According to HashiCorp-Forrester report, 94% of the organizations are overspending on the cloud. Even though cloud has changed the software world for the better with its flexibility, scalability and speed, its costs have turned into one the major concerns for businesses today.

How did we get here? In the traditional IT model, costs were predictable – planned well in advance through detailed budgets and depreciated over the life of physical servers. The C-suite had clear visibility and control over major IT investments. Capacity planning was a deliberate, long-term process handled centrally by IT.

How did we get here? In the traditional IT model, costs were predictable – planned well in advance through detailed budgets and depreciated over the life of physical servers. The C-suite had clear visibility and control over major IT investments. Capacity planning was a deliberate, long-term process handled centrally by IT.

How did we get here? In the traditional IT model, costs were predictable – planned well in advance through detailed budgets and depreciated over the life of physical servers. The C-suite had clear visibility and control over major IT investments. Capacity planning was a deliberate, long-term process handled centrally by IT.

All of them have made cloud cost optimization a key part of their engineering culture and processes through an approach called FinOps.

In this article, you will learn how to get visibility into your cloud costs, align your teams around spending efficiency, and put guardrails in place to scale cost-effectively – all while continuing to move fast.

In this article, you will learn how to get visibility into your cloud costs, align your teams around spending efficiency, and put guardrails in place to scale cost-effectively – all while continuing to move fast.

Let’s begin:

Introducing FinOps

Cloud Financial Operations (FinOps) is a discipline that brings financial accountability to cloud spending. FinOps creates a collaborative framework to monitor and optimize cloud costs while maintaining cloud agility by connecting finance, technology, and business teams.

The result? Teams work together with shared responsibility for both cloud spend and business value.

FinOps Principles

Let’s look at the key principles of FinOps from a C-suite perspective:

1. Visibility

To manage costs, you need to know where your money is going. But with the complexity and scale of modern cloud environments this can be a big ask. Cloud bills are opaque, with hundreds of line items and pricing models that vary by service, region and usage level.

This is where resource tagging comes in. It can help provide granular visibility of your cloud spend by adding metadata to each cloud resource (e.g. owner, project, cost center, application). This enables you to slice and dice bills, understand what’s driving costs, what’s not being used and where you can optimize. This visibility is critical for the executive team to start having conversations about cloud costs and making decisions about where to allocate budget and invest.

Real-time cost monitoring is another key part of visibility. Cloud costs can change by the day or even hour based on usage patterns. Waiting for the monthly bill is too late to take action. FinOps tools can provide real-time dashboards and alerts so you can see trends, anomalies and waste as it happens. This allows for proactive management of cloud spend rather than reactive firefighting.

2. Continuous Optimization

The next aspect of FinOps is continuous optimization. The cloud is dynamic so cost optimization can’t be a one-time exercise but an ongoing process. This may include optimizing cloud spend by right-sizing instances, eliminating idle resources, workload placement, reserved capacity and architectural design.

Right-sizing, for example, is about making sure you’re using the cheapest instance types and sizes for your workloads. Many organizations over provision resources, paying for more capacity than they need. Looking at usage data and using automated recommendation engines can help you downsize or consolidate instances and save big without impacting performance.

With the scale and complexity of modern cloud environments, it’s just not possible to manually track and optimize every resource. FinOps tools can automate many of these tasks such as identifying and shutting down idle instances, adjusting resource allocations based on usage patterns or enforcing policies. So, automation is a key enabler and allows organizations to scale their optimization efforts and free up human resources to focus on higher value activities.

Here, optimization is about making smart trade-offs between cost, performance and risk. For example, reserved instances or savings plans can offer big discounts for committing to a certain level of usage over a 1 or 3-year term. However, it also limits flexibility and can lead to overprovisioning if not managed carefully. FinOps helps teams make these trade-offs in a way that’s aligned to the business.

3. Cloud Unit Economics

Traditional IT budgeting with its annual cycles and fixed allocations is not suited to the consumption-based model of the cloud. FinOps introduces a more agile approach with rolling forecasts, frequent budget reviews and a focus on unit economics.

Unit economics is the cost to deliver a single unit of business value. In the cloud that might be the cost to serve a single customer, process a single transaction or run a single use case of the application. Unit economics helps organizations make more informed decisions about pricing, investment and growth strategies by tying cloud costs to business metrics.

This business orientation is a key part of the FinOps mindset as it aims to align IT spend to business value. FinOps teams work closely with business stakeholders to understand their objectives and constraints and to ensure cloud usage is optimized for those outcomes.

4. Building a FinOps Culture

Culture-wise, FinOps challenges traditional roles and responsibilities and requires new levels of collaboration and communication between previously siloed teams.

Developers, for example, need to be empowered with the tools and knowledge to make cost conscious decisions. They need to understand the financial implications of their technical choices and be incentivized to optimize cloud for cost efficiency alongside other metrics like speed and quality. This may require upskilling and education as well as changes to job descriptions and performance evaluations.

Finance teams on the other hand need to adapt their budgeting and forecasting models to the variable nature of cloud spend. They need to work more closely with IT and engineering teams to understand cost drivers and optimization opportunities. They may need to review chargeback and showback models to ensure costs are accurately allocated and business units have the right incentives to manage their cloud usage.

The benefits of this cultural shift can be big. Organizations that adopt FinOps report significant cost savings, often 20-40%. But the benefits go beyond cost reduction. FinOps can also improve forecasting accuracy, reduce risk and accelerate decision making. It can help organizations invest more strategically in innovation and growth by aligning cloud spend to business priorities.

Getting Started

For C-suite executives, FinOps is the most dependable way to get control of cloud costs without sacrificing the agility and innovation that the cloud enables.

In a nutshell, FinOps solves the cloud cost problem by fixing accountability instead of doing accounting exercises. FinOps embeds the psychology of money in software development to make cost-effectiveness a natural part of the development process itself.

Bankai Infotech is offering $2000 worth of consultation for free to organizations who want to get their IT infrastructure evaluated by experts.