It is a familiar scenario: a company buys into the economic and flexibility promise of the cloud, starts cloud-first initiatives, and, in a matter of months, experiences sticker shock. Then, panic sets in.
Disappointment, fingerpointing and finance action to rein in all cloud investments hamper builders’ efforts to innovate, learn and discover. This is around when company executives find out about FinOps to control “IT waste.”
According to the FinOps Foundation, it is an evolving cloud financial management discipline and cultural practice that enables organizations to get maximum business value by helping engineering, finance, technology and business teams to collaborate on data-driven spending decisions
For Nathan Besh, senior director for product management and technical evangelism at Apptio, those who are using FinOps’ to cut out cloud cost waste are missing out on the big picture. “This is probably the biggest issue I see emerging today: FinOps is being treated and promoted as a waste and cost reduction tool. FinOps is somewhat a victim of its own success.”
Instead of a tactical and more reactive approach to FinOps, Besh urges companies to take a more strategic view of FinOps. So instead of saying how to reduce waste, we should ask how long has this waste been there and how do avoid it in first place?
“There needs to be the desire from the [business and IT leaders] not to grab a headline for the next pay rise, but think long term and build capability for immense returns in future,” says Besh.
There’s good reason for taking a strategic approach to FinOps.
First, cloud spend is exploding corporate wallets faster than before. Thanks to the COVID-19 pandemic and significant digitalization efforts across the globe, Gartner believes that cloud spend will overtake traditional IT by 2025.
“This means that any waste is now a significant problem in terms of the overall organization spend, and it makes business sense to invest heavily in FinOps. It’s also a concern for a lot more companies as deeper cloud adoption continues,” says Besh.
Cloud platform providers are also investing heavily in FinOps. AWS has its Well-Architected Cost Optimization paper, Azure has its Well-Architected Cost Optimization paper, and GCP released its Cloud Architecture Framework on Cost Optimization. New tools and free resources, such as the Well-Architected Labs, are helping customers implement FinOps.
Like the Ukraine invasion and the pandemic, unplanned macroeconomic events are other reasons companies need to get smarter on cloud spending. “Organizations are looking at FinOps as the key function to increase their overall business efficiency and gain insights into where they can improve their efficiency throughout their business,” says Besh.
Blame the messenger
Besh believes that one reason why companies react with FinOps instead of taking a more strategic approach lies with FinOps practitioners.
“We need to focus more on the business outcomes and efficiency, rather than technical efficiency such as for managing cloud resources. There has been far too much focus on meaningless metrics and KPIs that look good on paper but have no meaning or impact on the business,” says Besh.
However, moving away from technical metrics like “% utilization” or “% coverage” to ones that measure the FinOps capability of an organization, such as “% of our employees that are FinOps trained” or “% of our workloads that we measure the efficiency of” is not easy.
Expanding the responsibility of builders to go beyond code is one option. “Making delivery teams accountable for not just delivering the right services and features but also managing the fixed and variable costs is not easy. How do you motivate them to be more accountable for cost management?”
Deploying the right FinOps platform can help provide the answers. Besh, who calls his company’s platform a “force multiplier”, believes such a platform can scale and enrich the vendors’ cloud data, and reduce the effort to gain insights.
“A FinOps platform is there to help you gain organization insights — what challenges you have, where you have them, and possible ways you can overcome the challenges, how to address the challenges given your unique organizational priorities, will the effort invested be worth the outcome, and if you have already solved it elsewhere in your organization so you can leverage that success,” he says.
The economics of change
The right FinOps platform goes beyond telling what you need to change for efficiency. It also highlights the actual cost of making that change.
“It is of no value to provide a recommendation that costs more to implement than it returns. This can only be achieved when organizations invest in platforms and implement their organizational information, capability, and business rules so that recommendations and insights are meaningful for that specific organization and the specific users,” says Besh.
Just ask Koch Industries. The organization used Apptio Cloudability’s Account Group Mappings and Views to organize its spend by business and create global filters on its cloud data so each business can selectively view its spend. The higher level of security and efficiency helped it support the various subsidiary businesses and successfully roll out its cloud platform.
Rolling out the platform to every business made it possible for the implementation teams to adopt best practices and integrate good cloud hygiene tasks, including turning off stale resources and improving tag coverage. It also allowed IT and finance to work together closely to manage cloud cost management better.
“This model of collaboration across teams and disciplines is now being called FinOps and allows Koch to act as a FinOps Business Center, organization-wide functionally. Blending skill sets from accounting, technology, business and engineering disciplines is part of what makes Koch’s approach to cloud cost management so strong,” explains Besh.
Apptio can do this because of its heritage. “Over a decade ago, we created the Technology Business Management (TBM) Framework — which promoted alignment between business units to provide a consistent way to connect business value to technology investments. FinOps is, in essence, an extension to this work — the outcomes are the same, the methods are different,” says Besh.
Apptio is now expanding its ecosystem of products and features to ensure that customers have the best in class tooling and stay ahead of the existing and new challenges with the ever-changing landscape of cloud and technology.
The cost of missing out
Besh predicts that asking the right questions with FinOps will only grow in importance as IT becomes an essential driver of business for innovation, delivering better products and services and improving the customer experience. For example, it can help companies make critical business decisions on whether certain cloud products are worth creating and will it be successful in the market instead of following others or waiting for the right use cases.
“We’re already seeing signs of this — venture capital firms are already asking for proof of FinOps capability and processes in startups before they continue to provide further funding. It will not be long before we see shareholders and shareholder advisory firms asking the question of how responsible you are with their money, especially with the recent focus on FinOps’s cousin — sustainability. Waste has a direct impact on areas of sustainability, and FinOps is the solution to address these,” says Besh.
Sitting on the fence and deciding whether FinOps is for you is not an option either. “If you don’t, your competitor will, and you will simply cease to exist,” Besh warns.
Winston Thomas is the editor-in-chief of CDOTrends and DigitalWorkforceTrends. He’s a singularity believer, a blockchain enthusiast, and believes we already live in a metaverse. You can reach him at [email protected].
Image credit: iStockphoto/Ildo Frazao