FinOps | 7 Min Read
Scrutinizing Cloud Cost Management Through the FinOps Lens
Efforts to address cloud cost management have given rise to FinOps, a transformative methodology where stakeholders collaborate to optimize cloud spend and accelerate business value. FinOps brings financial accountability to the variable spend model of the cloud. FinOps continuously evolves as a company develops best practices specific to its business objectives. Spiraling costs mandate the deployment of cloud cost management solutions. However, when an organization endeavors to improve its cloud cost management, it may falter in execution. Designing and implementing cloud cost management solutions is CloudSaver’s area of specialty, with its highly trained team of engineers, accountants, and FinOps practitioners. It can shoulder the heavy lifting and guide businesses transitioning to a FinOps practice. Understanding how the components of the FinOps framework interrelate aids a company in determining the proper pace for the changes it must adopt when making a transition.
The FinOps Dynamic Duo
Two dynamics operate in tandem within FinOps. The first is described as the model, “Crawl, Walk, Run.” The second is known as the FinOps Life Cycle. The maturity model describes the proficiency of a company’s FinOps practice whereas the life cycle describes the process in getting there. As a business gets better at managing cloud costs it matures, becoming capable of more complex solutions. The process of maturing is accomplished by the FinOps life cycle which can be visualized as a loop. By repeating the life cycle over and over with increasing rapidity, a business gains experience, hastening its maturation.
FinOps Maturation
FinOps is achieved by taking incremental steps. Beginning at an elementary level, each success story promotes growth to the next level. The different levels are identified as, “Crawl, Walk, Run,” the three stages of the FinOps maturity model. These stages delineate the company’s FinOps sophistication and are useful in assessing the capabilities of the organization within FinOps. Interestingly, the goal is not to mature each of its capabilities to the highest level of maturity. Rather, it is to achieve the level of maturity that creates the most value for the company. For example, if additional value is not gained by maturing a competency from walk to run, the company should advance no further but instead focus on other competencies that would yield more value by further maturation. As an organization advances through the maturity stages, it gains the capacity to deploy more cloud cost management tools at a higher level of complexity. No one arrives at a fully mature FinOps position simply by pushing a FinOps button. Maturity in the FinOps ecosystem is gained by acquiring proficiency at a basic level and then scaling up to a more challenging level.
Crawling
In the Crawl stage organizations seek to understand current costs and to correctly allocate spend to various users. Cost-saving actions are taken to reduce cloud spend. These actions typically consist of seeking discounts through service provider agreements as well as utilizing savings plans and reservations. CloudSaver finds that these actions create roughly 20% in savings of current cloud spend. This level of endeavor is a characteristic of the crawl stage as it is noninvasive and does not require a cultural change or the creation of a FinOps team. The organization’s actions at the crawl stage are primarily reactive, addressing the cloud spend after it has become a problem.
Walking and Running
As the organization matures it advances to the Walk and Run stages. At the Walk stage the changes become more structural, including strategies such as rightsizing and shutting down unused or underused cloud resources. These kinds of changes require shifts in the culture as more stakeholders become involved and decisions are made among competing interests. CloudSaver finds that historically these actions create another 20-30% in savings for clients. At the walk and run stages the organization’s actions become more proactive. Policies and architecture are established to anticipate cloud spend.
Beyond the Spend
Businesses tend to report that their FinOps level of maturity is at an early stage. A survey of businesses found that 43.5% felt they were in the “crawl” stage, 41.5% in the walk stage, and 15% in the “run” stage. The organizations in the higher levels of maturity, the Walk and Run stages, focus on more than simply reducing cloud spend. They dive deeper. They may choose to assess the efficiency levels of their teams to determine how each team is driving cloud spend. Or, deeper still, they may develop machine-learning forecasting capabilities or develop artificial intelligence for high-speed applications. Each deeper dive advances the organization higher up the maturity model. The business starts small in scope and complexity. As it matures it undertakes larger and more complex goals.
The FinOps Life Cycle
While the maturity model assesses a company’s proficiency, the FinOps life cycle describes the process by which the company seeks to reach that proficiency. There are three phases in the FinOps life cycle, Inform, Optimize, and Operate. Teams within the same company can be at different points in their FinOps life cycle journey as they process their development at different speeds.
Inform The first phase of the FinOps life cycle is the Inform phase. In this phase the organization seeks to gain real-time visibility into its costs. CloudSaver’s proprietary resources enable teams and individuals to see what they are spending and how their decisions impact cloud spend. Accountability for costs on a granular level is allocated to responsible teams.
Tagging should be accurate and complete to facilitate proper cost allocation and to enable comprehensive reports. The task of accurately tagging can be an extensive undertaking as many entities will have untagged or inadequately tagged infrastructure. Additionally, a number of resources are untaggable, inconsistently tagged or shared. A thoughtful tagging strategy will seek to tag as many resources as possible so that the full cost of each workload is known. Visibility is the key focus. Visibility will bring understanding and encourage better decision-making. Enhanced visibility will pay off with more accurate budgeting and forecasting.
Optimize Once the organization has a clear understanding of its cloud usage it can develop strategies to reduce cloud spend. Examples include rightsizing, automation, stopping unused EC2 instances, and orphaned volumes. Anomalies can be investigated for savings opportunities. Savings Plans and Reserved Instances provide additional savings opportunities. The FinOps team may compare different cloud vendors for the best pricing. Setting the goals for optimization is the key focus.
Operate Once goals are established, those goals are implemented in the Operate phase. The cloud infrastructure is modified to take advantage of the savings strategies developed during the Optimize phase. Implementation of cost saving infrastructure changes is a large part of what CloudSaver does as a managed service provider. Additionally, the business will put in place policies, governance, and controls. Stakeholders continuously monitor their cloud spend against their budgets to determine performance. Execution is the key focus.
When an organization completes its trek through the FinOps life cycle it circles back to the Inform phase where it evaluates new data which now exists because of the goals just executed in the previous Operate phase. The new data will further increase visibility resulting in even greater understanding of the cloud spend. Thus, the life cycle continues as the organization once again cycles through the Inform, Optimize, and Operate phases.
Conclusion
Having a grasp of the dynamics at work within FinOps enables enterprises to implement cloud cost management solutions more effectively. Guidance from CloudSaver lends expertise to the process, leading to the development of a comprehensive cloud cost management strategy, customized to the company’s unique business objectives. When partnered with CloudSaver an enterprise will experience a reduction in cloud spend of up to 50% with a guaranteed cash return on investment in the first year of over 500%. With an investment of time and innovative collaboration a company can transition to a mature FinOps practice, resulting in reduced cloud costs and greater business value.