Cloud Financial Management

Many enterprises are well on their way with their cloud migration journey and most will be facing one common challenge: spiralling cloud costs.

One of the benefits punted for making the decision to migrate to the cloud is the cost-saving assurance. Yet many CFOs and CIOs are found on opposite sides of the table, trying to reconcile where it all went wrong.

The challenges and solutions related to managing cloud costs can all be encapsulated in the phrase `FinOps’.

FinOps is the operational management of cloud costs. The ‘Ops’ in the term is key because it’s about collaboration with all the operational teams that are impacted by cloud, either directly or indirectly. Product, engineering, procurement and, of course, finance teams must bring a common financial consciousness to ensure that optimal value is derived from each rand spent.

Evolving processes and resources

To enable a successful cloud migration, people, processes, and technology must be in sync. No two cloud journeys will be the same, but with costs, there are fundamentals that have to be in place to successfully navigate the journey.

1. Change management: cost awareness

In the cloud, engineers can spend money with code and it is imperative that the cost lens and performance metric is carried through from design to implementation, running and monitoring.

Traditionally, the management of costs was regarded as the role of finance, the FinOps approach requires a 360-degree shift from the natural DNA of an engineer and therefore resources and time need to be invested in embedding this mind shift. Conversely, finance and product teams need to also skill up on the basic technical jargon of the cloud to enable them to interrogate the cloud bills and usage metrics to suggest optimisation opportunities.

It is critical that cost awareness change management is rolled out to both groups, with re-enforcement and support from leadership, as value lies in their ability to collaborate.

2. Champion cloud costs

Many enterprises have established Cloud Centres of Excellence (CCOEs) to drive cloud strategy and adoption, but very few have a FinOps Sponsor to complement that. This results in a lack of ownership to purposefully manage cloud costs across the board and leads to disparate cost maturity across the teams.

Without the intentional drive of a FinOps Sponsor complemented by Champions, product squads often compete with many other priorities and costs are only addressed in retrospect, when it is in crisis mode.

The ideal state is to have a FinOps Sponsor identified as early as possible, enabling an environment to drive cost awareness, identify best practices, introduce new processes and scale those across the enterprise.

3. Understand the bigger picture first

It’s important that all role players understand their workload performance and the costs they are incurring for the services they consume and the benefits they derive as that is the 80/20 principle that will influence their optimisation.

In an on-premises world, architecture is provisioned for peak capacity and the infrastructure is a fixed cost on the balance sheet depreciated over multiple years. The cloud gives you elasticity at the click of a button and, mostly, you pay-as-you-go in an operating expenditure-based model.

Consequently, timely reviewed and interrogated bill reports is what informs better decision-making and mitigates the surprise element. Having the right policies, budgets and forecasting capabilities, alerts, automation, and various other practices in place will naturally drive a better outcome for costs.

Techniques such as rightsizing resources, re-tiering disks, snoozing and buying reserved instances can yield massive savings for enterprises, but if these are left unchecked, it can be agonizing to the bottom line.

The benefits of cloud are undisputed, but to reap the benefits, it is essential that the costs are understood, managed, and reviewed continuously with appropriate actions taken throughout the workload lifecycle. The maturity of any FinOps practice is likened to a crawl-walk-run stage by the FinOps foundation because it really is about growing the muscle memory and embedding this as part of your organisation’s DNA, ensuring shared accountability of managing cloud costs to maximise business value.

Irrespective of where your enterprise is in its Cloud journey, contact Vaxowave for an introduction to FinOps and see how the implementation thereof could benefit your business.

Vaxowave is the first company in Africa to become a FinOps Foundation Member.

By Kume Luvhani
http://www.brainstormmag.co.za/business/15406-cloud-financial-management-getting-the-basics-right