on-site IT asset management systems, business-specific information, and other data from the plethora of cloud services and IT databases you use. Early FinOps growth focuses on converting these different data sets into a single, searchable database. With this, a unified source of information about costs and usage starts to appear.
Cost Allocation
At the core of FinOps lies the ability to assign costs to specific departments, teams, or products. It’s all well and good knowing your monthly Azure costs – but achieving that aforementioned cross-referencing requires knowing precisely which project incurred what cost. This is made possible by tags.
While different cloud providers’ terminology varies, the FinOps foundation’s definition of a tag is most relevant in this case. Here, a tag is a key-value pair assigned to a resource that’s used to describe a piece of metadata. They’re typically used to assign ownership and describe the resource itself. Co-opting these into your FinOps journey is one of the fastest and most efficient ways to kickstart early FinOps success.
Data Showback
The final component of real-time insight is showback. This provides insight to the teams that need to know. Showback provides real-time reports that highlight total costs, cost-saving opportunities, and KPIs relevant to the team in question. This informs the ongoing decision-making that steers every project. Collectively, these three capabilities set the stage for the next phase of FinOps maturity.
How to Optimize Cloud Rates
Managing Commitment-Based Discounts
This entails understanding and leveraging commitment discounts to optimize costs and maximize cloud investment value. Commitment-based discounts are some of the most automatable components. For this reason – and the fact that they provide immediate savings – they’re essential to early FinOps maturity.
For human users, managing the discounts provided by Reserved Instances and Savings Plans can be never-ending. Users need to determine the appropriate resources and services for these discounts, decide the extent of their commitment, consider whether any upfront payment is necessary, and choose between 1-year or 3-year commitments. Additionally, the vast number of options for optimizing rates can be daunting. The cost of the effort, time, and resources spent in assessing, buying, and adjusting these discounts often surpass the actual savings they offer. Automated tools, on the other hand, can not only take into account historical usage, but purchase reserved resources far quicker and more accurately than their human counterparts. As a result, your cloud benefits from continuous optimization – and your engineering teams are free to engage with the upper levels of FinOps maturity.
Anomaly Management
Anomaly detection spots data points, events, or observations that stand out from the normal pattern. Pre-FinOps, this would only be made evident after the bill had been issued. Now, however, the same automated tools that handle data ingestion can also detect spikes in real-time usage – by connecting up with event management systems, FinOps and engineering teams are able to respond in hours, rather than days.
Forecasting
Predictions to how cloud infrastructure and applications usage will change over time are the foundation of automated discount purchasing: by sprucing up this data and making it accessible via dashboards, FinOps tools allow for real-time forecast changes that give you direct line-of-sight to your own budget viability.
Capabilities to Optimize Cloud Usage
Managing Shared Costs
While early cost visibility efforts aim to link projects with cost, many projects extend far beyond individual teams. As organizations expand their use of public cloud services, the absence of a strategy for allocating shared cloud resource costs to specific business units makes it challenging to fairly distribute costs. This lack of clarity also hinders accurate forecasting and budgeting. Accurately dividing shared resources is partly an extension of your tagging architecture – alongside support from teams in self-identifying their own usage. FinOps tools provide support for this via cost groups, which allow you to segment a wider product bill into the individual functions that drive portions of cost.
Workload Management & Automation
With team-specific and task-specific pricing data on hand, it becomes possible to prioritize the teams that need to improve their cloud workload scheduling the most. On-the-ground decision-making can also be supported by automation, which can comb through complex cloud stacks and identify idle and unused resources. Alongside this, processes for integrating new and existing applications into the cloud can provide further support for FInOps longevity.
Capabilities to Achieve Organizational Alignment
Measure and Share Unit Costs
Organizational alignment requires an understanding of FinOps through every cloud touchpoint – unit costs provide one of the most accessible pieces of data for achieving this. This capability allows organizations to understand the revenue generated per unit of business and the associated costs. Not only does this aid in data-driven cost optimization decisions, but it simplifies the reams of FinOps data into a figure every team member can understand.
Chargeback & Finance Integration
Integrating FInOps data with your organization’s pre-existing financial processes and accountability mechanisms can also help foster cost-consciousness. Cultivating a sense of accountability and ownership in cloud cost is one way to accelerate FinOps maturity – so too does FinOps education, which helps ingrain and explain FinOps practices throughout the organization.
Establish an Accountability Structure
Creating FinOps accountability requires a structural approach, that defines the responsibilities and roles related to FinOps within an organization. This structure aims to close the gaps in managing cloud costs operationally across different teams. It provides a framework for cross-functional teams to establish the processes and decision-making pathways necessary to address challenges and resolve conflicts. Additionally, this structure ensures that teams are prepared and proactive in taking necessary actions in advance, rather than reacting to situations as they arise.
Each of the above FinOps capabilities – from cost data discovery to cohesive team action – plays a unique role in achieving optimized cloud costs. With a solid FinOps foundation, you don’t only command more control over cloud costs – but thanks to its streamlined approach, your employees and products benefit from greater collaboration and oversight.
How Assessing Your Own FinOps Maturity Can Help
Assessing your organization’s FinOps maturity is crucial in understanding how to best optimize your Finops approach. GlobalDots’ cloud cost optimization solution doesn’t just provide you with an understanding of your current approach’s strengths and weaknesses, but further takes a proactive approach to improving it. From managing commitment-based discounts and anomaly detection to forecasting and workload automation, GlobalDots’ holistic approach ensures your cloud investments and engineering teams are best placed for cost, performance, and efficiency.