Why Should Companies Use Cloud FinOps to Optimize Cloud Costs

While your cloud environment expands or grows, chances are that your cloud expenditure also starts skyrocketing. The global end-user spending on public cloud services is estimated by Gartner to reach nearly 700 billion USD by 2024. And with the latest influx of Gen-AI-based innovations, this number is only going to go up.

Cloud FinOps is an evolving discipline of cloud cost management that will help you streamline your cloud expenditure. With cloud spending poised to increase drastically, it is vital that you understand and implement cloud FinOps practices. In this blog post, we will comprehensively analyze what cloud FinOps is while exploring its key nuances. But before we go into the details, let’s first look at some of the common challenges that you might encounter with regard to cloud cost management.

Cloud Cost Management Challenges Businesses Face

1. Lack of Visibility into Cloud Spending: Cloud environments are often extremely diverse, featuring on-prem infrastructure coupled with multiple cloud solutions from different service providers. This makes it difficult to obtain accurate data on cloud spending as you have to consider numerous dynamic elements, resulting in problems such as overprovisioning of resources, hidden costs, and much more.
2. Lack of Usage Tracking: Companies often miss out on tracking the real-time performance and cost associated with cloud solutions. This creates a scenario where you are unable to identify and rectify any cost and performance anomalies.
3. Operational Silos: Modern-day business teams tend to operate in silos. Different technical teams make numerous cloud purchase and usage decisions without communicating effectively.
4. Unpredictable Cloud Pricing Models: The cloud computing market is extremely unpredictable and diverse. Pricing models change, and new ones get added to the roster constantly, making it difficult to forecast cloud spending.
5. Lack of Governance: Lack of efficient cloud governance practices can also lead to overspending. Without clear policies and guardrails around cloud usage, it will be difficult for you to create financial accountability and might result in cloud sprawl (rapid increase in an organization’s cloud usage leading to the unnecessary acquisition of multiple cloud instances, solutions, and services), duplicate resource allocation, etc.

   Even though these challenges may seem daunting, you can overcome them by integrating an effective FinOps framework designed specifically for streamlining your cloud usage. In the next section, let’s examine what FinOps is and why it is an absolute must-have in the cloud.

What is FinOps and Why it is Vital in Cloud Computing

FinOps, or financial operations, is a management practice that aims to optimize your financial performance by streamlining your expenses efficiently. It promotes a cultural shift that prioritizes enhanced collaboration between cross-functional business teams when it comes to investments, thereby creating better visibility. When these FinOps practices are implemented in a cloud computing environment, it’s referred to as Cloud FinOps.

That is, Cloud FinOps is a subset of the FinOps discipline that focuses on streamlining your cloud expenditure by implementing policies, practices, processes, tools, and much more. While cloud technology empowers you to rapidly procure and use IT resources, it can lead to high cloud expenditure that will place a massive strain on your bottom line. Cloud FinOps can help you overcome this by enabling you to manage your cloud costs efficiently across your organization and business teams.

How Does Cloud FinOps Work?

The Cloud FinOps lifecycle comprises of three stages—Inform, Optimize, and Operate. Let’s try to understand what each stage encompasses.

1. Inform: The "inform stage" of cloud FinOps is all about attaining complete visibility into cloud costs and assigning them to the respective teams, projects, and cost centers to create financial accountability.
2. Optimize: The "optimize stage" of the FinOps lifecycle involves looking for ways to reduce costs while not impacting service delivery. This includes processes like rate optimization and resource optimization, and identifying practices that will improve overall efficiency.
3. Operate: The "operate stage" is the final stage and focuses on executing plans outlined in the earlier phases. This will feature everything from budgeting and forecasting to setting up governance policies and continuous feedback mechanisms.

   Now that you have gained a brief knowledge of the three stages of the FinOps lifecycle, let’s look at its core tenets.

The Key Principles of Cloud FinOps

Understanding the key principles of FinOps is important for executing a successful cloud cost management strategy.

1. Collaboration: FinOps demands extensive collaboration between cross-functional teams. It aims to eliminate all business silos and integrate cloud costs from different departments, facilitating better visibility.
2. Business Alignment: FinOps practices are centered around the belief that business goals must drive cloud adoption and not the other way around. That is, if you are acquiring any cloud service, it must enable positive business outcomes (scalability, speed, etc.).
3. Accountability: The FinOps model mandates that every stakeholder must take ownership and responsibility for cloud usage. This will help foster a cost-centric culture, empowering each individual to understand the cost implications of their cloud usage.
4. Accessibility & Timeliness: The FinOps model places great importance on obtaining cloud cost data and insights that are readily accessible and up to date. Therefore, it promotes the implementation of tools and processes that provide real-time data into cloud usage and spending, allowing for effective cost management.
5. Governance: Effective governance is a crucial element of the FinOps framework. It demands the formulation of a centralized FinOps team that drives the seamless implementation of policies, processes, and control around cloud usage and spending.
6. Flexibility: The FinOps model essentially looks to fully leverage the cloud’s flexible pricing model and variable cost structure. It focuses on dynamically adjusting your cloud usage and spending in response to changing business needs.

How Does FinOps Help Manage Cloud Costs Better? Best Strategies

1. Implement Cost Allocation Tags: Due to the diverse nature of your cloud computing environments, it is easy to get lost in the labyrinth of compute instances, storage servers, and much more. Cloud FinOps facilitates you in streamlining all this by using cost allocation tags that will help you accurately categorize and assign cloud costs to respective departments, projects, or applications.
2. Use Cost Management Tools: Manually tracking cloud spending is tedious and impractical as your cloud estate grows. FinOps emphasizes using specialized cloud cost management tools (AWS Cost Explorer, Kubecost, Microsoft Cost Management) to gain comprehensive insights into your cloud spending. These tools often come with features like cost usage projection, cost anomaly detection, and optimization recommendations.
3. Right-Size Cloud Resources: Improper resource allocation is one of the biggest reasons your cloud costs spiral out of control. The FinOps framework demands that you analyze and configure your cloud resource allocations regularly and align them with actual usage patterns. This process will include tasks like resizing compute instances, eliminating idle resources, and optimizing storage servers, etc.
4. Leverage Service Providers’ Pricing Options: FinOps enables you to study your cloud service providers extensively. All the major cloud hyperscalers offer flexible resource allocation options like reserved instances, discounts, savings plans, etc. With FinOps, you can aim to leverage these options, especially when dealing with predictable workloads.
5. Implement Autoscaling: FinOps focuses on making complete use of cloud computing’s autoscaling feature to manage your cloud spending. With autoscaling, you can configure your cloud resources to automatically scale up and down based on demand. This eliminates the occurrence of issues like over-provisioning or underutilization of cloud resources, which creates cost irregularities.
6. Conduct Regular Cost Reviews: As mentioned throughout this blog post, the aim of FinOps is to trigger a cultural shift that is centered around cost-consciousness and financial accountability. Embracing a cloud FinOps model means that you must conduct period reviews of your cloud costs and usage patterns. By extracting crucial insights from these reviews, you can easily identify optimization opportunities and even update your FinOps processes accordingly.
7. Implement Accurate Forecasting Techniques: Another crucial aspect of cloud FinOps is that it facilitates the usage of forecasting and budgeting techniques. A FinOps model uses historical usage data, growth projections, and planned initiatives to set realistic budgets and implement proactive cost controls.

Eliminate Unexpected Cloud Costs with Gsoft’s FinOps Strategies

At Gsoft, we deliver proven FinOps strategies tailored to your business needs, driving real cost savings and optimizing cloud resources. Our expert team offers customized solutions, continuous optimization, and accurate cost forecasting to ensure maximum efficiency and performance across all cloud environments.

We empower businesses with training and educational resources, backed by our thought leadership, ensuring you stay ahead in cloud cost management while benefiting from our deep expertise across major cloud providers.

With our cloud cost management services, you can:

• Maximize the return on your cloud investments
• Improve the financial accountability and responsibility of your business teams
• Make better use of your cloud resource allocation
• Align business objectives with cloud decisions seamlessly
• Identify cost-effective cloud solutions apt for your business
• Eliminate overprovisioning or underutilization of resources
• Forecast cloud expenditure accurately
• Foster a cost-conscious culture

Conclusion:

Even though the cloud is a crucial enabler of digital transformation, it is vital that you set up necessary guardrails that will keep the cloud expenditure in check. For that, you need a change in mindset that puts the focus on streamlining cloud spending. And that’s where integrating cloud FinOps practices into your organizational workflow makes the difference.

By implementing a cloud strategy that encompasses the core tenets of FinOps, you reduce your cloud spending drastically while unlocking the full benefits of cloud computing. Looking to incorporate cloud FinOps practices in your organization? Reach out to our experts at www.gsoftcomm.net/contact-us/.