Amid fierce competition, businesses must harness the cloud’s potential cost reduction. FinOps aligns spending with goals, yet pitfalls in adoption must be sidestepped, advises Liam Cotter
Cloud computing continues to revolutionise how businesses innovate and grow in today’s hypercompetitive global environment.
While the race to the cloud has catapulted businesses into a new realm of speed and agility, few are cashing in on the cloud’s promise to drive down costs – and the challenges are mounting amid the proliferation of multi-cloud environments.
The problem is typically a case of too much spending and too little oversight. Businesses are struggling to effectively manage a critical new resource vastly different from the legacy environment it replaces.
There is no question that organisations need a radical new approach to managing their cloud spending. The answer? FinOps.
With FinOps (the combination of ‘Finance’ and ‘DevOps’), teams from IT, finance and business units collaborate on data-driven spending decisions. Transparency is prioritised, and everyone takes ownership of their cloud usage.
FinOps aligns cloud spending with business objectives and helps cross-functional teams work harmoniously to enhance financial control and predictability, reduce friction, and deliver products and services faster in today’s consumer-centric digital economy.
However, there are five critical mistakes organisations make when embracing the power of cloud capabilities.
1. The lack of a clear, strategic vision that aligns KPIs with outcomes
Success on the FinOps journey inevitably requires measuring, reporting, analysing and optimising cloud spending.
Taking a strategic approach to FinOps means keeping objectives and key performance indicators (KPIs) front and centre at all times – continuously revisiting, adjusting and evolving them as required.
Businesses should monitor and respond to new business data and make changes, particularly in today’s fast-evolving environment, where the rapid pace of change continues to accelerate.
2. Not understanding costs and trends at a granular level
You can’t measure what you can’t see, making a precise, granular view of cloud costs and trends critical to your business. It’s not enough to know your cloud spend at any moment – positioning your business to manage and reduce costs continually is essential.
Amid a lack of data that continually delivers timely cloud spend and usage insights, businesses often make significant cloud investments while unsure what they are accomplishing or how to manage costs.
Observability is essential to success – gaining visibility into where your cloud spend is going, monitoring activity at a granular level, and responding as needed as workloads and objectives change.
This visibility can empower your data teams with precise allocation, real-time budgeting information and accurate forecasting for cost governance.
3. Not using appropriate tools, technologies and tagging
FinOps’ success, apart from calculating and gathering timely data, also requires visibility of assets through IT asset management and the use of appropriate tools, technologies and tagging, including automation capabilities.
Unfortunately, many businesses with multi-cloud environments use tools and capabilities provided by their cloud vendors with little to no benefit.
Improper and inconsistent tagging of resources and a lack of appropriate automation can hinder success.
Trend-based forecasting is an appropriate method for simpler situations in which past trends will likely continue. It helps answer questions such as “What would monthly cloud spend be in a future month given the spending trend observed to date?”
4. The lack of collaboration between finance and engineering teams
A successful cloud journey relies on FinOps and the engineering team working closely together. While FinOps can manage processes and budgeting, this will likely not prove successful if engineering doesn’t agree to take the right actions.
Cross-training of teams and organisational change management to create a highly collaborative approach among diverse teams is critical for FinOps to deliver ongoing value.
5. Not taking action, communicating and optimising
Your business may have the necessary metrics, tools and technologies for a successful FinOps journey and be well-positioned to identify problems as they arise.
However, a strategic action plan is essential; one that provides appropriate guidelines that bring the required players together to understand the problem and its implications, manage the issue and set the course for a future strategy that can optimise processes and costs.
An intelligent approach is to manage by the numbers. These are the components required to help build a governance programme that positions you to do so:
- Reports and dashboards: Ensure all stakeholders have access to appropriate reporting and dashboards for their role and provide rapid, at-a-glance views into current cost trends and forecasts.
- Resource hierarchy: Structure cloud resources in a resource hierarchy that is granular enough for management and cost allocation using folders, projects, tags, labels, etc.
- Budget alerts: Set budget notifications that are triggered automatically when resources or costs ramp up beyond a predetermined threshold to help prevent unexpected activity impacting budgeted spending.
- Automated actions: Configure automated actions to throttle resources or cap costs to help prevent unwanted activity and overspending.
- Standard reviews: Establish standard review cadences between IT and finance to review historical spending and develop future action recommendations.
FinOps’ success requires bringing engineering and finance stakeholders together to plan, measure, report, analyse and optimise costs. It’s not enough to simply implement new tools, communicate a few expectations and occasionally meet for updates. A holistic operating model should be designed, implemented, orchestrated and evolve as new tools, techniques, ways of working and other factors emerge with time.
Liam Cotter is a Management Consulting Partner at KPMG
LOADING...