How to Avoid Overspending on the Cloud Using Finops

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According to Flexera’s 2022 State of the Cloud Report, optimizing spend is the number one cloud priority for enterprises, and migrating more workloads to the cloud is a close second.

How can companies reconcile these two competing objectives?

The answer is finops, a cloud-based financial management practice that brings together IT, finance, engineering, product developers, IT asset management (ITAM), management, 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 that advances finops best practices through standards and education. His The latest research, published in June 2022 at Finops X, the community’s largest conference, found that organizations across all major industries, including Global 2000 companies, have established finops teams.

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Practicing finops allows businesses to have the best of both worlds: agile workflows that support rapid innovation without overpaying for cloud usage. However, to successfully deploy finops, you need to create a culture of accountability in your organization, starting with clear communication.

Competing priorities make it difficult to manage cloud costs

Moving to the cloud introduces new expense complexities, and traditional IT executives aren’t set up to handle them. For example, engineers and developers can purchase cloud resources without going through an approval process. This configuration allows for flexibility and agility (both of which are essential in a fast-paced environment), but incurs increased cloud costs.

IT managers often attempt 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 engineers and developers to shut down the server for a particular workload and move it somewhere else. However, engineers want to avoid falling behind on projects that impact their performance ratings, so cost-cutting efforts are abandoned.

Changing this dynamic requires organization-wide communication and goal setting, and it has to start at the top. Finance IT teams struggle to make improvements when leaders haven’t aligned with finops priorities, causing friction between departments.

On the other hand, when the C suite adopts a cloud strategy without ensuring buy-in from across the organization, your organization may encounter resentment and resistance from teams.

5 strategies for deploying finops in your organization

When you first implement finops, don’t run before you walk. This is a long-term process, so set yourself up for success by ensuring stakeholders communicate their priorities and align on goals before moving forward.

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

1. Start with a cloud diagnosis

Start by bringing C-suite members together with heads of key departments such as IT, ITAM, finance, devops, engineering, and others to discuss your current cloud strategy and how you want to evolve it. Getting buy-in from the management team allows change to happen much faster.

Solicit feedback from team leaders, identify areas where you might have competing goals, and think of ways 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 overspending on the cloud is necessary rather than unnecessary.

Suppose you are developing a new customer-facing application that will differentiate your product and you need to launch it before the competition. Speed ​​is the most critical factor in this case, so you pay 30% more. From a reporting perspective, higher spend looks like wasted cloud spending, but you can justify it because it has a huge impact on the business.

On the other hand, let’s say you need to perform some necessary but relatively minor product updates. The iron triangle tells you to either extend the timeline or reduce the scope to avoid unnecessary expense.

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 distributes them across departments. Viewing cloud usage as the biggest item in their team’s operating budget motivates managers to control costs.

One way to mitigate cloud-related expenses at the service level is to define KPIs for optimized code and workloads that hold individual employees accountable for their share of cloud usage. Linking finops best practices to performance goals allows you to progress faster.

4. Enable Automation

As your finops framework matures, rely on automation to streamline workflows. For example, you can pre-configure various instance types that match business priorities.

You can also automate how servers are tagged and, for larger workloads, enter justifications for how migration and increased spending aligns with your business goals. Setting up these workflows allows your finops team to monitor spend without hampering developers’ ability to act 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 finance operations require continuous improvement to ensure alignment and control cloud spend without sacrificing agility.

Stay agile while controlling cloud spend

The cloud is here to stay. However, overspending on the cloud doesn’t have to be. Optimize cloud usage by implementing finops strategies to create a culture of accountability in your organization. When everyone from executives to entry-level employees is working toward the same goals, you can achieve cloud agility and innovation without spending too much.

Dan Ortman is the director of finops services at SoftwareONE.

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