In the fast-changing landscape of cloud computing, the efficient management of costs and resources has emerged as a paramount concern for businesses of all sizes. The concern is also shared by the majority of enterprise IT leaders. According to a 2020 survey of 750 senior business and IT professionals at large enterprises across 11 industries and 17 countries, only 37% of respondents say they are achieving the full value expected on their cloud investments[i].Moreover, this is becoming a rising board-level issue – According to CloudZero’s State of Cloud Cost Intelligence 2022 report 73% of respondents, cloud costs concern the board or C-suite[ii].
As organizations expand their cloud presence, there is a growing need for strategies and practices that can help optimize financial operations in the cloud. This is precisely where Cloud FinOps, or Cloud Financial Operations, plays a pivotal role. Organizations that use FinOps effectively can reduce cloud costs by as much as 20 to 30 percent[iii].
Cloud FinOps, encompasses a range of practices and principles aimed at optimizing and overseeing the financial aspects of cloud computing within an organization. Cloud FinOps is not merely about reducing costs; it is about achieving a delicate balance between controlling cloud expenses and maximizing the value that the cloud can deliver. Its primary focus is on cost control, ensuring cost-effectiveness, and aligning cloud expenditures with the organization’s broader business objectives.
One of its key attributes is the collaborative approach it fosters, uniting teams from finance, IT, and operations in the endeavour to collectively manage cloud expenses. This collaborative approach goes beyond cost management, ensuring that cloud expenditures are in harmony with the overarching business goals. In our blog, we will talk about why Cloud FinOps matters and share the simple steps we took to set it up internally and help others do the same. Join us as we break down why it is important and how it can make cloud management easier and more efficient for everyone.
Why is Cloud FinOps needed?
By uniting diverse perspectives and skill sets, Cloud FinOps cultivates a synergistic environment that empowers organizations to confidently and efficiently navigate the financial complexities in the ever-changing landscape of cloud computing. Cloud FinOps is your reliable guide for a bunch of good reasons:
- Cost Control and Optimization: While cloud technology offers remarkable flexibility and scalability, it can pose a financial challenge if not handled with precision. Cloud FinOps empowers organizations with the strategies and tools needed to regain control over their cloud expenses, ensuring that resources are used efficiently and budgetary constraints are avoided. In essence, it is a methodical approach to enhance financial discipline and resource optimization in the cloud environment.
- Cost Visibility: Gaining a comprehensive understanding of cloud expenses can be a formidable challenge in the realm of cloud management. Cloud FinOps practices provide organizations with the tools and methods to meticulously track and analyze their cloud spending, offering a detailed, granular view of where financial resources are allocated. It is similar to having a precise financial roadmap for your cloud expenditures.
- Efficiency: Cloud FinOps focuses on enhancing the efficient use of cloud resources by optimizing the size of instances, capitalizing on reserved instances for cost savings, and exploring cost-effective pricing models. It is like fine-tuning the performance of your machinery to maximize productivity and minimize costs.
- Business Alignment: Ensuring that cloud expenditures directly contribute to the achievement of business objectives is of paramount importance. Cloud FinOps practices are instrumental in aligning cloud spending with the delivery of tangible value to the organization. In essence, it is about ensuring that every cloud investment is a purposeful step toward fulfilling your business goals, making financial decisions a strategic asset for your organization.
- Accountability: Cloud FinOps uses strategies like cost allocation and tagging to ensure that teams and individuals are responsible for how much cloud resources they use. This encourages a culture of financial prudence and careful spending.
The setup essentials for a FinOps practice
Setting up a Cloud FinOps practice means taking specific actions to make sure we spend our cloud budget wisely, manage costs, and make sure our cloud resources match our business goals. Below is a comprehensive guide that outlines the initial steps to get started:
- Objectives and Goals: Start by defining your organization’s financial objectives regarding cloud usage. Are you aiming to reduce expenses, enhance cost transparency, allocate costs to specific teams or projects, or pursue other goals? Your FinOps practice’s actions will be tailored to these objectives, so ensure they are clearly defined.
- Team Formation: Build a cross-functional team comprising members from finance and IT Operations. This team will oversee the implementation and management of the Cloud FinOps practice, analyzing spending trends and offering insights into optimizing costs. The selection of the right individuals for this team is critical.
- Cloud Cost Visibility: Deploy tools and methodologies to gain visibility into your cloud expenditures. Utilize cloud cost management tools such as AWS Cost Explorer, Azure Cost Management, or Google Cloud Cost Management. AWS Trusted Advisor is especially valuable for rightsizing recommendations and other cost-related insights.
- Tagging and Labelling: Develop a systematic tagging and labelling strategy to track resources and allocate costs to specific departments, projects, environments, or teams. Tags and labels are vital for precise cost attribution, so ensure you have an effective tagging mechanism in place.
- Budgeting and Forecasting: Establish cloud budgets and forecasts based on historical usage data. This allows you to set cost expectations and monitor your spending against these predefined targets.
- Cost Allocation: Implement cost allocation methodologies that accurately distribute cloud costs to different departments or projects. This may involve creating custom scripts or employing third-party tools to streamline the process.
- Cost Optimization: Identify opportunities for cost optimization, such as rightsizing instances, utilizing reserved instances, or leveraging serverless computing. Regularly assess and adjust your resources to maximize efficiency and minimize unnecessary expenses.
- Cost Monitoring and Alerts: Ensure vigilant cost monitoring by setting up alerts that notify you when expenses surpass predefined limits. This quick-response system helps address unexpected cost spikes promptly.
- Education and Training: One of the key requirements to establish a robust Cloud FinOps practice is investing in the education and training of your employees. By providing targeted training, you empower your team to navigate the cloud landscape with financial acumen. Equipping your workforce with the knowledge and skills needed to make informed decisions contributes significantly to the success of your Cloud FinOps practice, fostering a culture of financial responsibility and efficiency.
- Monthly Reporting: Generate regular financial reports outlining cloud costs, allocations, and savings. These reports serve as a crucial tool for informed decision-making within your Cloud FinOps practice. Share these insights with relevant stakeholders to enhance transparency and foster strategic choices aligned with your organizational goals.
- Continuous Improvement: It is imperative to consistently refine your Cloud FinOps approach. Stay vigilant for pricing changes from cloud providers and keep abreast of evolving technology trends. This commitment to continuous improvement ensures the ongoing optimization of your cloud financial operations, aligning them with the dynamic landscape of both technology and pricing structures.
- Governance and Policies: Enforce governance policies to align cloud resource provisioning with organizational standards. This alignment not only fosters a structured and compliant approach but also lays the foundation for effective cost management within the Cloud FinOps framework.
- Cost Accountability: Cultivate accountability by associating cloud spending with specific teams or individuals. This not only encourages a sense of ownership but also empowers teams to actively manage and optimize their cloud usage, fostering a more cost-conscious and efficient Cloud FinOps practice.
- External Assistance: In instances where internal assistance in Cloud FinOps is limited, consider external expertise, such as engaging with a Cloud FinOps consulting firm. Their specialized knowledge can bridge the gap, offering invaluable insights, best practices, and hands-on guidance. This external collaboration ensures a smoother implementation of Cloud FinOps, even if your in-house proficiency is currently lacking.
- Feedback Loop: Establish a culture of continuous improvement. Gather feedback from teams and stakeholders to refine the Cloud FinOps practice. Remember, establishing a Cloud FinOps practice is an ongoing commitment. Regular monitoring, adaptation to organizational needs and dedication are key. It is a crucial element of cloud management, ensuring cost-effectiveness and alignment with business goals.
Incedo’s Cloud FinOps Success with AWS Optimization:
Incedo’s Cloud FinOps practice empowers clients to uncover hidden cost-saving opportunities in their cloud expenditures. Our innovative approach combines a swift 5-day Diagnostics process with the cutting-edge CloudXpert platform and powerful AWS tools like Cost Explorer, Trusted Advisor, and Performance Manager to guide clients through seamless cloud expense optimization.
In a recent success story, Incedo achieved a remarkable 20% cost reduction for a client by seamlessly transitioning to a serverless data ingestion architecture. This achievement shows our commitment to delivering real results and helping organizations get the most value from their cloud investments.
Conclusion: In today’s rapidly evolving cloud computing landscape, efficient cost and resource management are paramount for businesses. Cloud FinOps, or Cloud Financial Operations, is instrumental in optimizing cloud expenses and aligning them with overarching business objectives. It thrives on collaboration among finance, IT, and operations teams, ensuring seamless financial navigation.
To make Cloud FinOps work effectively in your organization, you need to establish clear objectives, assemble the right team, gain cost visibility, implement resource tagging and labeling, set budgets and forecasts, employ cost allocation strategies, and continuously optimize costs. These steps are essential for ensuring that Cloud FinOps becomes a valuable and impactful practice within your operations.
[i] – https://newsroom.accenture.com/news/most-companies-continue-to-struggle-to-realize-full-business-value-from-their-cloud-initiatives-accenture-report-finds.htm
[ii] – https://www.cloudzero.com/state-of-cloud-cost-intelligence/
[iii] – https://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/the-finops-way-how-to-avoid-the-pitfalls-to-realizing-clouds-value