Controlling cloud spending at the enterprise scale is a massive challenge.
Over 80% of respondents to a 2023 survey cite controlling cloud expenses as their biggest organizational challenge. Yet, these respondents estimate that almost one-third of their cloud investments could be more efficient and well-spent.
As cloud provider payments expand in size and complexity, companies rethink the justification behind their cloud investments. Many struggling to reduce their cloud costs ask themselves if they made the correct choice– when they chose to migrate to the cloud.
That is why FinOps, the intersection of financial management with cloud operations, is so important. It is an integrated strategy that combines business and IT for long-term cost control when tackling cloud utilization.
What is FinOps in the Cloud World?
FinOps is a collection of practices that connect financial accountability to challenges over the variable spending framework for cloud infrastructure as a service (IaaS). It is a system, a discipline, and a cultural transformation combining people, processes, and technologies to boost financial awareness of cloud-based processes.
FinOps empowers cloud-based businesses to determine the right tradeoffs between efficiency, costs, and quality. They can achieve this through:
- Audits: FinOps pushes you to conduct a comprehensive audit of your cloud-based spending while creating budgets for each team. FinOps helps you comprehend your expenses, projections, and any possible waste related to cloud usage, given that it takes time to determine the exact cost of cloud utilization.
- Optimizations: No matter the provider you use, there are techniques to reduce your expenses. It might be necessary to leverage cloud cost calculators or stick to best practices, like closing virtual machines if they aren’t in use.
- Vendor management: In the FinOps approach, aggregating cloud transactions across multiple vendors is crucial to partner with the cloud vendors to align the resources allocated with your company’s long-term goals.
- Culture shift: FinOps is primarily about culture. To maximize cloud value creation, pan-enterprise alignment and collaboration must take place. Everyone is involved, from finance to engineering, from senior management to other relevant stakeholders.
What’s Causing Your Cloud Costs to Soar?
If your monthly cloud bills regularly present an unpleasant surprise, here are the most common causes of high cloud costs:
1. Hidden component costs
Several elements constitute cloud solutions, including file hosting, virtualized computation, and tracking tools. It’s necessary to look into the expenses of every component to decide whether they’re required. For instance, you may consider the storage cost per GB/TB while disregarding transfer charges.
2. Overspending on high performance
Some of your tasks might only need a modest quantity of processing capacity. Therefore, why will you pay for more? Right-sizing the assets guarantees that you only pay for the range of computing power needed to complete the task and nothing more.
3. Incorrect virtual machine configuration
Unutilized resources continue to be invoiced at the total price. Tools for monitoring and stop/start protocols can optimize usage and minimize the risk of overspending on unused assets. Implementing autoscaling supports the allocation of resources according to performance requirements.
4. Inadequate planning
Failing to plan could result in increased cloud costs. This is because you are unable to make investments in reserved instances. You can book instances at a lower price than pay-as-you-go charges if you correctly anticipate an impending usage surge.
FinOps approaches these issues from a strategic perspective and enforces a collaborative governance structure. IT managers gain more visibility into ongoing cloud spending and have executive buy-in to curb it.
5 Techniques to Save Cloud Costs with FinOps
The proper FinOps techniques can help you save thousands of dollars in cloud costs every year. These include:
1. Use spot instances for non-critical applications
Spot instances are discounted examples of underutilized cloud computing capacity. You could save anywhere from 75% to 90% on infrastructure expenses by using spot instances.
Remember that instances may be terminated abruptly when working with spot instances or if the cloud vendor intends to reclaim resources. That’s because these are available at a massive discount.
Prepare for this using AWS CloudWatch, Azure Monitor, OCI Monitoring, or Google Cloud Monitoring. When an instance ends unexpectedly, they will notify you so you may take the necessary steps.
You can also use auto-scaling groupings to routinely substitute terminated instances and preserve the ongoing availability of your applications while also taking advantage of cloud cost discounts.
2. Choose your infrastructure management tools carefully
The right FinOps tech stack can go a long way in helping you reduce your cloud costs.
Some tools, for example, enable users to build infrastructure modules that can be shared and employed across projects. Merely by dragging and dropping cloud resources, data assets, modules, or objects into the schematic, engineers can configure it to create code automatically.
This pre-built template can be saved and synced with another environment. This reduces redundancy and simplifies infrastructure handling, leading to cost savings.
These tools maximize cloud architectures by automating resource provisioning and configuration. This minimizes the amount of manual work and errors. Important characteristics to look out for include modules that can be reused, incorporation with cost-saving tools, and usage tracking.
3. Conduct a detailed analysis of your IT and cloud environment
Obtaining control and visibility over cloud spending begins with an in-depth evaluation of your current state. What are your online expenses at this time? Do you fully grasp your total cloud costs? Can your cloud expenses be specifically allocated across company units, centers of cost, apps, and projects?
Incorporating vital performance metrics, sectoral benchmarking, and trend and variation analysis in the FinOps assessment would be best. Sector benchmarking will allow you to assess how well you manage costs compared to others in your field. Trend and variance assessment will assist you in deciphering usage hikes and associated costs.
Also, evaluate your organization’s level of cost-consciousness maturity. When making decisions, can you balance cost, flexibility, and quality? Or are there gaps that require filling?
If so, consider partnering with an experienced cloud optimization vendor to benefit from their knowledge and address the lacunae identified.
4. Empower engineers while holding them accountable
When organizations rely on a conventional OpEx setting, the engineering team has excellent independence. They can quickly gather the resources needed to operate their services. This makes it hard for cloud users to gauge costs from a technical and financial standpoint.
This is because the engineering team produces resources without adhering to standard guidelines, like defining budgets, time-to-live (TTL), alerts and updates, and resource labeling. This autonomy facilitates velocity and faster product development, but it could be better in the long run.
Instead, delegate engineers as “owners” of the resource library. Please include them in the planning and estimation of cloud expenses. Every team member can contribute to managing cloud costs, so collaboration is the cornerstone of FinOps.
5. Don’t set and forget your cloud storage system
Typically, cloud storage providers provide numerous storage tiers with variable costs. With the correct FinOps strategies, this vast array of cloud storage options can be harnessed to your advantage.
Less frequently accessed data can be retained in a less expensive, delayed storage tier, while regularly accessed data may reside in an expensive, faster, and more adaptable storage tier.
Amazon Web Services (AWS) customers can use the S3 Lifecycle policy to migrate objects to the proper storage class depending on their lifecycle. Similarly, Object Lifecycle Management allows GCP users to independently shift objects to the suitable storage class according to their age, level of access, or other customized criteria.
The Cloud Cost Paradox and the Need for FinOps
Paradoxically, the benefits of the cloud are precisely what makes it so prone to cost overruns.
Everything is geared toward an eagle eye on genuine consumption, shifting control from an overarching procurement unit to individual departments, engineering teams, and developers. The provisioning of assets and cloud services is instantaneous and not subject to an exacting approval process.
Several cloud providers offer many SKUs, making cloud pricing complex and hard to understand.
FinOps allows financial, technical, and executive stakeholders to collaborate on cloud-related business decisions. Investments could become unmanageable and exorbitant without this critical enterprise “culture hack.”
Next, learn how to determine the actual costs of clouds in the new whitepaper from Forbes Insights.