The Cloud Spending Puzzle
TRANSFORM YOUR WORLD
The Change Agent
Using FinOps can enable cross-functional teams to work harmoniously to gain more financial control and predictability, reduce friction, and deliver products faster.
Leveraging FinOps for Better Business Outcomes
From inflation to chip shortages to a historically tight labour market, organisations face a litany of economic challenges. And organisations are also navigating a growing set of economic and geopolitical disruptions, which makes it even more important to focus on actions that ensure they are maximising the return on their technology investments. Organisations must find ways to increase efficiency and curtail costs to preserve their bottom line—CFOs are feeling the pressure from all sides.
But that doesn’t mean organisations can slow down the pace of change. As the world becomes increasingly digital, organisations are accelerating their rate of technology investment and strategically applying technology to enable business transformation. Cloud technology enables much of that transformation, promising to improve efficiency and competitiveness. However, with the rise of inflation, companies are struggling to manage the costs associated with cloud infrastructure and services. At the same time, two-thirds of organisations report that cloud compute resources are underutilised.1
With growing cloud footprints, the challenge of managing cloud spending has become increasingly complex. Cloud spending can quickly get out of hand without proper financial management practices in place.
This is where FinOps comes into play. FinOps is a set of practices that brings together IT, finance and business teams to optimise cloud spending and align it with business objectives. The goal of FinOps is to ensure that an organisation's cloud spending aligns with its business objectives and that cross-functional teams work harmoniously to gain more financial control and predictability, reduce friction, and deliver products faster.
Inflationary pressures create a challenge for FinOps practitioners, who must find innovative ways to manage costs while the organisation as a whole remains competitive in a rapidly evolving market.
Companies are struggling to manage cloud costs effectively and are facing pressure to reduce spending and optimise usage. As a result, FinOps practices are becoming more critical than ever, as they provide a framework for managing cloud costs and identifying areas of waste and inefficiencies.
Before incorporating FinOps into an organisation, one must ensure a strong understanding of the three phases of FinOps—Inform, Optimise, and Operate.
- Inform: This phase promotes a better understanding of cloud costs, analysis, and benchmarking of performance both internally and against peers.
- Optimise: Includes multiple optimisation levers. Organisations can, for example, leverage rightsizing insights, automate on and off times for workloads that don’t need to run continuously, and improve reservation planning (taking advantage of the discounts that cloud providers offer in exchange for longer-term commitments).
- Operate: Organisations continuously evaluate business metrics, measure business alignment, define policies, and build processes and workflows to further optimise the value of cloud.
With any new practice, there are bound to be hurdles to overcome.
Key Challenges Include:
- Navigating a multicloud environment: The added complexity of managing multicloud environments demands more time and resources to manage. The lack of transparency in cloud environments and cloud spending sprawl conspire to drive up costs. Additionally, cloud technology is constantly evolving, requiring organisations to continuously learn and adapt to new services and features.
- Managing shared resource costs: In many organisations, IT, finance and business teams work independently, making it difficult to collaborate effectively and create a culture of ownership and accountability. These silos, in turn, make it difficult to create a cost-conscious culture across technology, product and business teams.
- Developing an accurate forecast of cloud consumption: Organisations may have limited visibility into their cloud usage, particularly if they have a decentralised cloud environment or are using multiple cloud providers. Limited visibility can make it challenging to identify areas of waste and inefficiency and limits the ability to accurately forecast cloud consumption.
- Implementing a practical FinOps model: Establishing a FinOps foundation requires a wide range of skills and expertise, including financial management, cloud technology and data analytics. Many organisations may not have the necessary expertise in-house to develop and implement a FinOps strategy.
To overcome these challenges, companies must adopt a strategic approach to cloud financial management, leveraging the principles of FinOps to optimise cloud spending, reduce waste and align spending with business objectives. By doing so, they can ensure that their cloud spending remains under control, even in an environment of rising costs and inflation.
50% of CEOs are very or extremely concerned about the growing expenditures of cloud.3
At its core, FinOps is an operational framework and cultural shift that brings technology, finance and operations together to drive financial accountability and accelerate business value realisation through cloud transformation. There are four key principles to consider:
- Culture and awareness: Empower teams to create a culture of ownership and accountability, where everyone understands the impact of their actions on cloud spending. The goal is to increase awareness and visibility into cloud costs and promote a culture of cost optimisation.
- Data-driven business decisions: Involves using data and analytics to gain insights into cloud spending and usage patterns. Using industry peer-level benchmarking identifies areas of waste, inefficiencies, and opportunities for optimisation.
- Automation and tooling: Leveraging automation, tools and accelerators can help manage cloud costs and create faster feedback loops. The focus is on automating processes and reducing manual effort, allowing teams to focus on higher-value activities.
- Business and financial management: Cloud spending must align with business objectives and financial goals. Ensure that cloud spending is aligned with the organisation’s strategic priorities and that all stakeholders are aware of the financial implications of their decisions.
Change is never easy. As companies are forced to manage change at an accelerated rate, they must map out their journey so they can successfully move the business forward. A crawl, walk, run approach provides an initial framework to implement FinOps.
A crawl, walk, run approach can be a helpful framework for any complex business problems, not just cloud spending, because it allows organisations to gradually build the necessary skills, processes and tools required to implement a solutions framework effectively. The process begins by intentionally mapping out the direction and then the pace of change increases as you move along the journey. With FinOps, that starts with taking a phased approach.
Taking a Phased Approach
The starting point should include a workshop-style analysis to validate the organisation’s cloud FinOps objectives and complete an honest assessment of capabilities maturity. Next, focus on building the foundation of the FinOps strategy. This involves establishing a baseline of cloud spending, gaining visibility into cloud usage, and identifying areas of waste and inefficiency. Clearly define quick-win themes to help measure success and build the overall FinOps roadmap that will guide the programme.
At the walk phase, the FinOps framework has been established. The teams concentrate efforts on leveraging FinOps principles and foundation, onboarding the FinOps team and minimum viable product (MVP) implementation.
At this phase, organisations are focused on the enablement and adoption of the FinOps strategy. Continually look for ways to drive business value with an iterative FinOps maturity assessment and reporting.
The complexity of FinOps implementations can be just as challenging as the problem it is intending to solve. But through the adoption of a systematic approach to identifying, optimising, monitoring and managing multicloud infrastructure spending, organisations can effectively manage cloud costs and drive business value through their FinOps practices.