Want to Save More Than 20% of Your Cloud Costs?

The cloud delivers significant financial savings compared to running on-premises infrastructure. But these savings do not realise just by subscribing to the cloud. Without financial management, the cloud model may become more expensive than an on-premises system. For instance, unchecked cloud spending leads to resource sprawl, which impedes visibility into resource utilization and increases waste.

The FinOps approach is a proven solution to such issues. FinOps interventions optimise cloud costs and ensure savings.

What is the FinOps Approach?

FinOps is a collaborative approach that brings together IT, finance, and DevOps teams to manage cloud costs. These cross-functional teams review cloud usage and expenses and make interventions to maximise the value derived from the cloud. The team leverages real-time data to gain visibility into cloud spending and understand cost drivers. They use such insights to optimise resource consumption and seek cost-reduction opportunities.

FinOps enables operational teams to focus on delivering value without worrying about costs.

FinOps is an approach rather than any rigid methodology though. A recent research by Foundry highlights FinOps approaches that deliver the highest savings. The study covered 200+ IT and financial leaders who have implemented FinOps. It focuses on their best practices to maximise ROI on cloud infrastructure and applications.

According to the study, enterprises that partner with a FinOps software and services provider will save 20% of cloud costs on average. Applying artificial intelligence to FinOps practices will increase savings by more than 20% on average. However, enterprises that neither rope in an external partner nor apply AI will save less than 10% of their cloud costs, on average. The study also underscores the fact that not just the initiative but the manner of implementation makes a big difference to savings.

The Beneficial Impact of Third-Party Partners

The options for FinOps implementation are either doing it in-house or partnering with outside experts.

Experts recommend against attempting FinOps initiatives in-house. Research major Forrester considers that doing FinOps in do-it-yourself (DIY) mode can jeopardise the ROI of a FinOps practice. The complexity of FinOps and the huge investments involved makes DIY a risky option when it comes to FinOps.

DIY initiatives jeopardise FinOps RoI since enterprises rarely determine the best way to control costs. They limit their cloud initiatives to the tools offered by the cloud service providers. They do not consider whether these tools are the best way to save money. For instance, most DIY FinOps programs rely on cloud providers’ dashboards and analytics tools. These native tools are inadequate for a complete multi-cloud optimisation strategy. Also, enterprises, fixated on operational exigencies, do not have the time to be up-to-date on FinOps best practices.

Third-party partners deliver savings by implementing high-value best practices. They benchmark the successes attained elsewhere and customise it to the new environment.

However, not all service providers are equal. Blindly partnering with any service provider does not guarantee savings or FinOps success. It is important to choose a competent partner.

Look for a partner with deep knowledge and experience in FinOps principles, frameworks, and best practices. Also, ensure the partner is competent in the relevant cloud platforms. A partner with a track record in FinOps, with success stories and case studies to show, is an added plus. Partners with industry experience can better understand the specific cost drivers and challenges.

In the Foundry study, 70% of the respondents regarded industry expertise as the primary consideration. 69% of respondents considered the potential partners’ expertise in AI and automation. 68% of respondents considered the potential partner’s ability to deliver fully managed services.

The Use of Artificial Intelligence

Using Artificial Intelligence (AI) is fast becoming the number one best practice in FinOps. The Foundry study reveals that enterprises leveraging AI for FinOps are 53% more likely to achieve savings of over 20%. In contrast, enterprises that do not use AI for FinOps save only 6% to 10%.

The top use case for AI in FinOps is analytics. 63% of respondents in the Foundry study regard analytics as the top use case for AI in FinOps. 50% of respondents use it for financial management. 48% of respondents attest to productivity gains from AI automation.

Use cases for AI in FinOps abound. For instance, AI makes it viable to evaluate the huge quantum of cloud usage data and identify actions that will deliver the highest savings. AI algorithms run what-if scenarios on cost optimization suggestions. It also implements the approved suggestions automatically.

Reducing Costs through SaaS and IaaS Optimisation

Another time-tested FinOps approach to maximise cloud ROI is making better use of IaaS resources and SaaS licences.

Addressing cloud waste is the most common FinOps practice. FinOps teams set up monitoring systems to track cloud resource utilisation and costs. Applying analytics to these metrics pinpoint overspending, underutilisation, and idle resources.

The best practice based on these insights is rightsizing instances.

Ensuring the right levels of computing, memory and storage resources optimise IaaS and reduce running costs. Over-provisioning increases operational costs and under-provisioning impact performance. Auto-scaling policies allow for dynamic, demand-based resource adjustments to pre-empt over-provisioning and under-provisioning.

Time-tested strategies proven to save costs include:

Using reserved instances for long-term workloads.
Using spot instances for fault-tolerant workloads
Updating the operating system and application images.
Reducing redundant applications
Consolidating SaaS services.

Many enterprises do not pay sufficient attention to licences. Regular audits and reconciliation of SaaS licences unearth unused or underutilised licences. Reallocating the same delivers huge cost savings. A dynamic process to add and remove users ensures accurate and optimal licence allocation.

Likewise, analysing usage patterns can cut costs. When a user always operates within the limits of a lower tier, it makes sense to downgrade the subscription. When users need high-tier features only at times, it is more cost-effective to opt for temporary upgrades or add-ons.

Both SaaS and IaaS cost optimization strategies are integral to FinOps. But saaS delivers more savings compared to IaaS, as per the Foundry study. FinOps programs save 20% or more on cloud software, compared to less than 10% on cloud infrastructure.

The popularity of FinOps runs parallel to the popularity of the cloud. But FinOps success depends on adopting the right approaches and sound implementation. Partnering with a proven resource expert and adopting the time-tested best practices helps.

Christopher Khor

Christopher provides technology insight as well as advising & coaching services to IT Professionals. He is also an Adjunct Teaching Mentor with SMU Business School. He graduated with an MBA as well as MSc(Computer Science) and has over 30 years of working experience, serving in critical roles such as IT Director and CIO positions. He believes in the power of relationship building and people development through mentoring and coaching organizational success.