The COVID-19 pandemic kicked off a mad rush to the cloud, with many organizations accelerating their digital transformation initiatives by three to four years. While cloud computing has opened up tremendous business opportunities, many organizations aren’t getting the full benefit of their cloud investments, with estimates of wasted cloud spend totaling 30% to 35% or higher in some cases.
Why are organizations wasting so much of their cloud budgets? Business leaders frequently point at cloud services bills, which are notoriously difficult to decipher. However, the root of the problem is that organizations are attempting to apply traditional financial management processes and cost controls, which lean heavily on capital expenditure (CapEx) budgets, in modern IT environments.
These old-school methods work well in data center environments, where large chunks of the IT budget are eaten up by periodic (and fairly predictable) investments in hardware. They fall apart in the cloud, which operates on a serverless model where most IT spend is on operational expenditures (OpEx), which are far more variable (and difficult to predict) than CapEx.
To both rein in spending and get the most bang out of their cloud bucks, organizations need to fundamentally retool their IT financial management models. Enter FinOps, short for “Cloud Financial Operations” or “Cloud Financial Management” or “Cloud Cost Management.”
What is FinOps?
Encompassing more than just cloud spend optimization, FinOps takes a holistic approach to managing public cloud spend that combines people, process, and technology. FinOps brings financial accountability to the variable spend model of the public cloud while enabling faster product delivery.
FinOps breaks down organizational silos.
In a digital world, the IT department isn’t a business cost but a business driver, and it can no longer operate as an island unto itself. Strong partnerships between IT teams and business teams are vital to minimizing cloud waste, maximizing cloud value, and driving organizational goals.
FinOps brings agility to the IT budgeting cycle.
Traditionally, business planning and budgeting is performed annually, supplemented by quarterly forecasting and financial planning. FinOps organizations take a far more agile approach, with far more frequent feedback loops that allow teams to reassess and, if necessary, rebalance their resources at shorter intervals to meet changes in the market.
FinOps promotes decentralized cost ownership.
Instead of a siloed, centralized team allocating IT spend across business units based on factors such as revenue and headcount, a central best-practices group supports cross-functional teams in taking ownership of their cloud usage. This decentralized approach shifts accountability for cloud spend from IT to individual business teams, while providing them with the visibility they need to balance their cloud spending with their needs.
FinOps brings predictability to OpEx cloud spend.
Traditional trend-based estimates of OpEx spend don’t work well in cloud environments, with variances reaching 25% or more. FinOps uses more accurate driver-based forecasting models, along with automated budgeting and other cloud spend tools that provide real-time notifications of spending thresholds.
FinOps is about making money, not just saving it.
While FinOps helps organizations rein in their cloud spend, it also helps them determine how to allocate their funds to optimize resources and maximize business value. For example, in some cases, taking full advantage of a free product trial may not be in an organization’s best interest if the paid plan offers additional features, support, and integrations that the organization could capitalize on immediately.
FinOps done right is cloud-agnostic, but Google is ahead of the competition.
Good news for multi-cloud organizations: Solid FinOps practices apply in any cloud environment. While cloud vendors’ services and billing structures differ, the general principles of managing cloud spend apply regardless of cloud provider.
Google Cloud was the first major public cloud provider to join the FinOps Foundation, a non-profit trade association focused on advancing the people and practice of cloud financial management. As a member of the FinOps Foundation’s Technical Advisory Council, Google Cloud is committed to supporting, contributing to, and advancing FinOps principles and the FinOps framework.
Let SADA help you leverage FinOps to maximize your cloud value
Despite the widespread global adoption of cloud services, most companies have insufficient resources to manage their organization’s cloud use and spend. As a Premier Member of the FinOps Foundation, we have the expertise to help your organization get the most value out of every dollar spent in the cloud. Contact us to learn more about how we can help your organization triage current challenges around cloud spend, assist in creating or expanding your own FinOps organizations internally, and fully enable your organization to maintain best practices moving forward.