With the advent of digital transformation across enterprises, the need for sophisticated infrastructure, software tools, rapid application development, and deployment became the need of the hour. Cloud technologies allowed for these rapid technology upgrades across enterprises along with the flexibility of solutions "as a service." The popularity of the cloud increased with the "on-demand" business model where upgrades or downgrades of information technology infrastructure could be done instantaneously. But there was a problem.
Waste Cloud Spend
Needless to say, all this convenience made available to enterprises came at a price. Via the cloud, digital transformation progressed even faster, and customer demands were being met, but balance sheets began to show an uncomfortable trend of spiraling expenditure.
According to Research and Markets, the global cloud computing platform market is expected to reach $1240.9 billion by 2027 at a healthy CAGR of 17.9%. However, at the same time, Flexera's 2022 State of the Cloud Report outlines that companies are wasting 32% of the cloud spend - up from 30 percent documented in 2021.
Reasons for Waste Cloud Spend
Survey on survey shows that there is inadequate control of cloud spending in enterprises resulting in wasted cloud spending. Inadequate cloud resource management is one of the key reasons for excessive spending. Idle resources, instance mismanagement, and extra storage are areas that get neglected while chargeable fees are ticking away.
Virtual machines which are left running when not required and unused capacities are ideal cases contributing to overspending. Resources no longer needed yet hoarded, along with inefficient usage of premium on-demand services, are further causes for premium cost overruns.
Pricing of individual cloud services might appear low, but cumulatively, cloud expenditure can add up amounts that can cause budget overruns and upset financial controllers.
The Solution Lies with FinOps
Simply put, FinOps is a framework or process which gives an enterprise more visibility into actual cloud cost and its management. With the adoption of FinOps, enterprises begin to get relevant data as to why budgetary projections for the cloud have got tossed out of the window even though innovation levels are incredible.
The legacy systems of monitoring business-related data, such as cost control, need to be revamped to keep up with the introduction of cloud infrastructure within the enterprise. Using FinOps methodologies, IT teams, financial controllers, and business strategists can share insights and make appropriate and informed decisions when it comes to cloud management without derailing the advantages of using cloud technologies. Financial accountability is the final goal of any FinOps initiative.
Once the digital transformation dust settles down, the aim should be to introduce a consolidated method of control while monitoring expenditure of the cloud as done with other departments of an enterprise. Bringing different departments of an enterprise together for a consolidated approach to the utilization and purchase of cloud services is the primary aim of FinOps. Sustaining the financial viability of a project is not possible when different departments are making their own decisions without a framework of centralized command and control as architected by FinOps.
Evaluation of requirements across the enterprise and choosing the best architecture that would be common and suitable across all different cloud initiatives within the enterprise is where FinOps begins to make its presence felt. This holistic view of requirements across the enterprise makes purchasing cloud services more efficient and cost-friendly.
After the introduction of collaboration, information sharing, and a reasonable degree of monitoring in place, FinOps also introduces protocols and compliances for requirement definitions, budgeting, procurement, financial control, and reporting. With these FinOps protocols in place, cloud expenditure is no longer a bull in a China shop, and procedures begin to take root resulting in the introduction of long overdue financial control.
Lifecycle of FinOps
FinOps introduces a 3-step life cycle process for enterprises. These steps are then to be followed iteratively.
Information regarding all requirements and proposed purchases must be made available at all times. This allows for the timely intervention of cost allocations and management. There has to be deep visibility of information, ensuring all stakeholders can share information such as projections, allocations, return of investment (ROI), and other business benefits. Accurate identification of cloud consumers within the enterprise and their monitoring becomes possible with this information. "What each one is spending and why" is key in this phase.
As the word itself suggests, the optimization phase is where the action is taken to optimize all cloud resources currently being utilized. Scaling up, scaling down, pooling, shutdown of unused services, and identifying underutilized resources are just some of the actions undertaken in this stage.
In this phase, processes and mechanisms are introduced to quantify and analyze all metric data collected via FinOps to evaluate the state, performance, benefits, and pitfalls of operations in the cloud. This data becomes a guideline across departments which is shared and collaborated on before the next iteration. Compliances and governance protocols can also be introduced at this stage.
These three phases must have company management, concerned departmental heads, financial controllers, and IT engineering as primary stakeholders for the successful implementation of FinOps.
Benefits of FinOps
Resource usage visibility, financial accountability, control, and ROI are crucial for any cloud-based initiative in an enterprise. Without such accountability, business sustainability is not possible. Adopting FinOps ensures there is information sharing, collaboration, and clear visibility from a business perspective. This phase-wise iteration of the life cycle of FinOps ensures cost saving, financial control, and continuous optimization of corporate expenditure.
With the FinOps architecture in place, an enterprise can further introduce structures of governance and protocols of compliance for the purchase and use of cloud-based services. Interested in learning more? Talk to an expert today!
This article was originally published here: https://www.dqindia.com/what-is-finops-do-we-really-need-it/