Authored to Darryl Sackett, Managing Director of Cloud FinOps at SoftwareONE
Recent McKinsey research found that COVID-19 has accelerated digital transformation by several years – and the scale of the pandemic has forced a rapid and dramatic increase in digital transformation investment across all sectors. However, when implementing a new digital infrastructure in an organisation, especially at an accelerated pace, it’s tricky to monitor spending. The Flexera 2022 State of the Cloud Report found that organisations waste over 30% of their cloud spending.
Fortunately, the cloud is full of opportunities for finding savings and recovering spending quickly. However, optimising cloud costs is an ongoing challenge due to the highly dynamic nature of cloud use. This is where FinOps fits in. FinOps uses tools such as trending and variance analysis to examine cloud costs – and simultaneously benchmarks cloud workloads and costs to gain meaningful insight into how the business performs.
Cultivating a new cloud culture
At its core, FinOps is a way for cross functional teams to manage their cloud spending while promoting a faster product delivery. FinOps is about extracting the maximum amount of value from your cloud strategy by improving transparency, financial control, and accountability. As a cultural practice, FinOps encourages all members of an organisation to take ownership of their cloud usage by applying best practices and working together to ensure the most value for every pound spent. The result of the FinOps operating model is better visibility, control, and predictability of cloud spending- ultimately leading to an increase in business value. But where do you start?
The first stage of implementing a FinOps strategy is gathering the data. There needs to be visibility into your cloud spending, and a need to create a system of shared accountability by showing teams and stakeholders what is being spent, where it’s being spent, and by whom. This stage doesn’t yet require a cultural shift, but can be complex to perform, the intelligence produced provides transparency across an organisation’s whole cloud expenditure.
During the next Optimisation phase, cloud spending is reduced by identifying and removing unnecessary resources, for example turning off resources outside of the hours they are used. Ideally, the impact of these measures on speed to delivery and performance is minimal, while cost savings of as much as 20 to 30 per cent are realised.
The final stage of the FinOps model is Operate. Here, processes are defined and executed that align overall business goals with Technology, Procurement and Finance. By this stage, the cloud is being used efficiently, often saving costs over equivalent on-premises setups. Budgets are also more easily predicted and managed as spend is tied directly to the estimated value of each cloud use case.
Maximising every pound spent in the cloud
A 2021 Gartner report found that almost 70% of organisations using cloud services today plan to increase their cloud spending. Cloud adoption, however, has created a certain unpredictability in many IT budgets, which frequently results in overshooting that budget. Businesses are now starting to feel the squeeze, especially when they are dealing with a multi-cloud strategy. It’s a growing problem that requires a new operating model.
FinOps optimises cloud spending by taking a collaborative approach, FinOps seeks to understand the subtleties of an organisation’s cloud costs and technology needs and aligns those with business goals to drive value. One of the important things to note about FinOps is that it’s not just something you implement and forget about. It’s an evolving practice or culture designed to develop over time. Adopting a FinOps operating model is ideal for companies that have or are planning to digitally transform and need to evolve their business model accordingly.
There is a high level of commercial and technical complexity in the cloud that now needs to be proactively managed, FinOps is necessary not only to cut costs but to maximise every pound spent in the cloud, drive innovation, and create transparency across the wider business. When implemented correctly, FinOps becomes a core pillar of cloud strategy and reinforces each decision to be made with the tenets of delivering value cost-effectively. FinOps requires a huge effort from both the teams and management involved, but reining in those runaway cloud costs is worth it.
