In part one of our two-part FinOps blog series, we give a high-level overview of the four primary areas of cloud transformation cost optimization.
We’ve all seen the statistics around global cloud growth. By 2025 the public cloud market will be over $800 billion, with nearly 100 percent of companies using cloud services in some form or another. Growth at this scale requires organizations pursuing cloud adoption to be focused and diligent while implementing metric-driven cost optimization.
When we think of cost optimization, we often think of optimizing workloads in the cloud. We think of rightsizing, automated shutdowns and usage optimization. These cost controls allow us to scale compute, storage and databases efficiently to minimize waste. The question becomes, at what point during your cloud journey can you start optimizing spend and cost savings?
With a FinOps-first mentality, you can incorporate cost optimization strategies from day one of your cloud journey. Total cloud transformation cost accountability is not only a requirement but a strategic necessity. Your organization should have a solid FinOps foundation plan accompanied by iterative optimization tactics to make cloud adoption cost effective from discovery through operations.
In this blog series, we’ll show you how to create and execute that plan, placing cost analysis and cost optimization as central to every step of the cloud adoption journey.
The Four Areas of Cloud FinOps Cost Optimization
We can break down cloud transformation cost analysis into four primary optimization areas. In this series, we will explore each optimization area in greater detail, offering FinOps-focused tactics that the most diligent organizations deploy in their journeys to cloud adoption. The four optimization areas are as follows.
Cloud Strategy Planning
Building a vision statement is the foundation of any successful cloud-first adoption. Frame your migration program around a detailed total cost of ownership (TCO) to ensure a budgeted transition across IT, finance and the business.
Why? The TCO is foundational to building a cost-effective migration plan. At its core, TCO focuses on fixed costs, reduced costs, variable costs and cloud costs. You can also use a TCO to build budget forecasts across the Capex to Opex transition while gaining visibility to “by department” sharebacks and chargebacks.
Speaking of planning, building a migration plan in parallel with end-of-life (EOL) refresh cycles can help you to mitigate depreciation loss and avoid large, on-premises capital investments.
Physical to Digital
Cloud adoption, at its best, can lead to widespread, holistic transformation from operations to innovation. First, baseline your current IT service management (ITSM) and operational processes around demand management, project delivery and procurement. Knowing your baselines leads to cost savings down the road as operational processes become more efficient under cloud adoption.
Then, by shifting operations to innovation, organizations can increase development speed, production changes and user experience (UX). This shift allows faster response to market changes, enhanced customer satisfaction and overall revenue growth.
Additionally, you should baseline your mean time to respond, resolve and restore (MTTRs) to quantify all the revenue loss you will avoid through improved uptime.
FinOps Best Practices
A centralized FinOps team can pay for itself through cloud cost savings. Transform your organization to focus on collaboration from engineers to executives and across business, IT and finance. One area of collaboration many stakeholders can agree on is waste reduction. Reducing waste is a key output of migrating to the cloud. Identifying orphaned servers, under-utilized resources, license waste and dev/test downtime leads to overall cost savings during migrations. Cost savings can also translate to sanity savings during an otherwise intensive migration process.
Choosing the correct service is also critical. Cloud service providers (CSPs) have well over 150 services and tools. Selecting the correct storage tier, security tools and database services all play a part in keeping costs low while maximizing the benefits of cloud-native services.
Finally, building a methodical commitment strategy allows centralized cloud teams to manage convertible reserved instances (RIs), savings plans, commitment waterlines and overall forecasting.
Metric Driven Cost Optimization
Successful cloud adopters establish processes, procedures, controls and standards to establish spend reporting for continuous innovation and real-time decision making. You should set cost controls through policies and track them through tagging. When you set controls, it adds much-needed guardrails around provisioning, builds and approved changes, and building accountability through these controls adds multilevel cost visibility for all stakeholders.
Remember, after right-sizing, usage optimization doesn’t end. Stay proactive. Continue to build controls with budget and anomaly alerting, automated shutdowns and configured autoscaling. While optimizing resources, be sure to focus on areas of usage reduction. You should remove unattached or orphaned volumes and unused attached volumes and strive to reduce data ingress wherever applicable.
These are only a few broad strokes outlining the tactics you should implement to ensure an optimal cloud transformation. Each one deserves its own, separate treatment, and we look forward to discussing them in greater detail with you in the series to come.
We continuously see innovations and new services in the public cloud while companies across the globe migrate away from on-premises data centers to cloud-native technologies. For most companies, the only way to adopt the cloud is to execute migrations in the most cost-effective way possible.
In other words? Successful cloud adoption relies on adopting a FinOps-first mentality.
The Benefits of Cloud FinOps
Your organization can enjoy the multiple benefits of cloud FinOps through TCO development, cloud migration planning, metric-driven cost optimization and assessing value through business transformation. These benefits include:
- Transparency: Cloud enhances collaboration across business, IT and finance
- Business Value: In the right areas, cloud spend can be a value creator – not an expense
- Shared Ownership: Instills ownership from engineers to executives
- Reporting: Generates cost reporting for real-time decision making
- Budget Management: Decreases waste and optimizes spend through sharebacks and chargebacks
- Accelerated Growth: Builds speed through decentralized cloud management
- Cost Savings: Optimizes usage and maximizes commitments
- Increased Security: Enhances security controls through a culture of accountability.
As you can tell, adopting a FinOps-first mentality encourages measurable, iterative tactics to ensure a cost-effective and transformative journey to the cloud. In part two, we’ll uncover the tactics that will help you conduct cost analysis along every step of the cloud transformation.