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Companies that don’t have visibility into their public cloud spending could be in for a nasty surprise when they get their final bill. With a FinOps strategy you
Companies that don’t have visibility into their public cloud spending could be in for a nasty surprise when they get their final bill. With a FinOps strategy you can ensure that every dollar spent produces the desired return.
Not knowing exactly what you’re paying for or how much seems to be a common trend in the public cloud. Cast AI has calculated that on average, companies buy 37 percent more CPU capacity from public cloud providers than they actually need, exceeding their budget by 13 percent, regardless of the size of the organization. Such situations can be avoided by having more transparency about what you spend on cloud services and whether your spending is profitable.
FinOps is the discipline that focuses on this. We’ll discuss what FinOps means and why your company should get started with it as soon as possible.
The main advantage that the cloud offers compared to on-premises infrastructure is the low cost of entry. Ultimately, you don’t have to purchase your own servers and other hardware, but rent part of the server capacity from the provider. The bill ultimately depends on the amount of storage, CPU, and RAM you purchase and is often calculated per active hour, minute, or even second. The more you need, the more you have to pay.
That sounds logical, but many companies are surprised by it, notes Niels Buekers, CTO at Devoteam G Cloud, a certified Google Cloud partner. “Due to the pay-as-you-go model of cloud providers, companies struggle to allocate their costs. The classic procurement process is no longer available, engineers have earned the right to cover costs without obtaining prior approval. This works well for a long time until the costs suddenly rise.”
Nevertheless, Buekers is convinced that the cloud remains a financially more attractive option for many companies than on-premises. To make a representative comparison, you must use the Total ownership costs take into account. Buekers: “Your cloud costs include much more than in a traditional environment. You often purchase managed services in the cloud, which include replacement of defective hardware, security, backups, configurations and more that are not visible at first glance. You would have to provide all of this yourself if you managed the infrastructure yourself. This costs time and money, not to mention the number of hours IT staff can use to perform more important tasks. You have to factor all of this into the overall cost of the cloud.”
Knowing your costs is no more or less important in the cloud than it is in an on-premises environment, but the approach is completely different. FinOps, an abbreviation of Finance and DevOps, which in turn brings together IT development and operations. The focus is on collaboration between engineering, finance and business teams.
Bringing all these different teams together requires a cultural change within the organizations, explains Buekers. “Where procurement used to be the top priority when hardware had to be purchased, we work in the cloud with a ‘beverage billing system’ where the costs are only incurred at the end. IT and finance used to meet every few years to set the budget. The cloud has changed this and interaction is taking place much more frequently. The goal is to assign every dollar you spend to a specific team to hold engineers accountable for the costs they incur.”
Buekers would like to clear up a misunderstanding surrounding the term FinOps. “FinOps is sometimes equated with cost savings, but I think that’s short-sighted. It’s also about predicting costs and optimizing them relative to the growth of your business. If your costs have increased by twenty percent, but your customers have increased by eighty percent over the same period, that twenty percent may be acceptable. But you can only be sure if you have an overview of the overall picture. When you look at FinOps as a whole, not just how you can save costs, you gain these insights.”
FinOps is not just about saving costs. It’s also about how you can optimize costs in relation to your business.
Niels Buekers, CTO Devoteam G Cloud
In uncertain economic times, many companies will spend every dollar they have at least once before spending it. FinOps must ensure that no resources are wasted, even if, as is often the case, theory precedes practice. Buekers: “We are seeing more demand, but not all of our customers are actively working on FinOps. It takes a long-term vision.”
A FinOps strategy can be built faster than Rome, but you can’t complete it in a day. First of all, companies must dare to look back. Buekers explains: “We will first work out a solution together with the customer Maturity assessment Carry out. We look at how long and far customers have been in the cloud and what culture prevails within the company: Do teams even see what they consume and are they held accountable for it? Many organizations don’t yet have a framework in place to do this.”
Then it’s important to proceed step by step, Buekers continued. “It’s best to put together a small central team with people from different areas such as product, engineering, finance and management. This team can form the basis for developing a FinOps culture in your company. You can concentrate on so many things that you can’t see the forest for the trees. We recommend proceeding both strategically and taking some concrete operational measures to gradually reach maturity. Once you learn what works and what doesn’t work for your company, you can develop policies and principles and further implement them within the organization.”
A little technical help can’t hurt, and cloud providers certainly don’t try to hide the cost of their services. Buekers agrees: “Each provider has specific tools for measuring consumption costs, and with long-term contracts you can negotiate better rates.” If you work in multiple clouds, there are also cross-platform tools to increase visibility across clouds. It’s not necessarily about not knowing the tools exist, but companies don’t always know which ones are important. The tools available also won’t be able to show you the full picture of why costs are the way they are.”
Devoteam G Cloud itself uses the framework of the FinOps Foundation, a non-profit organization committed to developing best practices around FinOps. This framework contains the five core functions of a FinOps strategy:
But that’s not the end of the FinOps story. Your cost strategy itself should also be subject to regular evaluation. Devoteam repeatedly performs one FinOps maturitytest through. “This assessment covers all areas and capabilities and shows how well teams are applying FinOps. It’s a good idea to repeat this assessment every six months to monitor the team’s progress. You can then assign a maturity level per domain or capacity,” concludes Buekers.
FinOps is a marathon, not a sprint, but those who start now will soon reap the rewards. Technological progress does not stand still and companies must continue to invest in IT to keep up. Knowing what you’re spending and what return you’re getting is the foundation of a healthy IT and cloud strategy.
This editorial article was created in collaboration with Devoteam G Cloud.
Source: IT Daily
As an experienced journalist and author, Mary has been reporting on the latest news and trends for over 5 years. With a passion for uncovering the stories behind the headlines, Mary has earned a reputation as a trusted voice in the world of journalism. Her writing style is insightful, engaging and thought-provoking, as she takes a deep dive into the most pressing issues of our time.
