Implementation of cloud FinOps in five key areas to reap the benefits

Janifha Evangeline | Monday, 05 December 2022, 01:18 IST

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One of the keys to a successful digital transformation is Cloud technology. According to a recent McKinsey report, by 2030, the Fortune 500 alone may realize over USD 1 trillion of EBITDA value drivers that are associated with public cloud enablement. However, unlike OpenX, several organizations struggle for achieving near-term value objectives from their cloud investments. In addition, the surveys also reflect that more than thirty percent of cloud spend last year was either wasted or inefficient.

The Conventional IT finance processes do not fit or suit the cloud infrastructure; conventional planning as well as budgeting processes are challenged for addressing dynamic consumption patterns as well as complex migrations. By using centralized IT budgets with traditional allocations often fail to render the needed visibility into sources of cost overruns. Also, CapEx-focused cost controls which do not hold much ability for managing largely OpEx-driven spend & trend-based forecasting inaccurately predict cloud costs often & developer teams do not have the access to cost-aware architecture patterns in order to deploy applications efficiently.

Helping realize the transformational benefits

Google has worked with several organizations such as OpenX, in order to help companies, realize the transformational merits and benefits they can reap out of the cloud. This can be achieved by cultivating a culture of transparency as well as embedding agile processes in order to manage costs.

There are 5 key areas a Cloud FinOps approach depends on, at a high level:

Tools & Accelerators

Without any proper cloud finops tools or processes in place, trying to understand as well as manage the cloud costs can be overly complex & this is specifically true as companies can scale their business in the cloud. Furthermore, by deploying the right cloud cost management tools as well as accelerators & automation scripts for setting guardrails & enforce cost control policies, companies can effectively manage, and track cloud spend with access to near-real-time billing & cost data in order to make better informed business decisions.

Accountability & Enablement

Most of the times accountability & enablement aim at instilling a cost-conscious culture across the company & it means standing up a cross-functional as well as dedicated team with members from technology, finance & engineering for establishing cloud financial best practices with governance. In various companies, this can be seen through an extension of a Cloud Center of Excellence, a Cloud Business Office or even simply a team of Cloud FinOps engineers. While the main factor that enablement focuses is on empowering IT, finance, & business leaders via training for helping them understand the economics of cloud service & the strategies better in order to efficiently deploy as well as manage them, Cloud financial training guides the teams on how to design cost-effective cloud environments. For instance, embracing “cloud-native” design principles such as auto-scaling/elasticity & Infrastructure as a Code.

Cloud-cost optimization

Another iterative as well as continuous process which renders a consistent methodology for managing cloud consumption cost-effectively is cloud cost optimization and it includes 3 key areas of optimization such as resource optimization, pricing optimization and architecture optimization.

For instance, Vimeo developed transcoding pipelines by making use of Google Cloud Spot VMs in order to optimize their infrastructure spend and to do so, they built fault-tolerant workloads which could withstand preemptions, & in exchange, obtained up to a ninety-one per cent discount when compared to using regular on-demand instances.

Measurement & Business Value Realization

Effective measurements do not just create awareness & facilitate agile processes, but they also support a culture which celebrates success & rewards teams to achieve business goals.  Measurement in the service of business value realization is mainly about building a comprehensive set of long-term benefits & cost KPIs in order to quantify the complete net value of the return on digital transformation. Therefore, companies can often start with cost-related KPIs & evolve those KPIs into business value metrics eventually which are mapped for targeted business outcomes.

Planning & Forecasting

Accurately forecasting finances in the cloud needs rethinking of conventional approaches for depreciation & trend-based forecasting of maintenance & licensing costs. However, one of the ways for enhancing the accuracy of dynamic cloud requirements is to leverage workload-specific forecasting models that utilize a combination of both trend-based models for steady-state workloads, and driver-based models for scaling applications, along with monthly variance analysis. In short, one can define cloud budgets as well as forecasts by monitoring cloud consumption trends. They can allocate cloud cost pools with a proper tagging strategy which is mapped to a chart of accounts in a general ledger & conducting a cost-benefit analysis that is based on cloud infrastructure, implementation & support costs.

The road ahead

Organizations and businesses today are continuously looking forward to better operate as well as manage their cloud environments & the need is increasing to manage cloud spend transparently, maximize costs, & get the desired business agility. By improving the capabilities of Cloud FinOps as well as adopting principles of continuous cost optimization, you can accelerate the business value of cloud computing.

 

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