Cloud FinOps - Without overkill

Cloud computing is like a super-highway.

Packed to the brim with technologies and projects poised to revolutionise the world.

But as the world becomes increasingly reliant on cloud technology, so arises the dangers of a super-catastrophe.

More companies joining the road, projects built around cloud tech, and more people consuming more more more.

It will be expensive. In fact, it already is.

Rising list prices, lower savings options (looking at you, Azure Savings Plans), and more complexity are just a few of the roadblocks ahead.

Thing is, customers have treated cloud computing like Never-never land.

And with good reason. Amazon, Google, Microsoft and all the rest have sold it like it was in fact the promised Never-never land.

“More’s Law will ensure prices are practically zero within a few years”

Or is it so?

FinOps to the rescue?

Most companies are experiencing exactly that feeling right now.

More and more are turning to cloud financial operations (FinOps) to streamline their financial processes and reduce costs.

For midsized companies in particular, the decision to implement cloud FinOps can be a daunting one with multitude of factors to consider.

Including the potential impact on employees, the cost of the transition, and the potential risks and rewards of moving to the cloud.

However, with a smart start and a clear plan in place, you can successfully navigate the transition to the cloud and maximise the benefits for your business.

In this blog post, we'll take a look at the journey of one midsized company as they navigate the process of implementing cloud FinOps and the benefits they've experienced along the way.

What is cloud FinOps?

First and foremost, it’s important to understand cloud FinOps practices are and why they are important.

Cloud FinOps is a discipline focused on maximizing the value of cloud computing while minimising costs.

This includes monitoring and managing cloud usage and resources, optimising cloud spend, and ensuring compliance with cloud service agreements.

Implementing cloud FinOps practices can help your company increase efficiency, reduce costs, and improve agility in the face of changing business needs.

The FinOps Foundation - the folks behind - explaining the maturity stages of a business’ FinOps.

The three FinOps maturity stages are:

1. Craw (beginner): At this stage, companies are just getting started with FinOps and are focused on understanding and managing their cloud costs.
2. Walk (intermediate): Companies at this stage are focusing on optimising their cloud costs and are beginning to develop more sophisticated FinOps processes.
3. Run (Advanced): Companies at this stage are taking a proactive approach to FinOps, with a strong focus on automation and continuous improvement.

Essentially, this is a benchmarking tool to help folks like you and me assess how well we and our company can:

1. Inform and allocate the right resource-spend to the right people and projects
2. Optimise those resources and respective spend for better rates and usage
3. Operate and improve on existing processes to save resources and spend

FinOps can become a hairy beast to explore and operationalise, so we’ll stick with the

So, how can you get off to a smart start implementing cloud FinOps practices in your midsized company? Here are some steps to consider:

Assess your current cloud usage and costs

Before you can start optimising your cloud spend, you need to have a clear understanding of what you are currently using and how much you are spending.

This includes not just the services you are using, but also the resources (e.g. compute, storage, networking) that you are consuming.

You may want to use tools like cloud cost management platforms or cloud billing APIs to gather this data.

If you haven’t already, you should go and check the Azure Cost Manager, and play with it. Don’t worry, you can’t break anything in it. It’s just a simple billing dashboard for you to dig in.

Do note that it has some limitations. A lot, actually.

For one, you can only trace back 1 year at a time. So today, anything beyond 2022, you have to dig deep in the billing API to get that information.

Same goes with extracting data, where here you’re limited to maximum 3 months.

Again, you have to dig deep in the billing API.

Then there are throttling at certain amount of requests, delays, so and so on.

And after extraction, you have to transform the data and load it into any system that can handle the CSV file, such as Excel, Power BI or something else.

We have worked with Azure Cost Manager in different enterprise settings, doing exactly what’s described above.

It’s cumbersome and slow, and responding timely to billing changes .

Identify areas for optimisation

Once you have a clear understanding of your current cloud usage and costs, you can start identifying areas for optimisation.

This may include finding more cost-effective services or regions to host your workloads, rightsizing resources to better match your needs, or identifying and shutting down unnecessary resources.

As you see, there are quite a few options for you to choose from. Again.

Microsoft and partners will generally steer you in the direction of reservations, which entails committing a certain amount of gold up front (1 or 3 years), and get a good discount in return (typically 30-60%).

You already have guessed that comes with its own set of drawbacks. And it’s only going to be lessened by January 1, 2024.

Then Savings Plans will be the standard. Which is more flexible (on papir), but with less discounts.

Right-sizing is the obvious ‘right’ thing to do. But too many right-sizings end up costing performance. And right-sizing is no easy feat. Nowhere near the cost-effective alternative.

There really are no right answers here. But the right thing to do, is to do something.

Whatever you choose, you are going to save money. But make sure you pick the right battles and don’t deplete yourself with catching whales when large batches of anchovies can give you similar return.

Develop a cloud FinOps strategy

With your current usage and areas for optimisation identified, it’s time to develop a clear plan for implementing cloud finops practices.

This should include specific goals and objectives, as well as a roadmap for achieving them.

You may want to consider forming a cross-functional team to help with this process, as cloud finops practices often involve input from multiple departments.

Do remember Brook’s Law (all the laws):

"Adding more people to a late project only makes it later”.

Newsflash.

FinOps is going to be a late project for you. Less than 1% of all the companies and folks we have worked or talked with, have FinOps as a priority in their cloud investment.

Adding George from Finance, Sue from Procurement, Marc from Project Management, Allie from Product Management, and so on, will only add exponential complexity to your FinOps efforts.

You heard me right. Not linear, but exponential complexity.

And exponential delays in return.

Therefore, consider what, how, who, and when to add people into the mix.

Take an - dare I say it - agile approach, and target where you believe - based on best analyses, of course - the quickest wins may be achieved, with the least amount of resources required.

Start there, test your assumptions, fix what needs fixing, rinse and repeat onto other areas like the one(s) you started attacking.

It really is the smartest and most rewarding approach. The opposite mega-right-sizing project is probably going to drain your resources and make leadership less-than-happy about your execution.

Implement tools and processes for monitoring and managing cloud usage

You cannot improve that which you cannot measure.

To be honest, I made an exquisite mac and cheese the other day only by winging it.

Other than that, the saying holds true. Especially for cloud.

One key aspect of cloud FinOps is the ability to monitor and manage cloud usage in real-time.

This can help you identify and address issues before they become major problems, as well as identify opportunities for optimisation.

There are a variety of tools available to help with this, including cloud monitoring platforms, cost optimization tools, and resource governance tools.

Out of the box, you get tools to help you do just that. Measure spending and usage.

In Microsoft Azure, it’s called Azure Cost Managment. In AWS it’s called Cloud Cost Explorer.

You need to start with establishing a process for cloud budgeting and forecasting.

This should involve setting clear budget targets and regularly reviewing and adjusting your cloud spend to ensure that you are meeting your goals.

One example is unit economics. As in “how much cloud money we are pouring into the project digital X”.

Ultimately leading up to Cost of Goods Sold (COGS).

You should consider using tools like cloud cost optimisations solutions, or financial planning software to help with this process.

Ensure compliance with cloud service agreements

Would you take up a mortgage without carefully considering your options?

No, exactly. But news flash: That’s basically how businesses behave when investing in cloud.

This includes understanding the terms and conditions of your contracts, as well as monitoring your usage to ensure that you are not overstepping any limits or incurring unexpected charges.

Another important aspect of cloud FinOps is ensuring compliance with your cloud service agreements.

In Azure, you typically have 3 overarching agreement types that you can work with, each giving its own set of benefits and headaches.

1. Pay as you Go (PayG)
2. Cloud Solution Provider/Partner Agreement (CSP)
3. Enterprise Agreement (EA)

Pay as you Go

This is straight forward. You pay for what you use.

List prices, no rebates or anything.

You do get access to using off-the-shelf pricing levers, such as Reservations, Savings Plans, Azure Cost Manager, etc.

It’s no doubt the most flexible plan, as you can cancel from day to day.

But unless you make use of the savings levers, you pay the highest price for the same resources.

Cloud Solution Provider

A Microsoft Cloud Solution Provider (CSP) agreement is a contract between a business and Microsoft that allows the business to resell Microsoft cloud products and services, such as Azure.

Under a CSP agreement, the business acts as a provider of these cloud services to its own customers.

The partner is responsible for managing your relationship with Microsoft’s services, including billing, support, etc.

CSPs would get a small discount on sold products and services, which usually led to you - the customer - getting a discount in return.

Partners basically choose the breadth and width of the services bundles and options to provide.

But it varies greatly across type, size, and segment of the partner. So choose carefully.

Enterprise Agreement

The “go big” commitment with Microsoft is called Enterprise Agreements (EA).

A business (e.g. Yours) and Microsoft purchase a LOT of cloud services and software licenses from Microsoft.

In return, they get at a discount for that upfront commitment.

Plus access to additional services, such as support, training, and consulting, etc.

Microsoft typically offers this to larger organisations - +1000 strong businesses - that have the resources to commit to a larger upfront purchase.

Or plain simply consume millions worth of cloud.

At the end of the day, it’s important to regularly review your contracts to ensure that you are getting the best value for your money.

Train your team.

Remember: cloud works a lot like private economy. It’s the pesky, variable costs that eat your budget.

And so, your cloud spend is bound around the same behavioural pitfalls as you and your private economy.

Your motivation may be high in the morning, beginning of the month, quarter or year. But sooner - rather than later - you fall into all the same patterns and excuses holding you from saving up to that vacation in the Maldives.

Therefore it’s paramount you ensure that your team is properly trained FinOps practices.

This includes not just the technical aspects of managing cloud resources, but also the financial and compliance considerations.

Consider offering training sessions, hosting workshops or enforce managerial online trainings before giving access to cloud resources, to help your team get up to speed on these important topics.

Please note that this is not a one-click solution. Training requires continuous monitoring, follow-up, and evaluation.

Conclusion

Implementing cloud FinOps practices in your midsized company may seem daunting at first, but with a smart start and a clear plan in place, you should be able to get some form of control.

But the main concern is the level of commitment you can establish within your company.

IT and finance is usually very different cultural domains, and are only just beginning to clash.

There are a multitude of levers you can use to optimise your cloud resources and spend.

But to maintain optimal, predictable levels, you need to be on your toes.

The seemingly tiniest of mistakes can become dirty, money-hungry buggers.

So, ally yourself with the right tools and guardrails to help you safeguard your cloud investment.

The difference between flow and lethal crashes are small.

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