How to avoid overspending on the cloud using finops

According to Flexera’s 2022 State of the Cloud report, optimizing enterprise spend is the top priority when it comes to the cloud — and migrating more workloads to the cloud comes a close second.

How can companies reconcile these two competing goals?

The answer is finops, a cloud financial management practice that brings IT, finance, engineering, product developers, IT asset management (ITAM), executives and others together to align cloud usage and spending goals.

Finops is a relatively new term, but the concept is gaining traction. This is evidenced by the emergence of the Finops Foundation, an organization that advances Finops best practices through standards and education. It is Latest research published in June 2022 at Finops X, the community’s largest conference, revealed that organizations across all major industries, including Global 2000 companies, have Finops teams.

Practicing finops allows companies to have the best of both worlds: Agile workflows that support rapid innovation without paying too much for cloud usage. However, to use finops successfully, you need to create a culture of accountability throughout your organization, starting with clear communication.

Competing priorities make cloud cost management difficult

Cloud migration brings new spending complexities, and traditional IT frameworks are not designed to manage them. For example, engineers and developers can purchase resources in the cloud without going through an approval process. This setup allows for flexibility and agility (both are critical in a fast-paced environment), but results in skyrocketing cloud costs.

IT leaders often try to create policies for cloud centers of excellence in response. However, these best practices often clash with engineers’ personal key performance indicators (KPIs) that they must meet in order to receive bonuses and promotions.

Perhaps your IT department recognizes the need to reduce uptime. Someone in the IT finance department asks the engineers and developers to shut down the server for a specific workload and move it to another location. However, engineers want to avoid falling behind on projects that affect their performance rating, leaving cost-saving efforts on the back burner.

Changing this dynamic requires enterprise-wide communication and goal setting that must start at the top. IT finance teams struggle to make improvements when leaders aren’t aligned with finops’ priorities, creating tension between departments.

On the other hand, if the C-suite adopts a cloud strategy without securing support across the organization, your organization may face resentment and resistance from teams.

5 strategies for using finops in your organization

When implementing finops for the first time, don’t run before you walk. It’s a long-term process, so prepare for success by making sure stakeholders communicate priorities and align with goals before proceeding.

At its core, Finops is about creating a culture of accountability, and culture changes take time and patience. Start by identifying opportunities, then implement policies and KPIs that enable everyone in your organization to take ownership of cloud spend.

1. Start with a cloud diagnosis

Start by bringing C-suite members together with executives from key departments like IT, ITAM, finance, developers, engineering, and others to discuss your current cloud strategy and how it’s moving forward. Ensuring executive team buy-in enables much faster change.

Solicit input from team leaders, identify where you may have competing goals, and consider how to get all departments on the same page. Hiring an outside expert to guide the discussion and remove potential roadblocks often speeds up this process.

2. Use 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 and not wasteful.

Suppose you are developing a new customer-facing application that differentiates your product and you need to release it before the competition. Speed ​​is the most important factor in this case, so you pay 30% more. From a reporting perspective, the higher spend looks like wasted cloud spend, but you can justify it as it significantly impacts the business.

On the other hand, suppose you need to make necessary – but relatively minor – product updates. The iron triangle instructs you to either lengthen the timeline or narrow the scope to avoid unnecessary spending.

3. create incentives

It’s always easier to spend money that doesn’t belong to you. Instead of allocating all of your cloud costs to IT, set up a chargeback model that spreads them across departments. Seeing cloud usage as the largest single item in their team’s operating budget motivates managers to keep costs in check.

One way to reduce cloud spend at a departmental level is to establish KPIs for optimized code and workloads that hold individual employees accountable for their share of cloud usage. By linking finops best practices to performance goals, you can make progress faster.

4. Enable automation

As your finops framework matures, rely on automation to streamline workflows. For example, you can preconfigure different instance types that align with business priorities.

You can also automate how servers are tagged and, for larger workloads, provide justifications for how the migration and increased spend meet your business goals. Setting up these workflows allows your finops team to monitor spend without hampering 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 increases, you may need to reevaluate priorities and adjust processes and KPIs accordingly.

Successful finops require continuous improvement to ensure alignment and keep cloud spend under control without compromising agility.

Stay agile while keeping an eye on cloud spend

The cloud is here to stay. Excessive cloud spending does not have to be, however. Optimize cloud usage by implementing finops strategies to create a culture of accountability in your organization. When everyone—from leaders to novices—is working toward the same goals, you can achieve agility and innovation in the cloud without spending too much money.

Dan Ortman is Director of finops services at SoftwareONE.