Connecting Cloud Cost Optimization & FinOps

Cloud Financial Management (FinOps) combines systems, best practices, and culture to increase an organization’s visibility and control over its cloud costs. By bringing financial accountability to cloud spend, FinOps enables teams to make informed business decisions, share valuable information with stakeholders, and streamline their cloud spending.

However, there is a way to make FinOps more powerful. By including Cloud Cost Optimization (CCO) in your FinOps strategy you can unlock full control over optimizing cloud costs. SoftwareOne’s Cloud Cost Optimization is an advisory service geared toward helping you identify and reduce cloud spend by implementing right-costing and right-sizing methods.

1. Establish the basis

The first step is to figure out where your organization currently is when it comes to cloud spending and which team members should be involved in FinOps moving forward. Start by getting a complete assessment of your current approach to FinOps in the cloud. This may be performed internally or with the help of a Managed FinOps Services provider like SoftwareOne.

A thorough diagnostic assessment addresses each of the following:

• Where your current cloud costs are, including how much spending is associated with licensing vs. computing costs.
• How your cloud spending has changed over time. For example, has it been increasing, decreasing, or remaining the same, and does it fluctuate unpredictably?
• Your current budget and financial goals when it comes to cloud spend.
• Potential areas of overspending, including unused cloud resources.
• Which metrics to track over time to better identify areas in need of cost optimization.
• The financial value generated by your organization’s cloud use.

Once you establish your current financial position in the cloud, you can then develop a clear path forward with well-defined objectives, best practices, and processes. It helps to establish a cross-functional and collaborative team and provide them with the support of a proven cloud management platform.

2. Gain visibility

Gaining a centralized, transparent view of cloud usage and spending is vital for successful FinOps. It’s difficult to diagnose your current spend, identify areas of potential optimization, implement new strategies, and observe the results if you can’t access accurate information about cloud spend in the first place.

This can be remedied through technology. SoftwareOne’s FinOps platform, for example, allows you to digitize your software supply chain and manage contracts while tracking, controlling, and predicting cloud spend - even across multiple different cloud providers.

Knowledge is power, not only for your FinOps team but for all stakeholders. Being able to accurately track and monitor spending enables you to align your spending with business goals. It also provides access to data and metrics that enable you to better assess the outcomes of new initiatives and provide justification for changes.

3. Optimize cloud costs

Once you’ve established your baseline and have the right teams and tools in place for providing visibility, you are ready to begin optimizing your cloud spend. Cloud Cost Optimization (CCO) is fundamental in FinOps.

According to a 2019 study from Right Scale, 35 percent of public cloud resources are wasted, which means organizations are paying for cloud services they aren’t even using. Moreover, Flexera’s State of the Tech Trend Report from 2020 suggests that fewer than 25 percent of organizations say they’re mature in optimizing software license spend - another significant cloud cost that can often be significantly minimized.

To avoid wasting resources, you can leverage the following CCO methodologies as part of your FinOps strategy:

• Right size your compute and storage: You shouldn’t pay for technology you’re not using. It’s important to identify underutilized but provisioned computing resources and storage space that is either unused or underutilized.
• Consider spot instances: AWS users can temporarily borrow unused computing power from the larger marketplace, ideally for less sensitive, transient workloads. This can result in savings of up to 80 to 90 percent over standard pricing.
• Use appropriate storage tiers: Many cloud providers offer different storage tiers depending on how frequently you may need to access stored data. For example, moving data that hasn’t been used in a month from hot storage on your edge to cold storage can save 45 percent or more in related fees.
• Clean up zombie assets: By identifying and eliminating programs and infrastructure components that are running and/or taking up space but aren’t actually being used, you can cut out excess costs.
• Make use of autoscaling and elasticity: Many cloud providers offer scalable services that allow applications to scale up and down as demand fluctuates. That way, instead of paying for your maximum computing needs all the time, you only pay for what you need when you need it.
• Check your software licenses: Often, software licensed for on-premise use can be extended to use cases in the cloud for minimal or no additional expense. Make sure you aren’t paying for additional licenses you don’t need.
• Consider reserved instances: Often, you can realize additional savings by reserving instances in advance of use.
• Leverage automation: Automation can drive operational efficiency and reduce waste, and help you automatically engage in these right-sizing activities.

The right tools and methods are critical for identifying areas of waste or inefficiency and implementing cost optimization strategies.

4. Define strategy and management

CCO and FinOps are both ongoing processes. The job isn’t complete after one round of optimization. Moving forward, you will need to enable accountability and traceability, establish best practices, and continually refine your cloud utilization as a central enabler for your business success.

The FinOps journey can be broken down into a continuous three-part cycle as follows:

• Inform: Gain visibility and acquire information and insights into your cloud usage and spending allocation. Share these insights within your organization so that team members and stakeholders are aware of what is being spent and why.
• Optimize: Using CCO methodologies, make a habit of constantly seeking out waste and overspend and implement strategies to reduce it.
• Operate: Create policies that align company goals across technology, finance, and business.

Successful implementation of this cycle relies on visibility, the ability to conduct thorough diagnostics, and an understanding of CCO best practices. Transparency, predictability, and governance are key for effective cloud financial management.