Almost every cloud consumer quickly realises one harsh reality of the cloud – cloud spending is like gravity; it will always float up unless you actively manage it.
Cloud has been a fantastic mechanism for releasing innovation within organisations, but the lack of central control over cloud spend has bought with it cost management issues as cloud adoption continues to accelerate.
Why should you care?
In our experience, nearly every enterprise cloud user is wasting between 20% to 70% of their cloud spend, with the average being more than 35%.
Cloud financial management is complex enough when you only use one cloud, imagine how bad it can become when you have multiple clouds, then add in the complexity of your legacy systems and other SaaS platform billing.
Before cloud, it was somewhat easier to control IT spend, procurement departments had to physically approval all large purchases. The move to cloud has upended this control and allowed engineers and development teams to bypass the procurement approvals process, buying what they want, whenever they want it, with procurement frantically playing catch-up. As cloud spend reaches material levels, organisations are left to allocate, explain and control often unexplainable costs.
With cloud providers releasing thousands of new features each year and hundreds of thousands of SKUs, what’s clear is that cloud financial management isn’t a problem that going to solve itself. The industry needed a new cloud financial management operating model. Enter FinOps.
“FinOps” is a term that has come late to the party. In the early days, the practice was better known as “cloud cost management”, then “cost optimisation” began to take hold. Nowadays you’ll often hear cloud providers like AWS refer to it as “cloud financial management”. Whatever you call it, the goal remains the same.
FinOps quite simply is the financial operating model for the cloud. At its core, it’s a cultural practise that delivers financial and operational control for cloud and cloud-related spend. Done correctly, FinOps can help organisations better understand their cloud costs and make value-based decisions on how to grow and scale cloud consumption without risk. It is the practice of bringing financial accountability to the variable spend model of cloud, enabling distributed teams to make business trade-offs between speed, cost and quality.
In most large organisations the cost of not doing FinOps is a cause of major pain – cloud spending soars and budgets get rapidly consumed by unnecessary spending, meaning operating margins decrease and frustration with IT increases. Equally importantly lack of structure causes cultural difficulties and factions within departments to form, hitting productivity and inhibiting innovation.
FinOps increases the business value you can gain from cloud services by bringing together teams from across the organisation, including technology, business and finance professionals. The outcome of a successful FinOps implementation can be easily measured – lower costs, better cost control and improved utilisation of cloud resources aligned with meaningful business intelligence.
Quite simply, a good FinOps practise will give you control over spiralling cloud spend, enabling your IT, Security, and Finance teams to manage your cloud ecosystem with confidence as usage scales. It delivers control over cloud budgets, reducing spend and freeing up investment for other business-critical initiatives.
Automation of the optimisation process using standardised tooling is an important step in your FinOps journey, doing this ensures that it becomes an ingrained operational process rather than an ad-hoc activity, maximising savings and freeing up your resource to focus elsewhere.
Before you rush into investigating and deploying tools and platforms to fix the problem, it’s important that you take a step back to ensure that your organisation is in the right shape to deliver on the potential financial benefit that a good FinOps practise can bring. FinOps isn’t just about identifying the waste and waving a magic wand. The bigger problem can be in implementing the changes inside your organisation, it’s about building a cooperative culture, where departments work together seamlessly to ensure your operations are as efficient as they can be, all working to a common goal, using a common language.
If you’re interested in looking into this further, please let us know. The world of FinOps is changing daily, with new areas of focus and methods for saving being constantly identified.