How FinOps Capabilities Save Your Company From 2023 Recession

2023/08/19 09:05

The global economy experienced a significant downturn in 2023, marked by widespread economic recession and strained financial conditions across various industries.

FinOps leaders foster culture and practices for improved cloud ROI. The proliferation of cloud computing has led to a significant disparity in knowledge between technical and business units. Navigating the intricacies of cloud cost dynamics has proven to be a challenge for finance teams, while engineers are gradually beginning to shoulder responsibility for the infrastructure expenses incurred. To address this, FinOps has emerged as a solution and toolkit for organizations aiming for a successful cloud migration journey.

How can you adopt cloud FinOps efficiently, avoiding extended planning periods and extensive team training? Here's a streamlined, two-step method for implementing FinOps within your company, regardless of its industry or scale.

FinOps leaders are seeking ways to improve Cloud ROI

Does FinOps represent the ultimate solution for managing cloud finances?

On average, companies tend to exceed their cloud budgets by 13% and squander about 32% of their cloud expenditure.

FinOps emerges as a remedy to tackle the most vexing challenges in cloud application management: wastage of cloud resources, overprovisioning, underutilized assets, and insufficient control over resource allocation among teams.

While the term "FinOps" may be relatively recent, the practice of monitoring and reporting cloud expenses has likely been present since the widespread adoption of public cloud services. Organizations that transitioned to public cloud swiftly realized that although it provides agility and rapidity, it also introduces novel financial management intricacies. Today, the industry buzzes with discussions about cloud return on investment (ROI) and how to optimize it.

To rein in cloud expenditures, many companies persist with methods that demand manual interventions, such as meticulous resource labeling or setting precise consumption thresholds to avert cost surges.

Yet, automation tools have already remedied numerous issues across industries, so why not apply them here as well? Ultimately, the prime objective of FinOps revolves around cost reduction. Solutions for cost optimization can swiftly bring your teams to this juncture within minutes.

The crux of cloud FinOps is cost visibility, a facet that yields substantial savings when amalgamated with automation. Below are 2 basic steps to execute it.

FinOps step 1: Cloud cost visibility

An expense tracking system empowers you to develop the below FinOps capabilities:

1. Budget Adherence
Teams can consistently monitor their cloud expenditure rate, ensuring it aligns with the designated budget limits. This not only satisfies the finance department but also aids in prudent resource allocation. The practice involves reviewing daily or weekly spending patterns and projecting them to deduce a credible estimate of monthly expenses.

For instance, consider a monthly cloud spending report offered by VNG Cloud, which facilitates comprehension of your consumption velocity:

The Billing History interface of vConsole

2. Fast Detection of Cost Anomalies
How can you promptly identify unusual spikes in costs as they occur? Relying on cloud providers' cost data updates, which typically occur once or twice a day, might not be the best approach.

Instead, leverage a monitoring solution equipped with real-time capabilities. Such a tool will display comprehensive insights on a dashboard or within a daily expenditure report. This is the platform where you can swiftly catch emerging issues before they escalate into major problems.

For example, if you use Kubernetes, here are some simple questions that help you detect cost anomalies:

Comprehensive cluster cost analysis – How does your estimated monthly expenditure measure up against the spending from the previous month? What contrasts exist between the current and prior months?
Workload distribution evaluation – Are there any dormant workloads that contribute nothing beyond incurring expenses?
Namespace expense breakdown – How were expenses distributed among different namespaces?
After addressing these questions, you will discern the reasons behind last month's cost escalation, be it due to a service operating over the weekend or a specific team opting for a high-cost virtual machine.

3. Enhanced Precision in Cloud Planning
Another advantage of cloud cost monitoring lies in its ability to offer teams a genuine understanding of their actual expenses while drafting budgets for cloud services. Frequently, individuals tend to overprovision applications in a bid to ensure seamless workload operation. However, failing to utilize the allocated capacity leads to inflated cloud resource costs.

By comparing requested and provisioned CPU capacities, you can pinpoint this disparity and accurately calculate the true expense per requested CPU. This data aids in refining your planning for more realistic budgeting.

For instance, your cost per provisioned CPU stands at $2. However, due to overutilization, your cost per requested CPU escalates to $10. Consequently, you find yourself operating your cluster at a rate five times higher than initially anticipated.

Tip: Foster a FinOps Mindset by Sharing Cost Metrics with Engineers
As indicated by findings from the State of FinOps survey, nearly 40% of respondents identify the greatest hurdle as motivating engineers to act upon cost optimization recommendations. By presenting cost-related metrics in a format that engineers find preferable and practical, you can disseminate awareness about infrastructure expenses. This empowers them to make informed decisions concerning investments in infrastructure.

Engineers are accustomed to observability tools that provide real-time insights into application performance. Opting for a solution that seamlessly integrates with their existing operational tools simplifies the inclusion of cost metrics. This establishes a shared foundation between technical and business teams, fostering a robust FinOps ethos where every individual assumes responsibility for cost management.

Amid 2023's economic uncertainty, optimizing costs is recommended for every business

FinOps step 2: Cloud cost optimization

With the swift fluctuations in demand and utilization seen in cloud-based applications, manual cost optimization becomes both time-intensive and labor-demanding.

Then, what is the solution? It’s automation. It empowers businesses to attain their cloud financial management objectives without necessitating additional efforts from the engineering facet of the company.

Here's the array of benefits that automated cloud cost optimization offers:

  • It identifies the most economical instance types and sizes that align with your application requirements.
  • It automatically scales your cloud resources to accommodate surges in demand.
  • It eradicates idle resources, including virtual machines unintentionally left running.
  • It restructures workloads to fit into a reduced number of virtual machines, thus lowering costs.
  • It automates the usage of spot instances to drive down expenses and adeptly handles any interruptions.

Crucially, all these operations unfold in real time. The integration of an automation solution empowers your teams to adeptly navigate the momentary nature of cloud optimization, without the need for constant oversight of their infrastructure.

Empower Your FinOps Strategy with Appropriate Tools

What tooling options are available for implementing FinOps?

  • Native Cloud Cost Management Tools: Tools such as Cost Explorer of VNG Cloud often serve as an efficient platform for you to manage your cloud costs. However, as your cloud infrastructure expands across multiple providers and services, you may need more tools to gain accurate insights.
  • Custom Tools: Some companies opt to create their own in-house cost monitoring solutions. Nevertheless, this choice isn't devoid of potential risks.
  • Third-Party Cost and Optimization Monitoring Tools: You have the opportunity to select from a variety of modern solutions designed to address the nuances of cloud-native cost dynamics. These tools furnish you with real-time cost monitoring and optimization capabilities that directly impact cloud resources.

The aforementioned approaches each possess distinct pros and cons, you should combine various solutions for comprehensive cost visibility and potential optimization.

Cloud migration is a long-term cost optimization solution

FinOps FAQs for cloud migration

1. Is it cheaper to run the same workload in the cloud than it was before the migration?
In most cases, the answer is yes. To accurately assess the cost-effectiveness of your cloud migration, the recommended approach is to conduct a workload-by-workload comparison of total expenses before and after the migration.

2. How do I know if I am measuring the costs of requested resources?
Many cloud budgets include the costs of resources only, aligning with the figures present on the pricing list furnished by cloud providers. However, these listed prices might not truly mirror your real expenditures.

In reality, IT teams often tend to overprovision applications in pursuit of optimal performance and availability. Yet, ultimately, these applications might not fully utilize all the allocated resources. This emphasizes the significance of computing the disparity between provisioned and requested capacity for enhanced precision in both cost reporting and estimations.

3. Is it possible to attribute costs to specific units?
Relying solely on general infrastructure cost insights can lead to complications. In the realm of cloud computing, it's imperative to have suitable tools for precise cost reporting and allocation.

Because the cloud empowers engineers to provision resources as needed, anytime. Failing to attribute costs to specific teams, projects, or business units can result in a lack of accountability for the escalating cloud expenses.

What's essential here is the integration of comprehensive cost allocation and reporting functionalities, coupled with a FinOps culture and heightened cost awareness among engineering teams.

4. Do cloud spend forecasts align with actual costs?
Forecasting usage-based cloud expenses can be challenging, yet comprehending your future resource requirements plays a vital role in managing these costs effectively. The cornerstone of prediction lies within your cost reports. Establish notifications and routinely examine the data on resource utilization, which can aid in estimating your monthly service fee.

Additionally, adopting cloud spend modeling proves beneficial. Evaluate pricing models offered by cloud providers and project capacity needs over time to calculate the total cost of ownership (TCO).

Identifying resource utilization peaks is also crucial. This is where periodic analytics and statistical reports come into play. Scrutinize seasonal demand trends; if these patterns align with your peak resource usage, you'll be well-equipped to prepare for them in advance.

If you are an existing customer of VNG Cloud, you can access vConsole, check “Current month cost” and “Forecast month cost”. These features helps analyze the costs in the current month and compare them with the expenses of the previous month, thereby enabling you to proactively optimize costs.