Taming cloud costs and carbon footprint with a FinOps mindset

Cloud computing has revolutionised IT, offering businesses agility, scalability and access to cutting-edge technologies like never before. But in today’s business environment, where cloud is at the centre of many organisations’ IT stack, the costs associated with the technology can get out of control.

With industry analyst firm Gartner predicting that worldwide end-user spending on public cloud services alone will grow by 20.4% to total US$675.4 billion by the end of this year, the rapidly rising investment by businesses in cloud is clear. As more services, solutions and infrastructure make their way to the cloud, it should come as little surprise that cloud bill shock has become a legitimate gripe among enterprises.

But why? Most businesses understand that when they move to the cloud, they need to change the way they operate their IT infrastructure, and this includes how they budget for it. However, the missing part of the puzzle is that organisations often don’t have the enterprise visibility and predictability of their cloud spend, and new architectures in place to optimise cloud with cost as a key parameter.

Against this backdrop, businesses are exploring new ways to manage their cloud costs, and one of the key ways forward is through “FinOps”. But while FinOps offers a powerful tool for cloud cost optimisation, many companies haven’t fully embraced it. Even those who do might not be utilising it to its full potential. This underutilisation represents a significant missed opportunity. So, what’s next for FinOps?

A phased approach to controlling costs

A portmanteau of “Finance” and “DevOps”, FinOps is, in the words of the FinOps Foundation, an operational framework and cultural practice aimed at maximising the business value of cloud. It enables timely data-driven decision-making and creates a bridge between engineering, finance and business teams.

There are three phases in the FinOps model: Inform, Optimise and Operate.

In the Inform phase, FinOps activities involve identifying data sources for cloud cost, usage and efficiency, and applying attribution for cost allocation. The Optimise phase involves identifying opportunities to improve cloud efficiency using the data and capabilities developed in the Inform phase through rate and usage optimisation. Finally, the Operate phase involves implementing organisational changes to operationalise FinOps using the data and capabilities developed in the Inform and Optimise phases, implementing governance across the service lifecycle.

Together, these phased steps are designed to optimise businesses’ IT and cloud investments by bringing together and aligning financial, technical and business functions to drive financial accountability and create predictability in cloud or hybrid IT costs. The process also ideally leads to a more cost-conscious culture across the business.

In short, a successful FinOps strategy means achieving the desired business outcomes of IT modernisation and growth by utilising expertise, experience and proven methodologies to help sustainably manage spending and usage for multiple clouds at scale.

Making cloud technology pay

But how can businesses make the FinOps dream a reality? When implementing a FinOps strategy, there are several key steps businesses should consider. As a starting point, organisations need to identify the current state of their FinOps maturity and establish clear goals across the three phases of the FinOps process.

Establishing a foundation through the Inform phase

Cost visibility has immense value in that it is the first step towards transparency. Transparency builds trust, which is fundamental in achieving the FinOps transformation organisations need. With cost visibility established, effective metadata tagging is crucial for allocating costs accurately and understanding spending patterns.

Optimising for efficiency through the Optimise phase

The Optimise phase identifies, validates and implements optimisation opportunities. This may even result in the creation of a new operating culture and model. Getting this step right will lead to the deployment of the relevant systems and the adoption of FinOps best practices.

Sustaining value through the Operate phase

Once the FinOps model is defined and adopted, continuous monitoring and optimising are key to ensuring that the business is also getting maximum value from its cloud providers. While the specific approach will vary based on organisational needs, the overarching principle is to make FinOps an integral part of the cloud operating model — from service design and planning to governance and payment.

It’s also important to note that it’s not a one-off cost exercise. Instead, it is a cultural and organisational shift that requires continuous optimisation and change management leadership to deliver lasting business value. Finding areas for optimisation and savings is just the start.

Catching cloud optimisation savings

In practice, this process can lead to extraordinary savings. For instance, NSW electricity distribution provider Ausgrid uncovered hundreds of potential cloud savings opportunities after going through a FinOps adoption process. Concerned with growing and unpredictable cloud costs, the company wanted actionable insights and financial visibility into its cloud operations.

At the end of that process, 1264 potential cloud optimisation savings opportunities had been identified, totalling over 8% of Ausgrid’s Azure cloud spend, with a potential return on investment for the company of 23 to one.

FinOps beyond the public cloud

While often associated with public cloud environments, FinOps principles and phases are equally applicable to hybrid, on-premises and mainframe infrastructures. By extending FinOps across these domains, organisations can achieve greater cost optimisation and control.

Another way that FinOps goes beyond cloud optimisation is by its potential to integrate with GreenOps. Streamlining cloud resource utilisation not only enables financial savings but it also can decrease a business’s environmental footprint. For instance, practices like dynamic resource allocation through data analytics and automation prevent unnecessary energy expenditure. At the same time, businesses can prioritise providers with sustainable energy commitments while tracking environmental metrics for external reporting purposes, in tandem with financial performance. In short, by adopting a FinOps and GreenOps approach, organisations can not only control costs but also contribute to a more sustainable future.

By embracing these practices, businesses can position themselves as leaders in both financial performance and sustainability.

Image credit: iStock.com/frentusha