How to avoid overspending on the cloud using finops
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Optimizing spend is a number one priority for organizations when it comes to the cloud, according to Flexera’s 2022 State of the Cloud report — and migrating more workloads to the cloud is a close second.
How can companies balance these two competing objectives?
The answer is finops, a cloud financial management practice that brings together IT, finance, engineering, product developers, IT asset management (ITAM), leadership and others to align on cloud usage and spending goals.
Finops is a relatively new term, but the concept is gaining momentum. This is evidenced by the emergence of the Finops Foundation, an organization advancing finops best practices through standards and education. Its latest research, released in June 2022 at Finops X, the community’s largest conference, found that organizations in every major industry, including Global 2000 companies, have finops teams in place.
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Practicing finops allows companies to have the best of both worlds: Agile work streams that support rapid innovation without overpaying for cloud usage. However, to successfully deploy finops, you must create a culture of accountability across your organization, starting with clear communication.
Competing priorities make it difficult to manage cloud costs
Cloud migration introduces new spending complexities, and traditional IT frameworks aren’t set up to manage them. For example, engineers and developers can purchase resources in the cloud without conducting an approval process. This setup enables flexibility and agility (both of which are vital in a fast-paced environment) but leads to ballooning cloud costs.
IT leaders often try to establish cloud center of excellence guidelines in response. However, these best practices often clash with engineers’ personal key performance indicators (KPIs), which they must meet to earn bonuses and promotions.
Perhaps your IT department identifies the need to reduce uptime. Someone in IT finance asks the engineers and developers to shut down the server for a particular workload and move it elsewhere. However, the engineers want to avoid falling behind on projects that impact their performance reviews, so cost-saving efforts fall by the wayside.
Changing this dynamic requires organization-wide communication and goal setting, and it has to start at the top. IT finance teams struggle to make improvements when executives haven’t aligned on finops priorities, causing friction between departments.
On the other hand, when the C-suite adopts a cloud strategy without securing buy-in across the organization, your organization may encounter resentment and resistance from teams.
5 strategies for deploying finops in your organization
When implementing finops for the first time, don’t run before you walk. It’s a long-term process, so set yourself up for success by ensuring stakeholders communicate priorities and align on goals before moving ahead.
Finops, at its core, is about creating a culture of accountability, and organizational culture shifts take time and patience. Begin by identifying opportunities, and then implement policies and KPIs that empower everyone in your organization to take ownership of cloud spending.
1. Start with a cloud diagnostic
Begin by gathering members of the C-suite with leaders from key departments like IT, ITAM, finance, devops, engineering and others to discuss your current cloud strategy and how you want to evolve it. Securing buy-in from the executive team enables change to happen much faster.
Solicit input from team leads, identify where you may have competing goals, and brainstorm ways to get all departments on the same page. Hiring an external expert to guide the discussion and remove potential roadblocks often speeds up this process.
2. Employ the iron triangle
The iron triangle is a project management framework that balances cost, time and scope against quality. You can use it to identify when excessive cloud spending is necessary rather than wasteful.
Let’s say you’re developing a new customer-facing application that will differentiate your product, and you need to release it ahead of the competition. Speed is the most critical factor in this case, so you pay 30% more. From a reporting standpoint, the higher expense looks like wasted cloud spend, but you can justify it because it substantially impacts the business.
On the other hand, suppose you need to make necessary — but relatively minor — product updates. The iron triangle tells you to either extend the timeline or narrow the scope to avoid unnecessary spending.
3. Create incentives
It’s always easier to spend money that’s not yours. Instead of allocating your entire cloud cost to IT, set up a chargeback model that distributes it among departments. Seeing cloud usage as the largest line item on their team’s operating budget motivates managers to reign in costs.
One way to mitigate cloud spending at the department level is to set KPIs for optimized codes and workloads that hold individual employees accountable for their share of cloud usage. Tying finops best practices to performance goals allows you to make progress faster.
4. Enable automation
As your finops framework matures, lean on automation to streamline workflows. For example, you can preconfigure various instance types that align with business priorities.
You can also automate how servers are tagged and, for larger workloads, input justifications for how the migration and increased spend to align with your business goals. Setting up these workflows makes it possible for your finops team to monitor spending without hindering developers’ ability to move quickly.
5. Keep optimizing
Creating a finops culture of accountability is an ongoing journey. As technology evolves and your cloud usage grows, you may need to reevaluate priorities and adjust processes and KPIs accordingly.
Successful finops requires continuous improvement to ensure alignment and keep cloud spending in check without sacrificing agility.
Remain agile while keeping cloud spending in check
The cloud is here to stay. However, excessive cloud spending doesn’t have to be. Optimize cloud usage by implementing finops strategies to create a culture of accountability in your organization. When everyone — from leadership down to entry-level employees — works toward the same goals, you can achieve agility and innovation in the cloud without overspending.
Dan Ortman is the director of finops services at SoftwareONE.
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