It’s no secret that cloud migration comes with many advantages. Unfortunately, there often seems to be just as many challenges, and accountability and lack of visibility into cloud spend often top the list of hurdles. These roadblocks lead to inefficient practices, lost money on unused cloud instances, wrong-sized resources, and more.
Enter Cloud Financial Management.
The Cloud Financial Management - better known as FinOps - operating model makes it possible to gain visibility and control over cloud spend, drive accountability, and simplify your cloud budget management. These days, having the ability to reallocate the money you save towards other aspects of your cloud journey is key. Keep reading to learn more about the advantages of FinOps, as well as the phases of FinOps that can help maximize the impact of every dollar you spend in the cloud.
Traditional IT spend has always required long-term planning. An organization would have to make its best estimate as to what it would need not only in the present but in the coming years as it provisioned its IT infrastructure. Naturally, this became increasingly challenging as the pace of technology accelerated. Wrong decisions could easily lead to missed opportunities a few years down the road, or overspend on rarely-used features. However, the birth of the cloud changed all of that forever.
If they haven’t already, many businesses and organizations are in the process of migrating workloads to the cloud. This move has become essential in order to attain the agility needed to stay ahead of the competition. The cloud offers elastic services that can be scaled up and down to meet changing needs. Moreover, new capabilities and services can be brought on board the moment they’re needed, instead of having to be planned for well in advance. This move has become essential in order to attain the agility needed to stay ahead of the competition. The cloud offers elastic services that can be scaled up and down to meet changing needs. Moreover, new capabilities and services can be brought on board the moment they’re needed, instead of having to be planned for well in advance.
Whereas in the past when traditional IT teams focused on provisioning infrastructure, keeping running costs steady, and maintaining core functionalities while minimizing risk, today’s IT is more service oriented. Departments must now adopt agile methodologies and increase their flexibility through automation and scalability. In most cases, this meant running even faster, not slowing down as a result of the COVID-19 pandemic.
Organizations are realizing many advantages of cloud migration, including the ability to:
But these opportunities don’t come without challenges and risks. With the given pricing model of cloud services, whenever you are leveraging technologies, you are creating immediate costs for your organization. Having the necessary knowledge and experience required for new technology, concepts, and operating models can be a challenge. Ultimately, a cultural shift is required to develop new processes and to modernize your practices. In order to reduce these roadblocks, the operating model of FinOps was born.
FinOps combines systems, best practices, and culture with the goal of increasing cloud cost visibility and control. By bringing financial accountability to cloud spend, FinOps helps global teams make data-driven business decisions while enabling IT to develop into a service organization with a focus on using cloud technology to add business value.
While many companies are used to IT spend increasing over the years, the shift to the cloud has created certain volatility in many IT budgets, with overspend being a common problem. Businesses are starting to feel the pain now, especially when they are dealing with millions of dollars and the migration of entire data centers to the cloud. In other words, it’s a problem that needs a much deeper level of attention.
FinOps can optimize cloud spend and how much you're earning from every dollar spent in the cloud. By taking a collaborative systems approach, FinOps seeks to understand the ins and outs of an organization's cloud costs and technology needs and reconciles those with business goals to drive value.
One of the great things about FinOps is that it's not just something you implement and it's over with. Like many modern business methodologies, it's an evolving practice designed to continually improve over time. Adopting a FinOps operating model is ideal for companies trying to digitally transform and work on their business model as it makes consumer data-driven decision making possible.
Companies with mature FinOps models are measuring unit economics - they know every resource in the cloud, what it’s being used for, and what revenue it generates. That’s considered advanced level FinOps and isn’t where most organizations start their journey. FinOps maturity happens in the following phases
The goal of this stage is to obtain visibility into your cloud spend as well as create a system of shared accountability by showing teams and stakeholders what is being spent, where it’s being spent, and why. This stage doesn’t yet require a cultural shift and is relatively fast and simple to perform, but it leaves you with the information needed to see and understand the whole cloud spend picture.
Optimization begins in this next phase, which requires taking deliberate action to reduce cloud spend by identifying and removing unused resources, turning off resources outside of the hours they are used, and other measures. Ideally, the impact of these measures on speed to delivery and performance is minimal, while cost savings of as much as 20 to 30 percent are realized.
This final stage is the advanced level described previously. Here, processes are defined and executed that align overall business goals with technology and finance. At this level, the cloud is being used efficiently, often saving costs over equivalent on-premises setups. Budgets are also more easily managed as spend is tied directly to the estimated value of each cloud use case.
Progressing through these phases of maturity typically results in increasingly optimized cloud spend, helping you achieve your goal of maximizing every dollar spent in the cloud.
FinOps is about change management and leveraging the cloud to make money, not just save. Simply hiring an individual to manage your cloud spend or purchasing a software tool won’t get you to the same place because it doesn’t keep stakeholders accountable in the same way.
SoftwareOne has the insights and industry experts as well as the proprietary PyraCloud platform designed to provide the transparency, predictability, and governance needed for effective FinOps practices. When you partner with us, we will ensure your organization is maximizing every last dollar spent in the cloud.
If your organization is like many and you’re just getting started on your FinOps journey, download our infographic to learn best practices for getting started.
If your organization is like many and you’re just getting started on your FinOps journey, download our infographic to learn best practices for getting started.
