IT professionals have migrated significant operations to the cloud in recent years. Managing costs has become increasingly complex as cloud usage has scaled rapidly. FinOps, a new discipline combining financial management and cloud operations, offers a promising solution. Adopting FinOps requires bringing financial accountability to cloud operations. By regularly monitoring expenditures, right-sizing to optimal storage solutions, and implementing other financial best practices, gain control over cloud costs. With FinOps, balance cost savings with operational efficiency even as the cloud usage continues growing. This emerging approach can effectively manage the financial complexities of operating in the cloud.

Understanding Cloud Cost Management Challenges

As organizations shift data and workloads to the cloud, managing costs becomes increasingly complex. Unpredictable spending patterns can emerge, driven by factors like resource overprovisioning, orphaned resources, inaccurate use forecasts, and “zombie” instances.

According to Gartner, 30% of cloud spend is wasted.

Gartner

• Overprovisioning of resources often occurs due to inaccurate predictions of storage or computing needs. This results in an unused surplus that still accumulates charges. Resources may also be “orphaned” when teams launch instances for temporary projects, and then forget to de-provision them.
• “Zombie” instances refer to unused resources that remain active and accrue fees. These often go unnoticed due to a lack of visibility into cloud usage and expenses across business units. According to Flexera’s 2021 State of the Cloud Report, 35% of enterprises have over 1,000 orphaned instances running, costing an average of $30,000 per month.
• Limited insights into how and why resources are being consumed also make it difficult to optimize spending. Teams may choose more expensive options than necessary for their workloads due to a lack of understanding about available resources and pricing models.

Implementing FinOps and cost optimization strategies can help curb overspending risks. Closely monitoring resource usage and expenses, eliminating unused resources, choosing appropriate resource types, and improving accountability across teams are key steps organizations should take to gain control of their cloud costs. With a FinOps approach, businesses can maximize the benefits of cloud computing while minimizing financial waste.

What Is FinOps? An Overview of This Emerging Practice

FinOps is an operational framework focused on managing the financial aspects of cloud usage. As more organizations adopt cloud services, costs can quickly skyrocket without proper governance and oversight. FinOps aims to help organizations optimize cloud spending through continuous monitoring and cost management best practices.

Constant Monitoring and Reporting

• The core of FinOps involves regularly reviewing cloud expenditures and usage to gain visibility into how resources are being consumed and billed. Teams monitor services like computing, storage, and bandwidth to check for waste, inefficiency, or unexpected costs. They generate reports on spending and resource usage, analyzing trends to forecast future costs and ensure budgets are met.

Optimizing Cloud Resources

• Once organizations understand their cloud costs and usage, the next step is optimization. FinOps teams work to maximize the value of cloud services while minimizing waste. They may shut down unused resources, resize oversized virtual machines, reclaim orphaned storage volumes, or renegotiate vendor contracts. The goal is to use only what is necessary to meet infrastructure needs.

Implementing Cost Governance

• Effective FinOps also requires defining and enforcing policies around cloud spending. This includes setting budgets, allocating costs to departments or projects, and implementing approval processes for new services or resource changes. Teams work with stakeholders across the organization to determine how cloud budgets should be allocated and spent according to business priorities.

With a solid framework of monitoring, optimization, and governance, FinOps can help organizations gain control of cloud costs while continuing to leverage the benefits of cloud services. The practices and tools associated with this emerging discipline are empowering more and more companies to effectively manage finances in the cloud.

Implementing FinOps: Key Steps for Cloud Cost Optimization

To implement FinOps, organizations should take the following key steps:

Regularly Monitor Cloud Spend

• The first step is to gain visibility into cloud costs by reviewing monthly bills and expenditures. Compare spending against budgets to identify cost overruns and anomalies. Use cloud billing tools to view costs by service, region, department, and tag. Look for opportunities to optimize and reduce waste.

Analyze and Optimize Storage

• Storage is a major cost center, so analyze how data is stored and see if efficiencies can be gained. Consider reducing redundancy by deleting unused storage volumes and snapshots. Archive or delete old data that is no longer needed. Choose lower-cost storage tiers for less critical data.

Enforce Financial Best Practices

• Apply corporate finance best practices to the cloud. Define budgets, cost allocation models, chargeback methods, and showback reports to increase accountability. Set policies around approvals for new services and spending limits. Train staff on cloud cost optimization techniques.

Continuously Improve

• FinOps is an ongoing practice. Continue to refine processes and seek new ways to manage costs as needs change and new cloud services emerge. Perform regular audits to ensure policies are being followed. Update budgets and cost models periodically based on actual spending and utilization trends. Promote a culture where cost management is a shared responsibility across the organization.

With continuous monitoring, cost analysis, optimization, and financial governance, organizations can gain control of their cloud spending through FinOps. Balancing cost savings and operational efficiency, FinOps allows companies to take full advantage of the cloud’s benefits at a sustainable cost. Following these best practices, organizations can build a FinOps foundation and develop advanced capabilities over time.

Real-World FinOps Success Stories and Use Cases

Netflix

• Netflix, the popular streaming media company, is an early adopter of FinOps. By closely monitoring its AWS cloud usage and spending, Netflix has optimized costs through improved resource efficiency and minimized waste. For example, Netflix developed an automated system to spin up and shut down non-production environments when not in use. This approach has saved Netflix an estimated $1 million per year in AWS charges.

Spotify

• Music streaming leader Spotify uses FinOps to gain visibility into and control over its Google Cloud Platform (GCP) costs. Spotify built an internal dashboard to track cloud spending by team and category in real-time. This level of granularity has allowed Spotify to identify and address areas of overspending, improve accountability, and optimize resources. Overall, FinOps has helped Spotify cut its GCP bill by 20-30% year over year.

Lyft

• Ridesharing company Lyft deployed FinOps to better understand and optimize its AWS costs at scale. Lyft created a cost optimization team to monitor spend, advise product teams, and implement savings strategies. Using a data-driven approach, the team reduced costs through resource rightsizing, improved resource utilization, and the shutdown of unused resources. Thanks to FinOps, Lyft has achieved 30-40% YoY cost savings in AWS.

In summary, real-world use cases demonstrate that FinOps can yield substantial cost savings and operational efficiencies for organizations running workloads in the public cloud. By applying financial best practices to cloud usage, companies gain insights into spending and are empowered to make strategic cost optimization decisions. With FinOps, organizations can fully realize the benefits of cloud computing in a financially sustainable way.

FAQs About Cloud Cost Management With FinOps

What is FinOps?

• FinOps, or Cloud Financial Management, is a framework for managing cloud costs. It combines financial management best practices with cloud operations to help organizations optimize cloud usage and expenditures. FinOps involves ongoing monitoring of cloud costs, optimizing storage and compute resources, and implementing controls to ensure that spending aligns with business priorities.

Why is FinOps important?

• As more data and workloads move to the cloud, managing costs becomes critical. Without proper cost management, organizations risk overspending on cloud services or underutilizing resources. FinOps helps curb waste, improve budgeting, and maximize the value of cloud investments.

What are the main principles of FinOps?

The core principles of FinOps include:

1. Shared accountability. FinOps brings together IT, Finance, and business teams to manage costs collaboratively.

2. Continuous monitoring. Teams regularly track cloud usage and spending to identify waste or overspending.

3. Optimizing resources. Teams right-size cloud resources and delete unused resources to improve efficiency.

4. Budgeting and forecasting. Teams create budgets, forecasts, and cost allocation models to make data-driven spending decisions.

5. Governance and policies. Teams establish guardrails and policies around cloud usage and spending to maintain control.

How can organizations implement FinOps?

Implementing FinOps typically involves:

1. Assigning responsibility for cloud cost management.

2. Gaining visibility into cloud usage and costs through billing reports and cost analysis tools.

3. Creating budgets, allocating costs to teams and projects, and setting spending targets.

4. Optimizing cloud resources by deleting unused resources and resizing underutilized resources.

5. Establishing governance with policies around approvals, quotas, and chargebacks.

6. Continuously monitoring usage and spending to identify new optimization opportunities.

7. Fostering a culture where all teams are accountable for responsible cloud usage.

With a sustained practice of monitoring, optimizing, and governing cloud costs, FinOps can help companies achieve significant cost savings and maximize the value of their cloud investments.

Summing It Up

Cloud computing and data analytics provide tremendous opportunities for businesses, but the costs of cloud services can spiral out of control without careful oversight. Implementing FinOps gives your organization the financial visibility and operational agility needed to maximize the value of the public cloud. By bringing together stakeholders from IT, finance, and business units to collaborate on spending decisions, you can align cloud usage with business priorities. Regularly monitoring expenditures, optimizing storage, and adopting financial best practices will enable you to balance cost savings with performance. With the right culture, teamwork, and tools, FinOps puts you in control of your cloud so you can innovate with confidence.

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