Enterprises seeking to thrive in an innovation-centric economy are capitalizing on multi-cloud strategies to leverage unique cloud services. These services help accelerate initiatives supporting AI, data processing, and other pursuits, such as driving compute to the edge.

That’s all well and good – until the CIO gets the bill.

In a survey of more than 1,000 global IT decision makers conducted by Forrester Research with HashiCorp, 94% of respondents said their organization was currently paying for avoidable cloud expenses.1

Meanwhile IDC’s Archana Venkatraman, Research Director, Cloud Data Management, Europe, adds: “While cloud adoption has accelerated, cloud governance and control mechanisms haven’t kept pace. As a result, up to 30% of cloud spend is categorized as ‘waste’ spend.”2

Examples of cloud cost surprises

Even inside the controlled environment of an enterprise’s datacenter, it’s not always easy for IT staffers to keep track of resource utilization. Now imagine the challenge of tracking usage from dozens of engineers in a multi-cloud environment where each service provider has its own tooling, processes, and procedures. Being able to bring all that data into a single view is extremely difficult.

Here are the top three cloud cost surprises that CIOs are likely to encounter.

Unused resources: Over time, cloud environments inevitably sprawl, leading to unused storage volumes, idle databases and zombie test instances.

Modernization: Businesses are slow to adopt newer instance types which offer 20% or more efficiency gains due to lack of visibility and understanding of the upgrade path. Given the hundreds of instance types, it’s easy to understand why.

Anomalies: The biggest cloud cost surprise is the one that comes out of nowhere – an unexpected spike that could be caused by a variety of factors – misconfigurations, orphaned instances, runaway crypto-mining malware, or unauthorized deployments.

Enter FinOps

FinOps has become the de facto way in which enterprises manage cloud cost uncertainties, typically with machine learning used to help deliver insights to DevOps, CloudOps and the C-Suite. What’s more, FinOps provides a common language between the developers, infrastructure and business leaders to help show Return on Invetsment per project or set of services.

A disciplined FinOps practice, coupled with tools like OpsNow, helps in three ways:

FinOps tools can discover unused or orphaned resources and enable organizations to “rightsize” their cloud deployments.

Through the use of anomaly detection, FinOps provides an early warning system that alerts IT teams to usage spikes and budget overruns before they get out of control.

Cloud environments are constantly changing, so FinOps is never done; it’s an ongoing process that can help organizations optimize their cloud spend over time, do a better job of budgeting and forecasting, as well as avoid those billing surprises.

The OpsNow approach

There are many options for FinOps ranging from developing tools in-house to purchasing FinOps platforms. Managing your own platform and tooling presents  CIOs with investment and ongoing maintenance challenges.  In the fast moving world of the cloud that is a risk many prefer to not pursue.

OpsNow offers a different take and allows you to deploy without the investment nor maintenance.  Coupled with its methodologies and metrics you have a way to monitor and track your success.  

OpsNow, a spinoff from Bespin Global, provides  a SaaS platform which utilizes a “shared savings”  model – customers only pay a small percentage based on actual savings and are free to utilize the breadth of capabilities at no cost otherwise.

The OpsNow platform provides a single pane of glass across multi-cloud environments to identify unused resources, recommend capacity adjustments, provide AI insight for optimization, and provide no-risk cost savings from their AutoSavings tool which best even  the multi-year commitments offered from the clouds.

Advanced cost analytics and machine learning also ensure this technology can support a more efficient approach to cloud spend, which ensures IT leaders can innovate without worrying about unexpected costs. The automation is one aspect, but the ability to closely model true usage and ensure the coverage and utilization are closely aligned to the forecast is where the savings typically add up. 

Begin your journey to better cloud cost efficiency now.

1 HashiCorp, Forrester Research Report: ​​Unlocking Multicloud’s Operational Potential, 2022
2 IDC, IDC Blog, The Era of FinOps: Focus is Shifting from Cloud Features to Cloud Value, February 2023

Cloud Computing

Is the cloud a good investment? Does it deliver strong returns? How can we invest responsibly in the cloud? These are questions IT and finance leaders are wrestling with today because the cloud has left many companies in a balancing act—caught somewhere between the need for cloud innovation and the fiscal responsibility to ensure they are investing wisely, getting full value out of the cloud.  

One IDC study shows 81% of IT decision-makers expect their spending to stay the same or increase in 2023, despite anticipating economic “storms of disruption.” Another 83% of CIOs say despite increasing IT budgets they are under pressure to make their budgets stretch further than ever before—with a key focus on technical debt and cloud costs. Moreover, Gartner estimates 70% overspending is common in the cloud

The need for cloud innovation amid economic headwinds has companies shifting their strategies, putting protective parameters in place, and scrutinizing cloud value with concerted efforts to accelerate return on investment (ROI), specifically on technology.  

New Parameters Designed to Protect Cloud Investments 

While many companies are delaying new IT projects with ROI of more than 12 months, others are reducing innovation budgets while they try to squeeze more value out of existing investments. Regardless of how pointed their endeavors are, most IT and finance leaders are looking for ways to better govern cloud transformation. That’s because, in today’s economic climate, leaders aren’t just responsible for driving ingenuity, they are held accountable for ensuring the company is a good steward of its technology investments with concentrated emphasis on: 

ROI: Capitalizing quickly on new cloud technology, recognizing benefits, and taking ownership of IT assets, success measurement, and feedback loops Operationalization: The ability to effectively use and secure cloud assets as well as manage new service providers and expenses Sustainability: Ensuring that cloud transformation can continue to afford positive outcomes with minimal impact on the business for both near- and long-term success 

If the past three years were dedicated to accelerated cloud transformation, 2023 is being devoted to governing it. But it’s not just today’s tumultuous times calling for executives to heed to the reason of fiduciary responsibility. The cloud also necessitates it—particularly when companies want to achieve ROI faster. 

Cloud ROI Dynamics: Understanding the Economics of Innovation 

The cloud can make for an uneven balance sheet without proper oversight. It needs to be closely watched from a financial perspective. Why? The short answer: variable costs. When the cloud is infinitely scalable, costs are infinitely variable. Pricing structures are based on service usage fees and overage charges where even marginal lifts in usage can incur steep increases in cost. While this structure favors cloud providers, it starkly contrasts the needs of IT financial managers—most have per-unit budgets and prefer predictable monthly costs for easier budgeting and forecasting.  

Additionally, companies aren’t always good at estimating what they need and using everything they pay for. As a result, cloud waste is now a thing. In fact, companies waste as much as 29% of their cloud resources.  

As companies lift and shift their workloads to the cloud, they trade in-house management for outsourced services. But as IT organizations are loosening their reign, financial management teams should be tightening their grip. Those who aren’t actively right sizing their cloud assets are typically paying more than necessary. Hence, why overspending can easily reach 70%. 

Achieving Cloud ROI in One Year 

Achieving ROI in one year requires tracing where your cloud money goes to see how and where it is repaid. Budget dollars go down the drain when companies fail to pay attention to how they are using the cloud, don’t take the time to correct misuse, or overlook service pausing features and discounting opportunities.  

But cloud cost management is not always a simple task. The majority of IT and financial decision-makers report it’s challenging to account for cloud spending and usage, with the C-suite cite tracing spend and chargebacks of particular concern. The key to cost control is to pinpoint and track every cloud service cost across the IT portfolio—yes even when companies have on average 11 cloud infrastructure providers, nine unified communications solutions, as well as a cacophony of unsanctioned applications consuming up to 30% of IT budgets in the form of Shadow IT.  

When you factor in these dynamics and consider that cloud providers have little incentive to improve service usage reports, helping clients better balance the one-sided financials of the relationship, you can see why ROI can be slow-moving.  

FinOps comes in to bridge this gap. 

Managing Cloud Cost Centers: The Rise of FinOps 

Cloud services are now dominating IT expense sheets, and when increasing bills delay ROI, IT financial managers go looking for answers. This has given rise to the concept of FinOps (a word combining Finance and DevOps) which is a financial management discipline for controlling cloud costs. Driving fiscal accountability for the cloud, FinOps helps companies realize more business value and accelerate ROI from their cloud computing investments. 

Sometimes described as a cultural shift at the corporate level, FinOps principles were developed to foster collaboration between business teams and IT engineers or software development teams. This allows for more alignment around data-driven spending decisions across the organization. But beyond simply a strategic model, FinOps is also considered a technology solution—a service enabling companies to identify, measure, monitor, and optimize their cloud spend, thus shortening the time to achieve ROI. Leading cloud expense management providers, for example, save cloud investors 20% on average and can deliver positive ROI in the first year. 

FinOps Best Practices  

As the cloud makes companies agile, managing dynamic cloud costs becomes more important. FinOps help offset rising prices and insert accountability into organizations focused on cloud economics. Best practices for maximizing ROI include reconciling invoices against cloud usage, making sure application licenses are properly disconnected when no longer necessary or reassigned to other employees, and reviewing network servers to ensure they aren’t spinning cycles without a legitimate business purpose. 

Key approaches include: 

Auditing: The ability to granularly collect and maintain service information across the broader cloud ecosystem, analyzing real-time usage data in a central system using AI-powered analytics Cost Optimization: The insights to recognize cloud waste and quickly reduce inefficiencies, adjusting services and reallocating unused app licenses or infrastructure resources Vendor and Expense Management: The ability to validate spending and use automation to reduce the management burdens of bill pay, chargebacks, and allocation Professional Services: Strategic and tactical help at key moments including cloud migrations, cloud service discovery, contractual negotiations, and IT budget forecasting and spending 

Is the cloud a good investment? Yes, as long as the company can effectively see and use its assets, monitor its expenses, and manage its service. The cloud started as a means to lower costs, minimize capital expenses, and gain infinite scalability, and that reputation should payout even after being pressure tested by the masses. With a collaborative and disciplined approach to management, companies of every size can recognize quick ROI without generating significant waste or adding unnecessary complexity.  

To learn more about cloud expense management services, visit us here.     

Cloud Computing

With the cloud becoming such an integral part of the IT strategies of so many enterprises, it’s natural that managing the expense of all these services would be an emerging priority for executives.

Although the cloud is touted by providers as a way to potentially save money because of greater efficiencies and shared expenses, an abundance of cloud-based resources can also lead to cost runaways if not managed properly. That’s where FinOps comes in.

What is FinOps?

Blending the terms finance and operations, FinOps is a business discipline and set of best practices and technologies for optimizing enterprise cloud spend.

The FinOps Foundation’s Technical Advisory Council further defines FinOps as “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.”

The foundation, a program of the Linux Foundation dedicated to advancing people who practice the discipline of cloud financial management through best practices, education, and standards, says at its core FinOps is a cultural practice for managing cloud costs — one in which everyone takes ownership of their cloud usage supported by a central best-practices group

The term “FinOps” comes from the DevOps software development model, with the addition of the financial component, and emphasizes communications and collaboration among various teams involved in the use of cloud services.

“The FinOps market is white hot today, growing faster than both IT general and public cloud spending,” says Jevin Jensen, research vice president of Intelligent CloudOps Market service at IDC. “I expect this to continue as IT budgets will be under increasing pressure in 2023. FinOps culture change and the rapidly advancing cloud cost transparency tools offer an excellent opportunity for enterprises to realize tremendous cost savings.”

How does FinOps work?

As a practice, FinOps operates by bringing together representatives from IT operations, development, finance, and procurement, as well as business unit leaders, Jensen says. Doing so gives the organization a central, cross-functional team focused on optimizing the enterprise’s outlay in the cloud.

“Enterprises can create a single source of truth for cloud spending,” Jensen says. “Additionally, they can develop metrics and set goals for each metric, including forecasting cloud spending, targeting saving opportunities, and benchmarking future cloud projects before approval.”

Agreeing on the charge-back method of cloud spending is another important task for a FinOps team, Jensen says. “FinOps is more about people and processes than a technology tool,” he says. “The tool is still an important enabler for the FinOps team. The FinOps culture change is about collaboration, spending accountability, and ensuring anticipated return on investment.”

The FinOps Foundation lists six principles of FinOps:

Teams need to collaborateEveryone takes ownership of their cloud usageA centralized team drives FinOpsReports should be accessible and timelyDecisions are driven by the business value of the cloudTake advantage of the variable cost model of the cloud

Why do organizations need FinOps?

“FinOps brings financial accountability — including financial control and predictability — to the variable spend model of cloud,” says J.R. Storment, executive director of the FinOps Foundation. “This is increasingly important as cloud spending makes up ever more of IT budgets.”

It also enables organizations to make informed trade-offs between speed, cost, and quality in their cloud architecture and investment decisions, Storment says. “And organizations get maximum business value by helping engineering, finance, technology, and business teams collaborate on data-driven spending decisions,” he says.

Aside from bringing together the key people who can help an organization gain better control of its cloud spending, FinOps can help reduce cloud waste, which IDC estimates between 10% to 30% for organizations today.

“Moving from show-back cloud accounting, where IT still pays and budgets for cloud spending, to a charge-back model, where individual departments are accountable for cloud spending in their budget, is key to accelerating savings and ensuring only necessary cloud projects are implemented,” Jensen says.

And because FinOps facilitates improved collaboration and communication among groups around cloud use, organizations can reduce or eliminate redundant applications and cloud initiatives, Jensen says.

FinOps “is the management of cloud economics,” says Lydia Leong, distinguished vice president and analyst at Gartner. “Ideally, it should not merely be cloud financial operations, but a broader perspective that maximizes the value of cloud computing rather than minimizing the cost. Properly done, FinOps helps an organization contemplate the business value it is receiving — or not receiving — from its cloud use, so it can decide how best to optimize its investments.”

What are some best practices for adopting FinOps?

When implementing FinOps, one best practice is to create a cloud center of excellence (CoE) to centralize the organization’s FinOps approach. “Neither technology nor finance can go it alone; this needs to be a cross-functional initiative,” says R.J. Hazra, senior vice president and CFO of global technology and security at consumer credit reporting agency Equifax.

The multinational consumer credit reporting company is using Apptio’s Cloudability platform integrated with a general ledger system and configuration management database for enterprise reporting on cloud usage, trending, and anomaly detection. It created a cloud CoE composed of sourcing, financial planning and analysis, and site reliability engineers, Hazra says. The CoE set up a strategy to better align cloud spending with the firm’s goals, and set targets for all of its cloud platforms to drive shared accountability.

Still, FinOps needs to be a cultural practice across the organization, not something that’s solely the responsibility of a “FinOps team,” Gartner’s Leong says. “It requires collaboration between business leaders — the business owners of applications — application developers or application management teams, cloud operations, finance, and sourcing/procurement/vendor management,” she says. “FinOps is a continuous process, not just a monthly cycle of playing whack-a-mole with the cloud bills.”

Designating a FinOps practitioner is an essential first step, IDC’s Jensen says. “This person is the evangelist of FinOps for your organization, and should have a solid understanding of IT and financial constructs.”

This individual will need sponsorship from a C-level executive, such as a CFO or CEO, to establish a cross-functional team and hold them accountable for meeting regularly and hitting metrics, Jensen says.

“Selecting a tool and getting buy-in for using it as a single source of truth for all cloud spending and its recommendations is the next logical step,” Jensen says. “The FinOps teams should then set metrics and provide a transparent company-wide dashboard to facilitate control of cloud spending.”

To adopt and deploy a successful FinOps strategy, enterprises should look to the FinOps community to learn through events, meetings, and other channels, Storment says. “No one needs to do this alone and FinOps practitioners will get farther, faster by sharing learnings and best practices,” he says. “Also, to have a viable and thriving FinOps culture and practice, invest in career development of practitioners through training and certification.”

What role should the CIO play in an organization’s use of FinOps?

“Executive buy-in has a massive influence in building successful FinOps practices, and the role of a CIO or CFO is often to ensure that the FinOps strategy and deployment are well crafted and carried out,” FinOps Foundation’s Storment says.

The CIO has several pivotal roles to play in the use of FinOps, he adds. One is as a promoter and vocal supporter. “The CIO sets the tone for the IT resources in the business,” Storment says. For the past two years the foundation’s survey of FinOps practitioners indicates that encouraging engineers to take action on cost optimization is the primary challenge facing organizations. “If the CIO is not supportive — through words, actions, incentives — it is very difficult to get an engineer to consider cost in their daily work.”

CIOs can also inspire collaboration. “The CIO doesn’t operate in a vacuum separately from the CFO, COO, and other C-level executives,” Storment says. “When using the cloud, the CIO’s resources are also not able to operate in an isolated silo.” The CIO should work to demonstrate cross-discipline collaboration by working with other senior executives to communicate about the cloud’s role in the organization and to reinforce the need to understand cost, he says.

While CIOs don’t have to lead FinOps initiatives, they should play an important advisory role. “CIOs are critical sponsors of FinOps efforts,” Leong says. “But in order to make it work as a cultural practice, [they] must have the cooperation of their peers in the business, and preferably the CFO as well.”

How can someone become a FinOps professional?

FinOps continues to proliferate around the world and there will be growing demand for people with related skills. “In the coming years, innovative technology solutions will be built using the cloud,” Storment says. “But cloud is a very different delivery model from traditional data center IT and requires FinOps” in order to be used effectively.

A recent survey by the FinOps Foundation showed that FinOps team sizes are expected to increase to an average of eight people over the next year, up from five.

“FinOps isn’t just a technical discipline nor solely finance-based,” Storment says. “It’s a cultural one that brings together finance, engineering, product, and management, and so roles and responsibilities encompass all of those arenas.”

One way to gain the proper skills is through certification programs, such as those offered by the FinOps Foundation.

“We see a need to certify people to be ‘certified practitioners’ to validate their FinOps knowledge and enhance their professional credibility,” Storment says. “Certified practitioners are enabled with key concepts and terminology to be contributing members of this community and interact with other practitioners and disciplines in their companies in detailed and meaningful ways.”

The foundation also offers a training course designed for engineers to understand how to work effectively with FinOps teams to manage cloud use and costs more efficiently, and to derive more business value from cloud, Storment says. “This is important, because [the] biggest challenge among organizations is getting engineers to take action on cost optimization.”

What are the top FinOps technology providers?

Based on IDC research, some of the top FinOps vendors in terms of market share include:

Budgeting, Cloud Computing, Cloud Management

The cloud offers limitless scalability and flexibility, powering digital transformation across every industry. But when not managed strategically in the long run, cloud spending can quickly escalate and impact margins, cost of goods sold (COGS), and cost of revenue (COR).

To optimize cloud investments, C-level executives are increasingly adopting cloud financial operations (FinOps). This framework positions organizations to manage their cloud investments more effectively, driving increased accountability to maximize business value. In this article, I’ll explore common cloud optimization and FinOps challenges and strategies for overcoming them.

1. Cloud usage & costs

Most enterprise companies have shared infrastructure, and managing cost allocation across marketing, HR, accounting, and other departments can be tricky. How they handle this depends upon the business-unit driver and the organization’s culture, typically defined at the C-level.

The business unit must tie back to the key performance indicators (KPIs) associated with the domain and the objectives and key results (OKRs). Managing and aligning cost allocation to the business unit requires real-time visibility and reporting around cloud costs and usage, with cost allocation constructs aligned to departmental needs. Organizations must examine shared resources, storage costs, network costs, platform services, monitoring, logging, and licensing. Then they must choose a financial model, whether an even split, fixed, or proportional model.

From a strategic perspective, some organizations set up executive sponsorship focusing on the FinOps maturity model and decision framework. Others start with a FinOps maturity assessment, establishing an actionable roadmap that defines the FinOps domain and organization roles and objectives, all aligned to business spending, efficiency, transparency, and compliance.

2. Performance tracking and benchmarking

When it comes to performance tracking and benchmarking, organizations frequently face challenges around resource utilization and efficiency. Utilization and efficiency provide vital insights for understanding the business value of expenses incurred. However, it can be challenging to measure the business value associated with each type of cloud resource based on performance, availability, and other factors.

Overcoming these challenges goes back to KPIs and OKRs. Organizations must define and track KPIs that meet efficiency and utilization objectives and deliver value-creation. For example, if the goal is to reduce hot storage, a KPI must be defined to meet the efficiency objective and deliver value creation—and it must be measured. This requires adopting the right FinOps tools, processes, and people.

3. Real-time decision making

A framework and accountability structure form the foundation for real-time decisions around usage, costs, and performance to meet organizational goals. However, establishing a FinOps decision framework and accountability structure can pose a challenge, particularly for those organizations with low FinOps maturity.

The organization must first perform a maturity assessment to understand the role of FinOps within the context of the overall organization. Once in place, the organization can develop and assign a repeatable process that enables real-time decision-making to a center of excellence, steering committee, or governance structure, depending upon the organization.

4. Cloud rate optimization

In this domain, organizations define and adjust pricing model goals based on historical data and make purchase decisions based on goals and discounts being offered—all to optimize cloud spending. Cloud service providers provide slightly different offerings with unique embedded discounts – some providers have computer unit discounts, and some have utilization-based pricing.

As a result, organizations often face challenges around data analysis, show-back, and managing commitment-based discounts. To address this, many enterprises use a KPI-driven, hybrid-cloud purchasing strategy to align their commitment period with infrastructure workload characteristics and lifecycle. This strategy aligns well with the concept of a smart cloud.

5. Cloud usage optimization

Dynamically matching cloud resources to demand to optimize cloud usage and ensure sufficient business value can also pose challenges.

That’s why organizations increasingly implement automated workload management solutions that match running resources to workload demand, scaling, de-scaling, and even turning off unused resources in real-time to maximize ROI while minimizing the TCO. Business-driven KPIs and OKRs help organizations define outliers and set the thresholds that inform alerts and actions.

6. Organizational alignment

FinOps capabilities are embedded within organizational processes and units, and often, this is where companies fail at FinOps. Unfortunately, many start with technology (tools) instead of organizational alignment, creating conflicts and challenges around policies, governance, and areas of responsibility.

Organizations must establish a FinOps framework at the C-level, complete with policies, processes, best practices, and a playbook that help ensure organizational alignment and buy-in. Once aligned, organizations can harvest the benefits of FinOps including:

Centralized smart-cloud cost managementAlignment to and accountability of cloud roles and usersImproved confidence and accuracy around budgets and forecastsAdvanced communication throughout the organization, creating a FinOps culture

Improve cloud optimization and FinOps maturity

As data volumes and usage grow, cloud FinOps enables organizations to manage cloud investments more strategically, efficiently, and cost-effectively. Understanding FinOps maturity can help organizations identify and resolve trouble areas to improve cloud optimization and accelerate business outcomes.

GDT can help your organization improve cloud optimization and FinOps maturity. By engaging with GDT, you’ll get a portfolio-level analysis of your FinOps maturity, along with cloud service optimization opportunities and recommendations to help you maximize spend efficiency, reduce cloud costs, and develop strategies for proactively and dynamically managing future expenses and utilization.

Contact the experts at GDT to learn more about improving cloud optimization and FinOps maturity.

Cloud Management