How Finance Services Businesses Can Better Manage Their Cloud Costs

The cloud has revolutionised business. Nimble, cost-efficient, on-demand cloud resources replace clunky and expensive on-premise infrastructure. Scalable resources tied to usage-based spending replace expensive on-premises capital spending.

The cloud also enables anytime access, facilitating telecommuting, online sales and other possibilities.

Financial service businesses have been leveraging such features to deliver net banking, 24×7 support, and to support several other business functions. Forrester estimates financial services firms spent $25 million on enterprise cloud in 2022.

But the cloud comes at a cost. Many enterprises get sticker shock when they receive their monthly cloud bill. They remain clueless about how to rein in their huge cloud bills. Banks and financial service businesses are no different.

An EY survey of IT leaders estimates that 72% of enterprises have moved at least one enterprise application back on-premise.

How can banks and other financial service businesses avert such a scenario?

Implement FinOps

FinOps or cloud financial operations optimise cloud spending across industries. The approach promotes collaboration and focuses on cost when making cloud decisions.

Cloud sprawl and out-of-control costs are often due to a lack of alignment between finance, technology, and IT teams. FinOps promotes collaboration by setting up cross-functional teams with members from these teams. An effective team:

Establish clear guidelines for cloud resource selection and usage. Clear guidelines prevent overspending and maintain compliance. Outside of FinOps, most enterprises do not prioritise cost implications during approval processes.
Fix the budget and review forecasts throughout the software life-cycle.
Fix ownership of cloud resources to specific departments or project teams. Fixing ownership promotes accountability. FinOps involves all stakeholders in cost management decisions. Empowered teams identify and report potential cost optimisation opportunities.
Oversee cloud governance, reporting, and optimisation strategies. Robust governance and reporting tools to promote transparency. Full transparency improves the predictability of costs.
Ensure visibility of all cloud systems to make all services visible and accessible. FinOps success depends on transparency and clarity of vision. To make the most out of their cloud resources, financial service institutions need to know what they are using and how they are using it. Clarity of vision allows alignment of business objectives with cloud operations. Waste reduces
Identify and track cost and usage metrics. The FinOps team benchmarks cloud costs against industry standards and best practices. Action plans offer a blueprint to attain such benchmarks.

Monitor usage and expenses

In today’s dynamic and flexible business environment, functional teams may set up shadow IT infrastructure. They may also circumvent optimisation rules in the rush to get things done fast. The only effective solution is constantly monitoring usage and expenses to correct any anomalies in the bud.

The IT or FinOps team can:

Use cloud service provider tools and third-party cost management tools to monitor cloud usage and expenses. The insights from these tools allow for optimising cloud resources based on actual usage.
Invest in automation. Set up auto-scaling rules to adjust resources based on real-time demand. The investment in automation pays back fast by eliminating spending during idle periods.
Auto-scale to adjust resources based on demand in a dynamic mode. Review instances and adjust configurations to fit actual needs. Downsize or terminate underutilised resources.
Configure alerts for unusual or unexpected spending patterns. Such insights help identify and address issues before they escalate to big problems.
Implement cost allocation tags to categorise and track spending by department, project, or team. These tags make it easier to identify areas that contribute the most to the overall costs.

Proactive steps to optimise usage

Acting on insights from monitoring tools is often reactive. Finance service businesses must also take proactive approaches to keep their cloud costs in check. They need to:

Explore multi-cloud strategies to take advantage of competitive pricing. Use cost comparison tools to analyse the pricing structures of different cloud providers. But be vary of vendor lock-in when going to a cheaper provider.
Utilise reserved instances. A clear idea of usage allows financial enterprises to reserve instances upfront rather than spend more on on-demand usage. Enterprises can use reserved instances for specific resources designated in the agreement. Amazon web service and Microsoft Azure estimate reserve instances to reduce costs by up to 72% compared to on-demand pricing.
Review and clean up unneeded data and storage resources from time to time. Remove unused resources, such as temporary server instances created for a project and never removed. Undertake periodic reviews to identify such unused resources.
Leverage the tools offered by major cloud providers to right-size projects. Many admins have a hangover from the data centre days when they were over-provisioned to meet peak demands. Today, autoscaling, load balancing and other tools make overprovisioning unnecessary,
Take advantage of spot instances. Use spot instances for non-critical workloads with flexible timing. These resources surface when the cloud provider has spare capacity. They are cheaper than on-demand instances, but the provider can interpret the same with short notice. Financial services can use spot instances for non-critical tasks, such as batch processing jobs.
Consider serverless computing, with auto-scaling, for certain workloads. Serverless computing charges only for the computing resources consumed during execution. But it can lead to vendor lock-in and limit control. Banks and financial institutions also have to consider the security of sensitive data. As such, serverless computing suits only specific workloads.

Focus on the employees

Encourage employees and other cloud users towards responsible cloud usage. No amount of rules or policies will keep cloud costs in check unless there is a commitment from the users. Users not committed to the cause disregard the initiatives. To secure employee buy-in:

Communicate the benefits of cloud cost optimisation to promote commitment to the cause. Drive home what is in it for them.
Offer training on cloud optimisation and best practices to rank and file employees. Training encourages responsible resource usage and avoids unintentional waste.
Empower internal talent with cloud responsibilities. A big reason for the cloud sprawl and waste is the lack of expertise to ensure proper implementation.

Conclusion

Cloud cost management is an ongoing activity. Finance services businesses that get it right and can maintain control over cloud costs become more resilient and agile. They reap competitive advantages in an uncertain and challenging business environment.

Nayab Naseer

Nayab Naseer has a master's degree in business management and a honours diploma in computing. He has over 15 years of global work experience spread across aviation, logistics and information technology industries. He's a tech enthusiast and an avid explorer.