Tag: FinOps

Do you want to know what is ahead for FinOps in 2023? This is Kostner’s take on what is ahead in the world of those managing costs of a major cloud platform like Azure, AWS and GCP.

Prefer video over text – scroll to the bottom of this page to see the full video.

The 3 major predictions are:

1. Cloud Cost Management on the CIO agenda - as well as the CFO

Cloud spend on major platforms like Azure, AWS, or GCP will eclipse all other IT expenditures to become the biggest cost item in IT. This will attract the attention of finance, in a way you likely haven’t been accustomed to. If IT can’t give credible answers to how it intends to manage and reduce what is to date on average 50% YoY growth, Finance is likely to take control – and that’s rarely a fun experience for IT.

2. Strategic Management of Commitments

Trading Agility for Affordability. I often joke that agility in cloud is 20% technology and 80% total lack of process. Well, going forward, expect to see more process. The hope is we can use a combination of the flexibility of cloud to allow after-the-fact cleanup, and the predictability and lifecycle of systems, to avoid the dreaded pre-approval processes. With the recent changes in policy, we need to be able to look at least 1 year into the future and make decisions about the stable portion of our environment. If we can’t, we’ll be missing out on at least half of savings.

3. Review, Spend and Clean-up

About half of all the attainable savings come from regularly reviewing the spend on installed environments with those who know that environment best. We regularly see identified savings of between 20 and 30% the first time this kind of spend review is performed, and making this a core process is a great way to keep that spend under control.

Next step?

So when your CFO realizes that your cloud spend has gone up a lot and it is looking like it is going to continue – having control over these two elements, presenting them, is a good way to make sure you get to keep as much agility and flexibility as possible – and still run as cost-efficiently as you possibly can.

Want more FinOps knowledge

Have you started hearing the word FinOps often? Or trying to wrap your head around how to manage your growing cloud costs? Without adding another time-consuming task to your team or removing the flexibility and agility of cloud in your organization?

This article gives you an overview of the why and how of FinOps so you can plan your FinOps activities and get started. In the bottom you’ll find the most important advice we’ll leave you with. Completely unintentionally… – you need to scroll through the whole blogpost to see it.

Why do you need FinOps?

The reason why you need to do FinOps is that you can save 50% of your bill through structured financial governance compared to an ungoverned cloud environment.

The savings come from 3 different sources:

Buying services as cheaply as possible and leverage all discount options
Only pay for what you need
Use the most cost-efficient services that fits your needs

FinOps is like cost management when you build a house

Just as when you are building a house – when you buy your materials, you want to buy the materials as cheaply as possible, and you might research where you can get them at discount. Second, you need to manage the quantity and make sure you do not buy more than needed so you later have to return them. Third, you look at the overall architecture and make sure you avoid using unnecessary expensive building blocks.

The new way to do financial management

Cloud calls for a new way to do financial management. The new thing is that we buy IT as a service and not large hardware and software investments. This gives flexibility and agility – but how do you ensure sound financial governance without creating a bureaucratic overhead sacrificing flexibility and agility – and adding a huge job on your scarce cloud resources?

Below we will go through the 4 steps of FinOps:

Visibility – know your costs

Create awareness of cloud costs by looking at your bill every month.

Visibility is the preliminary step to get your FinOps efforts going. If you’re not doing any FinOps initiatives yet, just taking the step of looking at your bill every month will put you in the mindset to start asking the right questions such as:

How much did we grow since last year?

What areas are driving the increase in costs?

Are we using everything we are paying for?

You need to know these things and track the development over time to avoid being blindsided by rising cloud costs. For example, a 5% increase one month may not seem like a lot, but if it continues for 6 or 12 months it’s completely different numbers.

Price optimizations – Buying services as cheaply as possible

Avoid overpaying for your services and leverage all discount options. This will save you 20-25%.

You can optimize price in many ways, but fundamentally it boils down to optimizing price, by working through the cloud service catalog, price, and discount models.

You might know the 3 essential ways to optimize on price – reservations /commitments, Azure Hybrid Benefit, and shared resources. But what makes price optimizations complex is the myriad of options there is within each of these, all affected by complex details, the state of your environment and the fact that Microsoft keeps changing the options for price optimizations. It’s not a difficult task – it’s just really time consuming and you need to ask yourself:

Does it make sense for you and your team to trawl through your whole cloud environment as well as your portal? Or would it be easier to get someone else to do it?

A tool is a great idea to do this as it is an optimal task for technology. With a tool your team doesn’t have to spend unnecessary time doing it.

While there is a tool side to price optimizations, i.e., using the organization tools in your portal, the main reason for not getting price optimizations done is uncertainty. What if our environment changes? What if I will move to a different service shortly? What if…?

The solution is investing in both tool and training. The tool makes you able to find the needle in the haystack and training gives you the necessary expertise to remove uncertainty and act on the recommendations from the tool.

Read more about price optimizations:

3 ways to get the most Azure for your money – and how to get it done!

3 indicators of a cost-efficient cloud

The 4 things you want to know as a CIO about cloud costs

Quantity management – only pay for what you need

Avoid paying for something you don’t use. This will save you another 20-25%.

In this step you need to get the different business owners involved in making decisions about shutting down services (lifecycle management), shutting services on/off, and buying the right capacity services (rightsizing).

To get the business units committed you need showback / chargeback to gain an overview, of which department is using what. Also, adding chargeback, incentivizes the different departments to take ownership and manage their cloud costs in a more structured way if they know they will gain the economic benefit of their own efforts.

Showback / chargeback is a moving target. In the beginning, the distribution of costs between departments can be relatively simple by just taking your cloud bill and split it between the different business owners. But with time more decisions need to be made e.g., how do you know which department is using what? how will you distribute hidden costs? and how do you distribute shared costs (shared Azure infrastructure, the FinOps team, and much more) and resources (containers, micro services etc.)?

Getting started you need to work with tags – and we strongly recommend adding virtual tagging to reduce administration. Consider using an external FinOps partner to get going in just a few weeks and avoid the common pitfalls that will make it time consuming to maintain.

Cost architecture – Use the most cost-efficient services that fits your needs

Avoid using unnecessary expensive services/ building blocks. This will save you another 10-15%.

Cost architecture is most likely the last step in the FinOps journey. Surely your team has done some research on this, but cost architecture is an ongoing activity – just like the other FinOps activities.

The reason for needing to do this ongoing is that the cloud has in-build challenges e.g., that the price for one service never drops. Consequently, you need to change server if you want a cheaper compute option.

What you specifically should focus on in your organization varies, but we see over and over again that SQL-servers, VMs, evergreening, IaaS vs. PaaS and Data Analytics are topics where an annual cost architecture review will greatly pay off.

“How do you ensure sound financial governance without creating a bureaucratic overhead sacrificing flexibility and agility? and adding a huge job on your scarce cloud resources? “

If you do these 4 things your bill will be halved compared to if you do not do any FinOps initiatives.

You might have taken some steps already or have not started yet. The most important to do right now is that you get started – 50% off your cloud bill amounts to a lot of money that could be used on other priorities.

The most important piece of advice we will leave you with

Starting from scratch and building your FinOps efforts is complex when FinOps is not your primary assignment. The good news is that your needs will look the same as other organizations, making FinOps an ideal external assignment. That way, you avoid a slow implementation process which only result in paying Microsoft or the other cloud providers more than necessary. With a FinOps partner you get a guide that asks the right questions, and helps you overcome the complexity by learning the simple principles of FinOps.

Our most important piece of advice is therefore to engage with an independent FinOps advisor, that can provide you with both tool and training.

Ready to move on? Have the FinOps journey infographic at hand so you know what to do when, or book a 30-minute inspiration meeting with us.

Get the FinOps journey Infographic

… have the FinOps journey at hand all the time so you know what to do when.

Download The FinOps Journey Infographic

Full overview of the different steps

Full overview of The FinOps Journey

… have the FinOps Journey at hand all the time so you know what to do when.

The implementation of a FinOps team will ensure that all FinOps efforts are aligned within your organization and drive your FinOps agenda from awareness to action.

If your company is using public cloud, you are probably well aware that there is a lot to manage – and as your cloud usage increases so does the assignments with managing cloud costs. Most C25 companies counter this increase by implementing a dedicated FinOps team to manage cloud costs. The FinOps team will be the link that assures the company is streamlined on their FinOps efforts.

The key take away’s of the FinOps journey

The FinOps journey makes it evident that the more money you spend on cloud the more effort you need to put into managing your cloud costs.

It shows what FinOps initiatives you should focus on depending on the size of your monthly cloud spend. It works as steps, and each time you go one step up you add on to the already existing assignments. The FinOps journey differs from company to company depending on the specifics of your organization, but for many the FinOps journey will look like the illustration above.

The key take-away from the FinOps journey in terms of building a FinOps team is how vital this team is for the organization, and the urgency for implementing this team the more you spend on cloud. As almost every company using cloud will inevitably start to see their spend increase as more and more data is moved to the cloud, it is only a matter of time before your company needs a dedicated FinOps team to take charge of all FinOps efforts to ensure a smooth FinOps journey for your company.

The central role of the FinOps team

The FinOps team is the glue that holds the FinOps initiatives together. They have an all-embracing role in helping the different departments with the aspects of FinOps that cannot be centralized i.e. helping management with reporting, business with quantity management, procurement with negotiation input, finance with reconciliation and chargeback and IT with cost architecture.

Added up it is a lot of tasks, yet it is simple if it is all centralized in the FinOps team.

When it comes to implementing a FinOps team some companies designate people that are already within the company and give them the resources to gather knowledge of the FinOps discipline either through self-learning or an external FinOps partner while other companies decide to recruit a whole new set of people.

The tasks that a FinOps team should be able to take charge of is invoice control, price optimization, quantity management, negotiation input, chargeback, management reporting, forecasting etc. Some of the tasks will be centralized in the FinOps team while others will be in cooperation with the rest of the organization. Which tasks is handled where also varies from organization to organization.

Download "The necessary roles for a FinOps team"

Checklist for the roles:

Background and experience

Overall responsibility

Job tasks

3 roles that are necessary for the FinOps team

In our work helping customers with cloud cost management, we’ve helped our fair share of companies build their FinOps team as they along their FinOps journey realize the importance of a central FinOps team in the organization to connect all FinOps efforts and help the different departments with what cannot be centralized.

The 3 roles we always see as an essential part of a FinOps team is one FinOps Business Manager, one or more Technical FinOps Manager(s) and a FinOps Project Manager who is needed as there are several projects with a need for financial management.

FinOps Business Partner / FinOps Business Manager:

This will be the person with the overall responsibility for the FinOps practice and the FinOps team.

The role requires a broad range of skills, i.e., discussing IT cost models with the business (who is not familiar with IT cost models), as well as being able to challenge IT/DevOps when they push back referring to “this will put operations at risk…”. The position offers a lot of interaction with the internal customers and requires business acumen and financial management capabilities.

The success of the FinOps efforts will come down to this person’s ability to drive the agenda from awareness to action both centrally, and with each project or customer stakeholder.

Technical FinOps Manager:

The technical FinOps manager is the “boots on the ground” of the FinOps team. Responsible for either directly, or with internal or external collaborators, implementing the agreed optimizations.

This role involves keeping the environment free of wasted resources through a continuous effort. It requires attention to detail and interest in keeping up to date on the constantly changing cost saving models. The position requires technical experience and offers a new career path learning the skills required to manage IT costs in a service model.

The technical FinOps Manager is the first to notice any cost changes, including observing the effects of implemented initiatives.

FinOps Project Manager:

This role is required to ensure a structured and planned process for implementing FinOps as a governance framework so that it is well documented, with the necessary technology support, and broadly accepted within the organization – all the way from the top and down.

In smaller organizations with small, non-business critical budgets this role may be filled by the FinOps Manager, but in all larger organizations with million EURO budgets this is a full-time project for months.

Implementing the FinOps team

You now have the 3 roles necessary for a well-functioning FinOps team. A FinOps team will bring you in control of you cloud spend and ensure that your cloud spend is not suddenly going up the roof due to unforeseen changes – with a FinOps team that risk is covered as they monitor your cloud environment daily as well as streamlining FinOps efforts in the whole organization making every department aware of the organization’s focus on FinOps initiatives.

Want to discuss the benefits of a FinOps team for your organization with a FinOps partner? Book an inspiration meeting with us here.

Download "The necessary roles for a FinOps team"

Checklist for the roles:

Background and experience

Overall responsibility

Job tasks

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

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

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

Optimize Price

In 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.

STEP

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

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.