If you are like most, you probably experience IT costs not being stable as they used to be. You might experience some budget overruns or have a nagging feeling that you are overpaying for some of the new cloud services. 

But don’t worry. This blog post will outline a simple roadmap for your FinOps journey, so you can focus on delivering business value.

What is FinOps?

FinOps is a concatenation of Financial Operations, just like DevOps is Development and Operations. It is the name of a new task that all consumers of the cloud must do.

 

In the old on-premises times, optimizing IT costs was mostly about optimizing how you bought technology. You negotiated large hardware or software deals with teams from multiple departments, including legal, procurement, finance, and IT. 

In the cloud, there is no single large purchase. Instead, you buy services continuously as developers deploy workload, and bills are monthly and therefore seem “small” compared to the hardware purchase made once a quarter. 

Make no mistake, though; the total amount is large.

The Cloud Requires You to Think Differently about Cost Management

Before we move on, we have a few statements to consider regarding how IT, finance, and procurement are working together to manage your cloud costs.

In our company we agree that:

This is not the time or place to detail each of these critical questions, but if you want to dive further into these questions, you can read our blog “Five critical elements in your cloud cost thinking.”

Surely, this requires a vastly different approach than in the on-prem world. Welcome to FinOps!

If you do not manage cloud costs with the right approach, you run the risk of overpaying. Maybe this is the reason why the average budget overrun reported in a recent survey by Flexera is 23%!

The Four Key Components in FinOps

There are four fundamental elements in FinOps that you need to learn understand and remember:

  • 1.  Optimizing
  • 2. Negotiating
  • 3. Informing
  • 4. Manage

FinOps is the practice of managing cloud costs in a variable spend model. Or simply put, FinOps is about managing this equation:

Cloud Cost = Price * Quantity

In this equation, Price is about keeping your unit costs down, i.e., getting the services you buy today as cheaply as possible. You can do this in many ways, but fundamentally it boils down to: 

  • • Optimizing price by working the cloud service catalog, price and discounts models (applies to all organizations), and 
  •  Negotiating enterprise-specific discounts and special terms (if you have sufficient scale). 

The great thing about price optimization is that you can do it without impacting the business.

Quantity is making sure that you are not buying more than you need, i.e., by shutting down unused services  (life cycle management) or purchasing the necessary capacity (right-servicing). These types of decisions typically require the involvement of the business owner and come in two maturity levels:

  • • Inform the business owner about what they are spending, and this will immediately have an impact on the quantity consumed
  • • Manage quantity in a structured process where you monthly or quarterly sit down with the business and go through material costs

A Roadmap to FinOps

No matter if you are a large or small enterprise, private or public, technology-based or traditional products and services, we experience the following roadmap providing the best results:

STEP

01

Optimize Price

We guide you through data collection in 15 minutes. No installation, no accesaIn order to optimize price you need to take a snapshot of your current environment, optimize it using a tool with a complete up-to-date service catalogue and price/discount list, validate the findings and make the adjustments in your portal.s, no sensitive data.

STEP

02

Inform about Spend

When you have optimized price – and taken the largest part of the savings available – you can start creating transparency on who spends how much on what.

STEP

03

Manage Quantity

This is where you need to get the business involved to make decisions about shutting down services (lifecycle management), shutting services on/off, and buying the right capacity services (rightsizing).

No matter if you are a large or small enterprise, private or public, technology-based or traditional products and services, we experience the following roadmap providing the best results:a

Want to know more about each of the steps? Read our blog on “Fasttrack Roadmap to FinOps.”

This roadmap provides excellent results because price optimization delivers considerable savings, making it easier for you to move on to business-critical decisions on quantity.

And if you get external assistance, you can optimize price very fast!

Get external help for price optimization

Another reason to start with price optimization is that it is well suited for external assistance.

You can get more savings, you can get them faster, and you need to spend only a 10th of the time or less.

The reason is simple – you share the cost of the time-consuming parts with other companies. Don’t worry about tracking changes, getting your spend, analyzing it, reading the fine print, etc. 

You want to retain control of your environment by validating the recommendations and ensuring that they do not run contrary to any plans you might have.

You might argue that you already have a person or a team doing this. Indeed, they are doing a great job on this. However, ask yourself if they can create more business value if they spend their time on other tasks than price optimization.

FinOps in the Real World

All of our customers have one thing in common – they care about not overpaying and want to stay in control. Some of them have large teams, other just a single person with limited time. They understand cloud technologies and all the concepts required to manage cloud costs. Yet, there is always time and money to be saved.

Let us share with you a couple of examples.

New Possibilities

 A Media client in Azure was spending large amounts on App Services. There had been no ways to save on these services other than reducing the number you ran. In the fall of 2020, Microsoft suddenly introduced reservations. Now, by upgrading these instances from standard to premium and reserving them, clients could save 60+% on these resources. We notified our client, and within one week, the customer implemented the change and saved hundreds of thousands of euros annually. Continuous monitoring of new announcements is an essential part of FinOps – but also one you can easily outsource.”

A highly technical save

One of our global clients run a large data warehouse in the cloud. It runs on massive machines with very high performance. However, on the cloud vendor’s advice, they had configured the environment with so much storage performance that they exceeded the limits of what the database servers could handle. The result: they were paying tens of thousands of dollars for the performance they were physically unable to utilize. The fix? Adjust the performance setting for the storage drives, instantly lowering costs by 50%.

The Aha! moment

We recently facilitated one of the first Showback review meetings for a client. They showed their development teams the costs they were driving, including the resources with the highest spending. What did they find? “That, that has been inactive for at least 18 months, I thought it was gone!”. You would be surprised how often this happens. No-one has the job to review all running services, so even with a team more than willing to help, this is not their priority. A 20-minute online meeting saved nearly $100k, by merely creating transparency and responsibility.”

FinOps is much more than delivering savings

The fact is that most cloud journeys do not have a cost focus. Rather, it is about digitalization, speed, and agility. Therefore, you might state the success of your FinOps journey in the direction of:

  • •  Getting more digitalization for the same money,
  • •  Avoiding digitalization slowdowns due to cost overruns,
  • •  Getting more time in the cloud teams to building and operating your cloud rather than managing costs.

Is this true for you? If so, working with an external partner like Kostner will help you focus more on success and less on the commodity parts of price optimization.

Want to know more?

Hopefully, it should be clear by now that we are here to make your life simpler. You will save more, faster, and your team will spend less time on FinOps and cloud cost management.

To make your decision as simple as possible, we have two completely risk-free ways of finding out if you want to work with us:

  • •  Book a free meeting, where you can learn about how we would work with you and ask any questions you may have, or
  • • Find out exactly how much you can optimize price by taking our free assessment. We will go through our optimization results, and you can ask any questions you might have.

We are looking forward to making your life a little simpler.

A small business owner recently asked me what she could do to lower their spend on Office 365. At $150 per user per year for the Business Premium package (the Business series is for companies with up to 300 users), it adds up.

So, what can you do?

Well, with all user-based software, you should do three things:

  1. Make sure you only license the users you need to
  2. See if you can use a smaller license package
  3. Consider other options

Only license the real active users

Let’s start with only licensing the users you need to. Here we’ve got a few tips:

  • Shared mailboxes: In Office 365, we often see customers who use full-blown licenses for shared mailboxes. That is, [email protected] receives a full license. You don’t need to. You can create shared mailboxes at no extra cost and add the users or groups to them that need to access the content. This is a good scenario for most, and we use it extensively.
  • Remove licenses from inactive users. Did you give an external consultant a user and license, and they are no longer doing work for you? Did an employee stop? In most companies these “ghost” accounts draw 5-15% of licenses.

Use smaller packages

In Office 365 – both for small and large companies – there are many packages available. They differ vastly in price, and you should consider what features each employee really needs. The big differences are centered on the need for:

  • Installed Office applications: For many users, a web edition is enough. This is especially true for those who rarely create documents, but merely read them, or enter data. The [KS1] difference between a Microsoft 365 Business Standard (formerly Office 365 Business Premium) and Microsoft 365 Business Basic (formerly Office 365 Business Essentials) account is primarily the lack of installed office (there are others like mailbox size, but we rarely see these becoming real-world limitations in our data). The savings? $90 per user per year. That adds up.

  • Collaboration tools: Do you actually use Sharepoint, Teams, or your mailbox? Your company might use Google e-mail and collaboration tools – or Zoom, or Slack, or… it’s a long list. If all you need are the office products, you can use Microsoft 365 Apps (formerly Office 365 Business) and save $50 per user per year.

Consider other options

  • Switch to owning office software. You can still buy office, and it’s not as expensive as you might think. A Office Home & Business 2019 license is $250 without discounts. If all you use are the apps, that’s an ROI of 18 months. Limitation is you’re only allowed to install it on one device, vs 5 for the Office 365 version.
  • Switch to something else. Libreoffice? Google Docs etc.? There are other options out there. This, however, is not necessarily a simple thing to do. In the long run though, open source might be worth thinking about. We are willing to wager the cost of Office 365 is unlikely to be going down in the future..

We hope this is helpful. If you have any questions we do host free webinars

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Cost optimization as the top business objective

The position of CIO is one with an ever-growing list of daunting tasks and objectives. “Digitize our business”, “disrupt everything”, “why aren’t you 3D printing more things”.

Yet, CIO’s are still facing the critical challenge of paying for all this, while keeping their existing environment running smoothly, and keeping costs low.

In Gartner’s 2018 CIO Agenda report, 10% of CIO’s cited “profit improvement, profitability, or asset monetization” as the top business objective for the next two years.

An additional 5% cited “cost optimization, cost management, or cost reduction” as the top business objective.

The easiest way to increase profitability is to reduce costs. Cost optimization is becoming increasingly difficult to achieve with IT operation costs soaring like never before. We’re no longer being bailed out by falling hardware costs. Software and Services get more expensive every year, and take up a larger and larger share of costs.

Worldwide spending on IT operations is projected to reach $3.8 trillion in 2019 with cloud service costs rising by 22%.

Higher costs and more emphasis on cost reduction go hand in hand and luckily wherever you do decide to run your IT, be it in the cloud or elsewhere there is money to be saved in the optimization of how you license and consume those services.

The process of optimizing and cleaning up in an IT environment can be daunting in itself with many hours of valuable time being used on outside consultants who in the end often fail to provide concrete savings. Add to that the complexity of software licensing and cloud service offerings, and knowing what to choose and how to save becomes nearly impossible.

AI is now changing this.

Cloud cost optimization with AI

KOSTNER’s Rightlicensing™ services have already helped numerous companies optimize their IT, saving millions in costs.

Doing so in very short time.

By using data, AI technology analyzes your workload and license portfolio to give you the ideal choice of license models, infrastructure decisions and workload placements tailor-made for your IT needs.

Using the solutions provided by our AI, KOSTNER can help guide you towards concrete solutions and draw a clear blueprint of how to get there.

KOSTNER optimizes Microsoft On-Prem licenses, Office 365, Azure, and VMware consumption, saving an average of 25% on license costs, leaving you with more money on the bottom line to spend elsewhere. On 3D printers for example.

Profitability and Cost optimization is a CIO priority and a CIO decision. Book us, and we will show you how easy it can be, to achieve your top business objective.

Thanks AI.

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For CIO’s, deciding where to run IT in the future has become an increasingly daunting task.

With so many different solutions available, the decision of where and how to run IT goes deeper than deciding between cloud, outsourcing or running IT in-house.

Decisions have to be made about which servers to use, what licenses are best for your businesses needs, what payment method you want, just to name a few of the decisions facing CIO’s today.

Suddenly there are millions of possibilities and making a decision reaches a complexity level well beyond what is humanly capable.

With so much to consider it is only natural to want help when navigating the many possibilities in front of you.

However, getting outside advice can be difficult too and there are several things to consider before taking it on.

Bias as an example. Do they have a goal in selling you a specific solution? Are they advising you on the best solution or the solution that benefits them the most?

Expecting your technical- or operations-staff to take all this into consideration is unreasonable.

AI can help provide clarity in the endless possibilities facing any CIO.

AI technology can simulate and analyze every possible solution without any bias to find the best fit for your needs out of the millions of combinations available to you.

All that is needed from you is data. Asking your data beats using a typical consultancy approach requiring countless hours and resources.

At Kosnter we create AI technology to advise you on the best solution for your IT needs.

Where and how to run IT is a CIO decision. So is seeking the right assistance in making it.

Book a meeting, and we will show you how easy it can be to achieve the best solution possible.

Thanks AI.

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A treasure worth potentially millions was found hidden away in a local data center.

Rumors of hidden treasure had been circulating in the industry for years but after many presentations and meetings, no real progress had been made.

Some questioned why the treasure had not been found earlier after consultants had spent months searching for it.

The treasure was discovered thanks to the use of a new innovative AI technology.

The finders said no dusty old treasure map with a red “X” was ever found, instead, they used existing data to pinpoint the location of the treasure.

The AI technology was able to help optimize the project, finding the treasure in only a few hours.

The story does not end here, however.

The developers behind the technology say treasures just like this one can be found in data centers all over the world.

CIO and CTO’s everywhere are now being urged to check their data centers for potential treasures.

You could be one of them and claim your treasure worth millions.

Interested? Subscribe to our blog or follow us on LinkedIn

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At Kostner, we believe it’s important to understand what you need. Have a look at this video with Mikkel Naesager to find out how we work with this question at Kostner

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More and more companies are switching to cloud storage, is your company following the trend?

Did you know cloud storage prices are stagnant and not declining like other storage alternatives? Learn more about cloud costs and benefits in our co-founder Mikkel Naesager’s monthly webinar to make the best decisions for your company’s IT future.

Join us for our next webinar for more actionable insight.  

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Translation of an article from Børsen posted on 27. september 2017.

The industry giant threw half a million kr. after a start-up company with an analysis tool that can track unnecessary licenses for software. The result: 12 million kr. saved.

At the engineering giant FLSmidth, the director of IT Mads Madsbjerg Hansen is very pleased.

When he was faced with a new three-year deal with Microsoft on software licenses for the company’s servers all over the world he was talked into letting a young, Danish company check if he could avoid some of the expenses. To say that he could, would be an understatement.

Kostner, as the company is called, asked for about half a million kr. to let its self-developed technology scour through FLSmidth’s IT systems globally. The savings on the new three-year contract were noticeable.

“About 12 million kr. over three years. But others have different numbers. So the really interesting part for me is that the investment was earned back in three months,” said Madsbjerg Hansen, who is in charge of IT and IT security at FLSmidth who are far from alone on being able to save quite a bit of money.

According to chief analyst, Anders Elbak from IDC, companies pay too much for software. This thought is shared by Kostner.

“We have analyzed 21 top-25 companies in Denmark. We have never found savings less than 2 million kr., says co-founder of Kostner, Helle Naesager.

When FLSmidth can avoid expenses of 12 million kr. in the next three years it has a simple explanation according to the IT director.

“if the licensing structure was simple, we could have figured this out ourselves. But it just is not. If I am being a little rude, that is what many software companies make their money on, that the people doing the work don’t understand it,” he says and uses an example.

“We have data on servers in over 50 countries. When a colleague asks my guy in Chile if he can set up a server to help an engineer he says yes. Then after a couple months, they found out they don’t actually need it anymore but they never turn it off again, so it just stands there pulling licenses,” says Madsbjerg Hansen, who does not put the blame on his colleagues.

Not a chance

“The guy who set the server up does not think commercially, he only wants to help his colleague with a server. Even if he does think commercially, he would not have any chance to understand when a license counts and when it does not,” he says and does not believe there is a possibility for more manual control.

“I don’t have someone I can set aside to use half a year on understanding all the different aspects, it has to be online. Change happens constantly in all companies. You move around, and open and close systems. It can be hard to keep track of.

The solution from Kostner came from running data from FLSmidth’s systems across the world. It quickly became apparent there was a lot to save.

“The frustrating thing is that the money does not go to our bottom line. It would have been money that was taken out of our budget if we had not done this. So I would call it cost avoidance over money saved,” says Madsbjerg Hansen, who from the start chose to pay Kostner a set price instead of letting them have a percentage of any potential savings.

More aha-moments.

“It quickly ends in people discussing what was savings and what was not. My life is too short to argue with people,” says the IT director, who gained some additional aha-moments during the process.

“I had thought that I would have to close a lot of small data centers for security purposes around the world. But the report made it clear that this was a clear cost element and that it is cheaper to centralize because you can use the licenses better when they are run centrally. I had not expected that. So if it cheaper and more secure, then I am twice as happy,” says Madsbjerg Hansen.


Rack or Blade? 8-core or 28-core processor? Enterprise or Standard license? 3-years or 5-years support contract? Cloud or On-Premises? These questions do not sound like board-level decisions but they do carry a million-dollar price tag.

When we think about decision making in enterprises, we tend to think that decisions driving millions of dollars of costs are made at a high level by executives weighing long-term effectiveness and cost efficiency. Within IT, the reality is often quite different.

Here, decisions driving millions of dollars of costs are made every day, by employees who are looking to solve problems in the short term and who have little or no information about the cost impact of their choices of software and hardware.

As a result, the decisions, while often effective at solving the technical problems, are very rarely made with a broad cost view or longer-term perspective. Not because they do not want to make good decisions but because the information is rarely available to them.

Employees at this level typically do not have the budget or inclination to seek outside help, even though many decisions about licensing choices or amortization periods should carry the warning: “Do Not Try This at Home”. The complexity can be daunting, and there is no shame in giving your employees the best possibility for making a good economic decision, not just a technically effective one.

Shameless plug:

At KOSTNER we enable these employees to make good decisions by giving them concrete information about their current configuration and costs, and an easy way to choose among the multitude of options available to them today. Simulating existing workloads running in new types of hardware and cloud offerings, we are able to present the best long-term, broad-view solution.

Luckily, even for decisions made in the past, we are able to reclaim millions of dollars in unnecessary costs for licenses, cloud services, and hardware support fees. Even after the hardware is purchased, support fees account for 60-80% of total costs. There is nothing wrong with revisiting old decisions and applying long-term and broad-view perspective to them. The result is often large-scale savings with minimal effort.

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Helle and Mikkel Næsager founded Kostner, a company who use artificial intelligence and big data to analyse their clients’ it-infrastructure. With the company turning profits they have set their sights on expanding their business to the international market.

Continue reading here

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