FinOps & Cloud Cost Management

One of the crucial “Well Architected Framework” pillar with any Cloud Service Provider (CSP) is Cost Management and Cost Optimization. This pillar is even more important today given the macro-economic condition of the market, the need to reduce costs and to continue improving financial efficiencies and increase share-holder value. Yet it probably is the most neglected. Some of the reasons for this lack of focus on this pillar is current organizational structure, lack of subject matter expertise, functional silos between finance and tech teams – to name a few.  Such gaps lead to financial over-runs, expensive resource usage, little to no visibility on costs of cloud. It also perpetuates market perception that Cloud is more expensive. Well in some situations Cloud maybe more expensive but a lot of time that is because Cloud cost management is not optimized and the issue is compounded by the fact that compute, storage, network resources can be turned on with a click of a mouse-button. This is where the intersection of finance, cloud engineering and operations makes the cloud more transparent under FinOps. It’s a paradigm shift in the way organizations manage and optimize their cloud expenditure.

Bridging the gap between these two functions is essential for achieving cost-efficiency in cloud usage. 

Although there are several ways and paths to achieving FinOps proficiency and maturity, the list below is a good start, nonetheless.

Alleviating Cloud Cost Management Challenges:

• Opening channels of communication between Finance and Tech Teams and having a regular cadence and interaction.
• Cross educating both Finance and tech. team.
• Curating and / or creating processes that align with OpEx not just CapEx.
• Having a standard nomenclature and definitions of terms for both tech. and finance teams.
• Creating a dedicate FinOps team, group, maybe even a central FinOps-COE that should liaise between finance and tech. teams.
• Defining and implementing automated guardrails to ensure cost-controls, detecting and stopping cloud cost over-runs and anomalies such as Economic Denial of Sustainability / Service (EDoS)
• Leveraging cost reporting and visualization natively available with all CSPs.

The FinOps Advantage:

Provided that some of the above stated efforts are conducted the rewards will be almost instantaneous, at-least from a cost visibility point of view, but it just doesn’t stop there.

• Real-time Financial Visibility – advantage of per second / per minute billing.
• Granular financial report based on individual resource usage. One can get really creative here with Azure / AWS resource groups, GCP Projects, Tags and Labels etc.
• Gaining financial efficiency insights on each organizational initiative, business value gain vs spend on each app., project, department, LOB etc. and making business decisions based on these granular financial details.
• This level of detailed granularity permits for accurate Chargebacks – which prior to such data was a difficult work to say the least. Even in best scenario the chargebacks were averaged out and hence inaccurate and somewhat unfair, after all why should department “A” pay as much as department “B” if the usage wasn’t identical.
• Leads to better accountability, cost awareness, and investment optimization not only at the LOB level but at the exec. & board level.
• More accurate financial forecasting and reporting due to detailed and granular data.
• Allocating optimized budgets for future cloud expenditures and defining budget controls via policies and other automated cloud controls.
• Reducing toil on both Technology Engineering and Finance teams – as a lot of effort is wasted is requesting for financial usage, manual reporting and validation via the dreaded Financial Excel Sheet!!
• Finally, such detailed insights and data, equips the customer to really understand and negotiate favorable pricing with Cloud Service Provides.

Provided below are some excellent references for FinOps and FinOps certification if you want to further dive into this stream:

• Azure: Cost optimization documentation - Microsoft Azure Well-Architected Framework | Microsoft Learn

• AWS: Cost Optimization Pillar - AWS Well-Architected Framework - Cost Optimization Pillar (amazon.com)
• GCP: Google Cloud Architecture Framework: Cost optimization
• FinOps Foundation: The FinOps Foundation
• FinOps Framework: FinOps Framework Overview
• FinOps Certifications: FinOps Certification and Training

#GCP, #AWS, #Azure, #FinOps, #Cloud