Financial management of the cloud is a growing priority for businesses. According to a recent study, 61% of organizations plan to optimize cloud costs in 2021 and 51% of users are overspending their budget on the cloud. “Tracking and consuming spending in the cloud is a complex and time-consuming task,” says Narinder Kumar, co-founder and COO, To The New, a Noida-based digital technology company. The sheer number of choices and plans coupled with inexperience in optimizing the cloud can result in wasted resources and costs for many businesses and startups, he adds, citing a Gartner study that indicates that more 30% of monthly cloud service spending will remain unused, until 2022.
FinOps, simply referred to as cloud financial management, is a new paradigm for managing growing cloud expenses. The methodology aims to help companies improve their planning, budgeting and forecasting. FinOps tracks spend and achieves efficient cloud spend while balancing performance and availability. According to Kumar, the FinOps lifecycle can be broken down into three main phases:
Inform: The company has an overview of the allocation of its resources during the information phase. The on-demand nature of the cloud enables accurate, real-time decisions. Dashboards provide a granular view of cloud spend, allocation, chargebacks, and markup. Analyzes help to better understand spending patterns, frequency of audits, and recommendations for proper sizing and costing.
To optimise: The second step is optimization, in which the team needs to find cost reduction options and take action. Organizations need to automate the sizing of current compute storage and network resources. Proprietary cloud resources and volume offered by vendors must be leveraged for discounts and savings.
Function: This is the third and final phase. Here, companies act according to their stated goals and keep track of their success. This will help monitor spend optimization opportunities and the ROI of those opportunities. Periodic audits must be carried out to ensure effective follow-up while ensuring customer support.
According to Kumar, a company’s commitment to a FinOps framework is long term. The process does not always go as planned, especially for young companies. FinOps vendors save businesses millions of dollars in resources and maintain sustainability.