What is the best way to manage cloud finances, one of the key disciplines of a FinOps practice?
The answer relies heavily on automation efforts, but many FinOps practitioners do not fully take advantage of the opportunities available to them or the savings available to their organizations. According to a report from the FinOps Foundation, a non-profit Linux Foundation trade association dedicated to codifying and promoting best practices and standards of cloud financial management, nearly half (49 percent) of more than 800 respondents (with a collective $ 30+ billion in annual cloud spend) have little or no automation of cloud spend management.
Of those with some automation, nearly a third rely solely on automated notifications (31 percent) and tag cleanliness (29 percent); Only 13 percent automated rightsizing, with fewer (9 percent) automating space use. Similarly, the Flexera 2022 State of the Cloud report found that, as cloud spending continues to accelerate, it remains difficult to control costs. Organizations estimate that 32 percent of cloud spending is wasted, which is a major reason why 59 percent of organizations plan to optimize current cloud usage, making it the top initiative for the sixth consecutive year. .
Clearly, companies are missing out on opportunities to optimize costs in the cloud. Many businesses are responding by building sophisticated FinOps teams. For those groups to succeed, their processes need to be well defined. Here are four ways to take control of your cloud financial management initiatives and build a good FinOps practice.
- Get the total value of the ownership view.
Companies use many different clouds, many of which rely on public and private clouds. One organization can use AWS for one workload that uses Lambda, Google Cloud for another that uses machine learning (ML), and Alibaba for a workload in China, for example. Regardless of the multi-cloud configuration used, one of the results can significantly challenge the analysis of costs. Taking a total cost of ownership (TCO) view helps ensure you see, manage, and find efficiencies in the big picture.
Having a comprehensive view of costs requires having a standard bill ingestion interface that can display and aggregate all costs, from public and private cloud, including on-premises and hybrid cloud spend . When using a standard bill ingestion interface, you can specify (in CSV format, for example) any costs to be entered. This may include costs for a content delivery network (CDN), hosted services, or for services from across the cloud (including costs from different regions). Ingesting other costs, such as labor costs and on -premises charges (e.g., licensing) or container costs (e.g., KubeCost), increases your ability to get a stable and clear TCO view .
- Get ready for effective multi-cloud reporting.
The natural next step after ingestion is to report. Multi-cloud reporting relies on normalizing your cloud spending. Normalizing spending can mean eliminating certain costs (such as AWS tax), marking up or down your charges to reflect internal adjustments, and/or currency conversion by so all your spending is in a single currency (with exchange rates adjusted monthly). Once this spending has been normalized across all the vendors you use, you’ll generate insightful reports.
Effective multi-cloud reporting allows you to drill down into data to see, for example, different cloud service vendors. This is another important area where normalization is needed. Vendors name their services differently, complicating the ability to gain clarity on cloud costs. Perform the step of recategorizing these services for consistency with cloud service providers. Doing so allows you to have an equal view of computing, network, and storage services across different vendors. This will help your initiatives generate customer reports that meet your showback and chargeback requirements.
- Get the right data with the right people.
An effective FinOps program relies not only on ingesting data from API-enabled sources-cloud vendors or externally hosted solutions, such as a configuration management database (CMDB) or an IT service management (ITSM) tool, for example. What is needed is the ability to analyze and manipulate that data in a way that supports action.
Applying automated policies will help make this process as streamlined as possible. Rely on policies-based on best practices and customized to meet the specific needs of your organization. These may respond to categories such as cost management, compliance, operational security, or SaaS management; other policies may be specific to cloud vendors.
When creating policies, specify what credentials are required, how often the policy should be scheduled (e.g., every 15 minutes, weekly, monthly), and specify the associated credentials. Possible actions to take with the output of these policies include anything that can be performed via the API. This could mean simply raising a ticket for engineering, making an email, or requesting approval. Other common actions in a cloud vendor might be to tag or label workloads, terminate instances, or rightize infrastructure. Each of these actions is a step toward streamlining your cost optimization efforts in the cloud. Integrating these policies with Jira or ServiceNow, for example, helps ensure that the output of your policies goes to the right people within the organization, helping them act on them.
- Identify and track your key performance indicators.
Key performance indicators (KPIs) are clearly required, but often overlooked. Take the time to identify and track KPIs that will explain the success (or shortcomings) of your optimization efforts. Common KPIs for FinOps include unit economics, which can include cost per instance hour, the total number of transitions, or total charges per vendor. KPIs are useful in how they not only measure outcomes, but see outliers in your data. There is a story to your data; make sure you pay attention to it. When you encounter results that don’t benefit your bottom line, rethink your strategy and adjust accordingly.
Managing technology spending is tricky enough. There is no need to complicate the cloud cost optimization process itself.
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Jeremy Chaplinsenior cloud solution architect at Flexera, specializes in cloud financial management and solution architecture. Prior to joining Flexera, he was cloud solution architect for VMware’s CloudHealth. Jeremy is a member of the FinOps Foundation.