Worldwide end-user spending on public cloud services is forecasted to surpass $800 Bn by 2025, a soaring growth driven substantially due to increased focus on Digital transformation and business agility [Ref: Gartner]. While enterprises have started to rapidly adopt Cloud for Elasticity, Cost & Agility, the value realized quickly evaporates due to inadequate practices in containing Cloud consumption costs. According to various industry analysts, “An estimated 30 percent of enterprise cloud spend is wasted and many of the enterprises feel managing cloud spend is a challenge.”
Ideal Cloud journey involves upfront economic value articulation that pivots on cost variance between their current on-prem operating costs, cost of migration/ transformation to Cloud & ongoing Cloud operations including Cloud consumption costs. Often enterprises need to transition from Capex centric outlays to consumption-oriented economics.
The common challenges that hamper economic value realization of Cloud Transformation are:
- Inadequate Cloud consumption forecasting and usage tracking due to variable spend patterns
- Micro purchasing originating from diversified DevOps teams Ex: Containers
- Multi-Cloud environment driving complexities in capturing the economics
- Sub-optimal architecture resulting in higher cloud costs and lower latency
- Cost accountability to the extent of per millisecond usage in case of some services
- Complex costing models resulting in cost arbitrage focus as opposed to driving business impact
Cloud FinOps helps in addressing these challenges and it is a strategic area of investment to drive true Economic Value Proposition of Cloud.
Cloud FinOps can be defined as “A practice of bringing together and balancing the priorities of Technology, Business and Finance teams to drive cost accountability and to gain competitive advantage.”
Fig: Cloud FinOps, the balancing act
A balanced Cloud FinOps adoption strategy consists of, “Make-Measure-Master” Cloud Economics strategy
- Make It, a Strategic Priority by establishing Cloud FinOps framework & Operating model
- Measure It, establish metrics, reporting using right tooling
- Master It, driving business value through Cloud FinOps Adoption Maturity Model
Make It, a Strategic Priority by establishing Cloud FinOps framework & Operating model
Right operating model is key to materialize the strategic benefits of Cloud FinOps. Cloud FinOps team must operate as an independent group working directly under CIO to drive the Cloud Cost Management and Optimization initiatives. The primary responsibilities of the Cloud FinOps organization are,
- Establish and enforce Cloud FinOps policy, standards, cloud cost control guardrails, tooling strategy
- Publish recommendations for enterprise/portfolio/project level cost optimization through rightsizing, resource life cycle etc
- Helping Application teams identify work-load level cost efficiency targets
- Cloud cost allocations strategy, cost tagging standards & compliance
- Synchronizing actual & planned cloud spend with official budgets & plan
- Training and enablement
Measure It, establish metrics, reporting using right tooling
While having the right operating model and focusing on maturity are critical to the success of driving the FinOps mindset & culture, it’s equally important to support the teams with right technology & tools.
Organizations should strive hard to achieve the “Always-On” and continuous cost optimization process using right selection of various tools, products and frameworks offered by CSPs and 3rd party vendors.
Master It, driving business value through Cloud FinOps Adoption Maturity Model
A matured Cloud FinOps operating model inherently focuses on driving the culture of cost accountability and contestability. Irrespective of Cloud adoption strategy whether it’s Cloud First, Cloud Native or multi-Cloud, the imperative is to drive better value for their Enterprise Cloud Transformation, of which Cloud FinOps is a strategic lever.
This can be achieved through meticulously planning the Cloud FinOps journey and progressively maturing. I recommend a well-crafted 3 phased Cloud adoption maturity model as below,
- Basic State: Drive awareness of the Cloud Economics, build Cloud mindset & FinOps Culture across all Teams. Implement Cloud Native Cost Management tools to enable near real-time Cost Reporting and Tracking structure. Enforce Cloud Cost Gatekeeping and Resource Tagging.
- Progressive state: Enable Budgeting across business service lines and implement Charge Back, strengthen tooling by custom reporting with more granularity and persona based, enable 3rd party tooling as required by right selection of tools capability. Pick, optimize & trade Right Sizing Services etc., focus on Data Transfer costs, implement optimization strategies etc.,
- Matured state: Strengthen the Operating Model, adopt more Cloud Native services, manage container costs, policy driven benchmarking, optimize based on workload architectures, enable right observability tools to proactively detect the possible anomalies to avoid system & business downtimes.
Cloud Cost Containment is a key priority for every CIO. As Enterprises look to make most of their Cloud adoption, a right strategy and execution will be key in delivering the outcomes. Likewise, the real business value proposition of Cloud transformation is enhanced multi-fold if a mature Cloud FinOps Cost Management and Optimization is implemented.