The cloud offers great benefits of enabling anywhere work, scalability and resilience, but costs can get out of control. As the popularity of the cloud increases, enterprises tend to add cloud resources in small increments. Soon end up in a situation where they have more cloud resources than needed, with cost runaways. Such cost overruns can wreck finances and profitability for firms.

Huge cloud bills have given many enterprises a reality check. The focus has shifted from blind migration to effective cost management of cloud resources.

The challenges in managing cloud costs

The core challenge in controlling cloud costs is the decentralised nature of cloud operations. The fluctuating nature of usage makes cloud costs hard to predict or control. 

In many enterprises, unit-level teams buy cloud services or instances. The reasons include enterprise-level silos or empowered teams who do not have the time or patience to route requests through IT. Geographically dispersed teams may also provision resources. Such practices lead to sub-optimal resource allocation at the enterprise level. 

In the traditional on-premises setup, technology was capital-intensive. As such, decisions took place at the senior management or C-suite level. But even individuals can purchase cloud services in small increments, with very small budgets. Even advanced services become accessible for a few dollars. The role of the senior managers changes from capacity planning to rate-optimisation analysis.

These situations lead to over-provisioning or under-provisioning and cause cost overruns.

Enterprises discover FinOps as a solution to these challenges.

What is FinOps?

FinOps is a business discipline that blends cloud operations with finance management. It is an approach to optimise enterprise cloud spending and get maximum business value from the cloud.

The IT team assumes cloud spending and management responsibility in traditional cloud management. The FinOps approach requires everyone in the enterprise to take ownership of their cloud usage. A centralised cross-functional FinOps group offers support.

FinOps framework and principles

FinOps applies cost controls without compromising the availability of needed cloud resources. But FinOps is more an approach or philosophy than any specific method. FinOps is more about changing the culture through people and processes. The tools used in FinOps are only enablers. 

The core principles of FinOps include 

• Collaboration. A centralised team drives FinOps and supports the rank-and-file.
• Ensuring anticipated return on investment on the cloud spend by optimising cloud spend. 
• Establishing spending accountability through shared ownership, effective cloud governance, and implementing best practices.

Collaboration

FinOps is a collaborative approach. FinOps requires cross-functional teams from IT operations, finance, development, procurement, and business units. A cloud procurement specialist usually heads the team. The core purpose of such a team is to promote shared responsibility for the enterprise cloud infrastructure and costs. Such teams collaborate to establish a single source of truth for cloud spending. 

One common fallacy is confining the team to IT, DevOps and other technical managers. Involving business managers enables identifying cost savings areas without sacrificing application performance. 

The FinOps team aligns cloud service allocations with organisational strategy. The onus is on the FinOps team to cultivate a culture of responsible cloud spending.

Optimising cloud costs

IDC estimates FinOps to reduce cloud waste between 10% to 30%. The catalyst for optimising cloud costs is the FinOps team. The FinOps teams provide the leadership to manage cloud costs across the enterprise. They do so by 

• Auditing cloud expenses to cut the flab and end unneeded services. In most companies, overworked employees forget to end subscriptions when the resources are no longer needed.
• Measuring the performance of cloud instances and managing workloads. The ways to do so include repositioning workloads and tuning applications to improve cost/performance.
• Rightsizing instances by benchmarking cloud performance to unearth over- and under-provisioning.
• Consolidating cloud services providers. Many enterprises, especially those that grow organically, have two or more cloud service providers. Costs duplicate, and enterprises lose volume discounts. But many companies also add cloud providers to diversify and avoid vendor lock-in. Geographically dispersed companies may set up regional cloud ecosystems. The FinOps teams have to balance operational and commercial interests with cost viability.

Several tools and resources help the IT and FinOps team to optimise cloud costs. For instance, the Intel Telemetry Collector offers insight into CPU and memory utilisation.

An effective reporting system makes IT budgets and allocations visible and transparent. Timely and easily accessible reports make cloud-related information transparent. Spending decisions based on such reports and driven by the business value of the investment optimise cloud spending. Such insights enable enterprises to make informed trade-offs between cost, speed, and quality.

A good benchmark to emulate is Equifax, the global consumer credit reporting. The company integrated its cloud platform with a general ledger system and configuration management database. The stack reports on cloud usage, anomaly detection, and trends. A cloud centre of excellence (CoE) centralises the firm’s FinOps approach. The CoE co-opts sourcing engineers, financial analysis, and site reliability engineers. It uses the data to set targets and align cloud spending with the firm’s goals.

Soon, the advent of programmable cloud infrastructure will make the task of FinOps teams easier. Artificial intelligence and automation will auto-pilot most optimisation tasks. Human capital gets freed up for more complex tasks.

Establishing spending accountability

A core element of FinOps is ensuring responsible spending. 

FinOps brings much-needed financial accountability and predictability to the cloud. It promotes cloud ownership to the users rather than confining it to the IT or FinOps teams.

The FinOps approach promotes responsible spending through the following interventions:

• Culture change. FinOps success depends on making cloud spending a shared responsibility across the enterprise. In FinOps culture, everyone takes ownership of their cloud use. 
• Enforcing cloud governance. FinOps establishes governance policies with oversight by the multidisciplinary team. The team enforces oversight to coordinate individual and unit-level subscriptions. The best team strikes the right balance between performance and cost across the enterprise cloud.
• Enforcing best practices. A vital task of the FinOps team is to implement best practices for cloud cost management.

Successful FinOps mandates a sustained, continuous approach. Enterprises that rest on their laurels prepare for disaster. Success depends on monitoring cloud workloads continuously.

While FinOps looks easy and great in theory, applying the same in real-life settings is hard. But enterprises have no way out than to focus on FinOps for cloud cost management with greater intent and intensity. Gartner predicts that the proportion of public cloud spending relative to all enterprise IT spending will grow from 17% in 2021 to more than 45% in 2025. Such a high proportion for the cloud makes FinOps indispensable for the cost competitiveness of the enterprise.