How to Choose a Third-Party FinOps Solution

GlobalDots
10 Min read

Cloud providers are becoming increasingly aware of their customers’ chronic overspending. To combat this, major industry players such as AWS and Azure are offering FinOps tools in the form of inbuilt cost dashboards and paying to become a member of the FinOps Foundation. While their native FinOps tools can offer an initial window into the potential of cost optimization within your organization, they are only the first step to long-lasting optimization. Third-party FinOps solutions are developed by independent vendors and come with enhanced functionality and features, including more data visualization and analytics options. 

To bring you up to speed on how FinOps should be implemented and realized, see our What Is FinOps guide. With that foundation in place, this article will cover your essential FinOps tooling needs – and how they fit into your organization.

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What Are The Advantages of Using Third-Party FinOps Tools?

Third-party FinOps tools offer several advantages over native solutions that allow them to enhance and empower cloud cost projects. These tools provide a comprehensive suite of features and capabilities that not only allow CISOs to better control their cloud expenses, but to streamline spending awareness throughout non-IT teams. Fundamentally, third-party FinOps tools allow organizations a cohesive way to align cloud costs with business objectives. This leads to more informed decisions about cloud resources and ensures efficient and cost-effective cloud spending. Learn more about FinOps tools that support this.

One notable outcome of third-party FinOps tools is their enhanced collaboration. While native tools do offer singular cost dashboards, their customizability only goes skin-deep – limited in both customizability and application, they connect up IT team leaders with the single cloud platform’s cost. This is a disservice to the true importance of FinOps dashboards.

The cost transparency touted by FinOps requires collaboration between both finance and technical teams – without a way of understanding each team’s day-to-day impact on cloud spending, informed decision-making becomes increasingly difficult. Ensuring that cloud spending aligns with business objectives means every spending team needs a view into their own impact. Only then can organizations track every penny and identify wasteful spending. This close cross-collaboration also promotes rightsizing of cloud resources, integrates automation for efficient resource provisioning, and provides insights for cost-effective scaling. 

Beyond the Dashboard

While a flexible and customizable dashboard helps achieve this, a dashboard is nothing without in-depth cloud visibility. This is crucial since distributed cloud systems can be complex, with varying reporting methods for costs. Lack of standardization between cloud platforms is a key challenge in cost management, as major platforms do not provide standardization of billing models, formats, APIs, or services. As a result, third-party tools particularly shine in multi-cloud environments, offering comprehensive cost management across multiple cloud providers.

These tools are also valuable for organizations undergoing rapid changes, such as those in expansion phases or those seeking control over rapidly-fluctuating financial transactions. They provide the flexibility to automate routine tasks such as data entry, invoicing, and reconciliation, significantly increasing efficiency and reducing the likelihood of human error. This leads to more accurate financial reporting – and often helps businesses comply with both local and international financial regulations, supported by their adaptability to multiple currencies and multi-cloud regions.

Finally, third-party FinOps tools are regularly updated and maintained by their providers, ensuring they stay current with the latest financial regulations and technological advancements. This is particularly important in a rapidly evolving landscape, where keeping up with such changes can be yet another challenge for your team. Ultimately, going with third parties can solve many of the traditional challenges faced by in-house FinOps efforts.

How to Choose a Third-Party FinOps Solution

Faced with the daunting prospect of choosing the best third-party FinOps solution? The following list breaks down every major feature, and how it’s achieved by the best-in-class solutions. By prioritizing the components each use case requires, you can build a picture of what solution is best.

Cost Management Dashboard

Although many business executives acknowledge cloud technology’s potential, they frequently regard it as an “IT project.” This philosophy has placed the burden of FinOps entirely on the shoulders of Chief Information Officers (CIOs) alone. Without sufficient involvement from key business figures, native cost management projects become isolated and stunted.

The aim of FinOps is to help organizations extract business value from their cloud usage. This requires a multi-team approach that considers how cloud consumption costs correlate with every product. A customizable cost management dashboard plays a critical role in this process, enabling a clear understanding of these unit economics. With this, a centralized view of cloud spending allows for usage tracking and immediate identification of cost-saving areas. 

Cost Allocation and Chargeback

Cost allocation, showback, and chargeback are three vital pieces of FinOps actualization. Data analysis involves examining and understanding data concerning cloud usage and expenses, while showback is the process of ensuring this cost is visible across an organization. Chargeback and Finance Integration involves distributing the responsibility for expenses to the far reaches of the organization that incur them.

After implementing chargeback and providing teams with cost visibility, seasoned FinOps professionals integrate this data into their internal reporting systems and financial management tools. While showback remains an essential element of any FinOps practice, chargeback allocates expenses directly to the profit and loss (P&L) of a specific product or department. In contrast, showback displays these charges by product or department while keeping the expenses within a centralized budget. It’s important to note that neither approach is inherently more advanced than the other – the choice between them depends entirely on the organization’s accounting policies and preferences. At the backbone of either approach is an adaptive and deep-integrating FinOps tool.

Cost Division Among Providers

The ability to divide bill components among providers, features, teams, and customers is key to understanding the monthly cloud bill. This is achieved through a combination of functional activities: the FinOps tool for you needs to be able to split costs and business groups into a consistent hierarchy of accounts, projects, subscriptions, resource groups, and other logical grouping. This is also supported by resource-level metadata such as tags or labels. While native tools are largely still dependent on manual metadata, third-party tools are increasingly offering automated cost division options.

Collaboration and Communication Features

Collaboration is essential for development – it involves interacting with others to receive feedback, foster growth, and accomplish complex tasks that are beyond the capacity of an individual to complete alone.

In the cloud, everything – whether compute power or traffic – incurs cost. Maintaining the balance between budget and flexibility is a task too complex for any single individual. In small businesses, this balance should at least involve collaboration between the Chief Technology Officer (CTO) or Vice President of Engineering and the Chief Financial Officer (CFO). For medium-sized and larger enterprises, the process is even more intricate. Your FinOps tool needs to support this with a wealth of collaboration features, while also offering a degree of flexibility to the individual team’s cloud cost focus.

Customized Reporting

Your organization’s data workflows enable teams to create tailored reports for specific departments, roles, and cloud applications. Native cost tools offered by cloud service providers can give a broad overview of costs but typically lack the capabilities for the detailed analysis that FinOps practitioners require. While most cloud service providers offer alternative means to access more detailed data, this usually results in extremely large files filled with extensive data that can be easily misunderstood. Consequently, this data needs thorough cleaning, normalization, and reporting to be actioned. 

Forecasting Based on Past Data

Forecasting involves predicting future spending by blending insights from historical expenditure with an assessment of upcoming plans. This practice focuses on understanding how changes in cloud infrastructure and application life cycles might affect existing budgets, thereby influencing both budget planning and decisions about future cloud investments.

This process also requires collaboration among key stakeholder teams, such as Finance, Engineering, and Executive leadership. Together, these groups work to develop mutually agreed-upon forecast models and Key Performance Indicators (KPIs). From these models, budgets are established that align with the overarching business objectives.

The ideal tool provides granular visibility of forecasts across various dimensions such as business units, cost centers, teams, products, and services, all framed within the context of the organization’s KPIs. Moreover, it’s crucial that stakeholder teams, including Executives, Engineering, and Finance, have real-time access to a unified source of truth. This access allows them to understand how cloud usage influences forecast trends and budgetary considerations, ensuring that all teams are aligned and informed.

Cloud Cost Optimization

While connecting an organization’s decision-makers to their real-world expenses is vital, the other side of your FinOps tool also needs to be accounted for: identifying and cutting out unused or underutilized resources.

Ideally, your FinOps tool should cover the entire cloud software delivery pipeline. The challenge lies in striking a balance between insufficient resources that hinder your application’s performance and overspending on unnecessary infrastructure. The aim is to establish an efficient architecture that perfectly balances being adequately resourced without tipping into excess. By actively managing resources without requiring custom scripts, third-party tools can flag resources that are not being used to the fullest extent. These tools can set up automated policies for shutting down or scaling down resources during off-peak hours. For example, non-critical workloads can be scheduled to run during cheaper pricing periods or scaled down when not in use.

Tagging

While traditionally the cornerstone of resource visibility, tagging gives human-readable metadata to cloud resources. This allows you to establish ownership of every resource, supercharging chargeback mechanisms. Furthermore, tagging increases your awareness of what environment each resource belongs to. Modern third-party tools are reducing the demands on manual tagging while retaining the same visibility, however.

Cloud Governance

Cloud governance equips organizations with the ability to implement and uphold policies and best practices for cloud usage, while also offering insight into compliance matters. This function can also include automation features designed to enforce policies related to utilization and spending, ensuring adherence to compliance standards to prevent expensive regulatory penalties. One example is missing tag detection, which can better support your engineering teams in flagging precisely what ground-level actions need to be completed before a task is finished.

Integration with Cloud Providers

FinOps tools need to integrate with various cloud providers (like AWS, Azure, and Google Cloud) to gather comprehensive data about resource usage, costs, and performance. This integration allows for the aggregation of data across different platforms, providing a holistic view of an organization’s cloud expenditure and usage.

Alongside its ability to connect up with your cloud landscape, a cost optimization tool further needs to slot in nicely with your pre-existing finance and operations tools. Some of these may be Enterprise Resource Planning (ERP) systems that allow for the alignment of cloud spending data with broader financial data. This paves the way for even greater comprehensive financial reporting and analysis. The same applies to Financial Management and Accounting Software: tools like QuickBooks, Xero, or SAP may already help manage your financial records. Integrating FinOps tools with these systems allows for more accurate budgeting and forecasting.

Anomaly Management

FinOps tools are equipped with sophisticated algorithms that detect, identify, and alert stakeholders about cost spikes and anomalies, which could potentially inflate cloud bills. These tools scrutinize spending patterns to pinpoint deviations, such as sudden cost increases or unusual usage behaviors. When an anomaly is detected, real-time alerts are sent to relevant parties for immediate investigation and response. Furthermore, these tools enable in-depth analysis of data to determine the underlying causes of the anomaly, be it operational issues, pricing changes, or unauthorized usage. Additionally, by integrating with operational monitoring tools, FinOps platforms can link cost irregularities with specific operational events, facilitating faster problem resolution.

Managing Commitment-Based Discounts

Discounts based on spend and resource commitment represent the most common types of rate optimization offered by cloud service providers; AWS’ Reserved Instances are only one example of many.

For the most developed FinOps operations, third-party FinOps tools buy and sell automated discounts in a way that tightly aligns with business needs. This involves frequent purchase cycles that are guided by metrics-driven management, which determines the optimal timing for adjustments. There is a two-way relationship between rightsizing, utilization, refactoring, and choosing the appropriate commitment type and term. Alongside this, regular reporting on KPIs ensures ongoing evaluation and strategic alignment of these processes. The same usage predictions that allow for accurate forecasting mean that FinOps tools can keep commitments tightly under control – in a far more nimble way than manual processes can.

Multi-Public Cloud Integration

Leveraging diverse cloud environments has proven itself a great way to achieve rapid research and development. Due to this, the integration of multi-public cloud platforms in FinOps tools is crucial.

This feature ensures comprehensive visibility and control over cloud expenditures, enabling more efficient and coordinated financial operations. By consolidating data from multiple providers, organizations can identify cost-saving opportunities, optimize resource allocation, and maintain a consistent approach to cloud financial management, regardless of the cloud service provider. 

These features collectively help organizations effectively manage and optimize their cloud spending, ensuring efficient use of resources and adherence to budgetary constraints. If this list makes FinOps seem far deeper than just cutting cloud costs – that’s because it is! One way to get started on your Finops journey is with FinOps as a Service – which helps you jumpstart cost optimization in a more controlled, expertise-driven way.

How Globaldots Injects Innovation into Your FinOps Strategy

Globaldots’ cloud cost optimization solution infuses innovation into your FinOps strategy by combining cutting-edge technology with industry-leading expertise. This approach consistently achieves optimal cloud expenditures and ensures your cloud investments align perfectly with your business objectives. Globaldots’ solutions are tailored to provide deep insights into cloud spending, enabling strategic decision-making and efficient resource utilization. By integrating advanced analytics and expert guidance, they empower organizations to navigate the complexities of cloud finances, transforming FinOps into a strategic advantage that drives growth and operational efficiency. Their innovative approach is key to maintaining a competitive edge in today’s rapidly evolving Finops landscape.

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