FinOps | 7 Min Read

FinOps Core Principles Explored in Search of Effective Cloud Cost Management

In search of a solution

Nearly every organization has a cloud presence. Web Tribunal reports that 94% of enterprises use cloud services. Flexera disclosed in its 2022 State of the Cloud Report that the top cloud initiative across all organizations was cost savings. With cloud spend on the rise businesses grapple with various methodologies to optimize their costs in the cloud. The adoption of FinOps for cloud cost management is gaining traction. According to the 2021 State of FinOps Report made by the FinOps Foundation, it has become a mainstream practice for large businesses across all sizes of cloud spend. Cloud cost management solutions are the essence of CloudSaver, a managed-service company whose expertise is to craft solutions for cloud–spend challenges, including the maturation of a business’s cloud environment to a FinOps methodology.

The Undertaking

When considering the FinOps journey, a business needs to understand the scope of its undertaking. FinOps is a cultural change. Six core principles delineated by The FinOps Foundation are to be adopted for that change to occur. All six are interrelated and regardless of the company’s maturity, the principles must be integrated in their entirety to transform a company’s cloud cost management to a FinOps practice.

FinOps is for the cloud

FinOps seeks to address the pain points experienced by a business in the cloud. It is cloud agnostic, applicable to any cloud environment, and thus universally adoptable. Traditional financial management is unworkable in a cloud environment. The variable spend pay-as-you-go model makes it a challenge to forecast or control cloud costs. FinOps brings governance and savings to the cloud with a collaborative approach. Its core principles begin with collaboration.

1. Teams need to collaborate

FinOps has engineering, business, operations, finance, and technology teams all working together to control cloud costs. Where previously a business structured its departments in silos that worked independently and did not share information, with FinOps the walls of the silos come down. The finance and engineering teams in particular need to work closely together. By working in tandem the various teams can make informed tradeoffs between speed, cost, and agility. Finance generates near real-time reporting for rapid response to cost, whereas engineers make cost a new efficiency metric. By working together these teams can prioritize savings, speed, and innovation to pursue the best business value in any given scenario. For example, getting a product to market first may take priority over cost savings today, whereas tomorrow cost savings may be more important than the speed of innovation. In either case the company has the necessary agility to maximize the value of its cloud spend by making decisions not solely based on savings. By sharing information and making collaborative decisions the teams create the most value for the business.

2. Decisions are driven by the business value of the cloud

Using the cloud costs money. But the costs incurred should create value. FinOps recognizes the business value created and seeks to maximize that value. Trend and variance analysis helps to understand the basis for cost increases and an evaluation of the value to the business. The business evaluation encourages the development of best practices for the organization as performance is measured against established business goals.

3. Everyone takes ownership of their cloud usage

Each person or team within the organization who uses the cloud must be responsible for that usage and accountable for their cloud spend. Ownership is facilitated by providing visibility to users at all levels of cloud spend. With visibility, users gain a clear understanding of how their actions affect cloud spend. Teams are empowered to manage their own cloud usage against their budget and track team-level targets for accountability. When given visibility and tools, cloud users can optimize their cloud spend.

4. FinOps reports should be accessible and timely

Rapid feedback enables a rapid and more efficient response. Compute resources can be rapidly deployed in the cloud and can be set up to deploy automatically. Real-time visibility enables timely assessment of the under or over-provisioning of resources. Alerts, including anomaly alerts, grant the people who make decisions about cloud usage the ability to make corrections quickly. Previous business cycles saw reports generated quarterly or monthly. Cloud reports need to be available daily and, in some cases, even more frequently.

5. A centralized team drives FinOps

5.1 Efficiency Greater efficiencies and cost savings are realized when the control of cloud spend is centralized. The responsibility for purchasing volume discounts or reserved instances is removed from engineering and controlled by the FinOps team. Cloud costs, direct or shared, are appropriately allocated to the teams responsible for them.

5.2 Representative The FinOps team should be representative of the various stakeholders in the organization and have a cloud-centered perspective. It establishes the cloud governance and controls for the organization’s cloud usage. This centralized team can take an initiative developed for a specific situation and convert the initiative into a companywide policy.

5.3 Innovative By continuous improvement the FinOps team drives efficiency and innovation within the organization. Collaboration should be innovative, quick to adapt to new data and fresh perspectives as best practices specific to the organization are developed and as the needs of the organization evolve. When the team has developed best practices the engineers have the knowledge they need to build well-architected systems.

5.4 Leadership A centralized team is of particular importance when it comes to the success of FinOps. It is one thing to identify spending for cost optimization purposes. It is another thing altogether to have authority to establish spending limits. The team must communicate the value of the limits and the value of having a process for limiting spending. Throughout this effort the organization must have an advocate or champion to drive the process to completion.

5.5 Credibility A centralized team responsible for FinOps adds credibility to the FinOps transformation. No single stakeholder has control at the perceived expense of the other stakeholders. Additionally, a designated team assumes a leadership role that forestalls waning interest in the FinOps transformation.

6. Take advantage of the variable cost model of the cloud

Historically, compute infrastructure purchases were made based on predicted need. Since the cloud allows for the purchase of more resources at any time, purchases can be made based on current use. If additional resources are needed they can be purchased at the time the need is recognized. Cost optimizations such as rightsizing, autoscaling, stopping unused EC2 instances, and orphaned volumes are all cost solutions that can be leveraged. Savings plans and reserved Instances provide additional savings opportunities. The variable cost model presents a plethora of opportunities for capturing value.

You are not alone

The FinOps core principles are far-ranging. They require a substantial investment of resources for implementation. If you are a business coming to terms with your cloud cost management you can obtain expert guidance. As you consider FinOps, or for that matter, any derivation of the cost savings methodologies that are designed to reduce cloud spend, you have the opportunity to partner with CloudSaver. CloudSaver offers FinOps services and has a team of experts who are specially trained in optimizing cloud resources with an array of software tools and talent designed to facilitate transitioning to FinOps and optimize cloud spend.

CloudSaver starts with an assessment of your infrastructure to identify savings opportunities. We provide visibility into your cloud environment enabling you to make informed decisions more quickly. CloudSaver will make recommendations for rightsizing resources, deleting unused instances, cost-effective storage, as well as many other cost optimizations. We become your FinOps-managed service partner and relieve you from the cost and burden of using your staff and resources to implement a FinOps practice.

It’s a Wrap

The enormous growth in consumption of cloud resources is driving businesses to find cloud cost management solutions. There is no quick and easy fix. Those businesses willing to do their homework will develop a cost management methodology suitable for their specific cloud environment. The investigation will probe the nitty-gritty of the pain points and with collaboration among the stakeholders a solution will emerge. Guidance from CloudSaver would lend expertise to the process, leading to the development of a comprehensive cloud cost management structure.

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