Why FinOps?

If you are considering migrating application or building new on-premises applications, you definitely heard the cost related arguments favoring the cloud:

1. Reduces the costs of maintaining physical data centers, such as hardware procurement, power, and cooling costs.
2. Save human resources by reducing the needs of skilled employees for data center administration tasks.
3. Pay for the resources that are actually in use, easily scale up or down according to business demands and adjust to fluctuating workloads without purchasing processes and infrastructure upgrades.
4. Ensure you benefit from the most recent advancements in server and network technology.
5. Use a wider range of  services and tools on the cloud, more than an organization can set up for itself.
6. Choose between the most cost effective pricing models for your needs.
7. Contributing to a sustainable environment with servers and data centers with energy efficiency.

I believe you have heard those arguments and maybe some more.

But, let me tell you that when it comes to mature environments on the clouds,  you might not be surprised to learn that the top 5 risks of cloud spend risks are directly correlated to each of these benefits:

1. Overprovisioning of Resources
   Companies often allocate more computing power, storage, and networking capacity than necessary, leading to inflated cloud costs.
2. Idle and Underutilized Resources
   Unused or underused  instances, storage volumes, and load balancers accumulate, increasing unnecessary cloud expenses.
3. Inefficient Data Transfer & Egress Costs
   Moving data between the cloud provider regions, availability zones or on-premises infrastructure incurs significant fees.
4. Shadow IT & Unapproved Cloud Usage
   Employees may deploy cloud resources outside of IT governance, leading to untracked spending and security risks.
5. Unpredictable Costs & Budget Overruns
   Cloud services operate on a pay-as-you-go model, leading to unexpected spikes in costs if usage is not monitored effectively.
6. Lack of Cost Visibility & Governance
   Cloud users struggle to track real-time spending, leading to budget overruns and financial surprises. Furthermore, Organizations struggle to attribute cloud costs to business units or projects.

When your infrastructure  resides   in a data center, you don’t have to worry that under utilized  resources or spare storage capacity will impact your net income, as they’re fixed assets and your network services are most probably at a fixed cost.

Budgeting can be an exhausting process to plan, approve and track, but once the annual budget is approved, you know your budget line item and cost centers, and you know what you are going to pay for.

Adding new resources are going through a purchasing process with approvals as well, you will not find in expected instance types that were ordered by a DevOps engineer in your data center.

 

So ‘Why FinOps?’

These practices change when you move to the cloud. The model of ‘pay as you go’ changes the game, as a new resource is just a mouse click away. The risks mentioned above are not going to be mitigated without FinOps practices. Without dedicated cloud cost optimization focus, organizations fail to implement cost-effective strategies and will not have a governance on the cloud expenditure.

This is where “FinOps’ comes in:

1. We are building the tools and the process that support the organization with mitigating the risks and addressing those challenges, we make the cloud spend visible, leveraging FinOps practices to integrate financial accountability across teams.
2. We build mechanisms and processes, utilizing cost allocation and chargeback models.
3. We provide regular cost analysis reports to stakeholders, related to the organization terminologies, project and events.
   We create real-time cloud cost dashboards for business units.
4. We utilize predictive analytics to forecast future spend based on historical data.
5. We make sure resources are optimally utilized and the pricing model are the most cost effective