How to spend too much money on the cloud using finops

Optimizing spend is a number one priority for organizations when it comes to the cloud, according to Flexera’s 2022 State of the Cloud report — and migrating more workloads to the cloud is a close second.

How can companies balance these two competing objectives?

The answer is finopsa cloud financial management practice that brings together IT, finance, engineering, product developers, IT asset management (ITAM), leadership, and others to align cloud usage and spending goals.

Finops is a relatively new term, but the concept is gaining traction. This is evidenced by the emergence of the Finops Foundation, an organization that promotes finops best practices through standards and education. To be latest researchreleased in June 2022 at Finops X, the community’s largest conference, found that organizations in every major industry, including Worldwide 2000 companies, have finops teams.

By practicing finops, companies can have the best of both worlds: flexible workflows that support rapid innovation without overpaying for cloud usage. However, to successfully implement finops, you need to create a culture of accountability across your organization, starting with clear communication.

Competing priorities make it difficult to manage cloud costs

Cloud migration introduces new spending complexes and traditional IT frameworks are not set up to manage them. For example, engineers and developers can purchase resources in the cloud without going through an approval process. This setup allows for flexibility and agility (both vital in a rapidly changing environment), but leads to skyrocketing cloud costs.

IT leaders often try to establish guidelines for cloud centers of excellence in response. However, these best practices often clash with technicians’ personal key performance indicators (KPIs), which they must meet in order to earn bonuses and promotions.

Perhaps your IT department is identifying the need to reduce uptime. Someone from IT finance asks the engineers and developers to shut down the server for a particular workload and move it to another place. However, the engineers want to avoid being left behind on projects that affect their performance ratings, so cost-cutting efforts are left out.

Changing these dynamics requires organization-wide communication and goal setting, and that has to start at the top. IT finance teams struggle to make improvements when executives aren’t aligned with finops’ priorities, causing friction between departments.

On the other hand, when the C-suite adopts a cloud strategy without ensuring buy-in across the organization, your organization may experience resentment and resistance from teams.

5 strategies for deploying finops in your organization

When deploying finops for the first time, don’t run before you run. It’s a long-term process, so prepare for success by making sure stakeholders communicate priorities and align with goals before moving forward.

At its core, Finops is about creating a culture of accountability, and shifts in organizational culture take time and patience. Start by identifying opportunities, then implement policies and KPIs that empower everyone in your organization to take ownership of cloud spend.

1. Start with a cloud diagnosis

Start by gathering members of the C-suite with leaders from key departments such as IT, ITAM, finance, devops, engineering, and others to discuss your current cloud strategy and how you want to develop it. By ensuring the buy-in of the executive team, changes can happen much faster.

Get input from team leaders, identify where you may have competing goals, and brainstorm ways to align all departments. Hiring an outside expert to lead the discussion and remove potential barriers often speeds up this process.

2. Use the iron triangle

The Iron Triangle is a project management framework that balances costs, time and scope against quality. You can use it to determine when excessive cloud spending is needed rather than wasteful.

Let’s say you’re developing a new customer-facing application that differentiates your product, and you need to launch it ahead of the competition. Speed ​​is the most critical factor in this case, so you pay 30% more. From a reporting standpoint, the higher costs seem like wasted cloud spend, but you can justify it because it has a significant impact on the business.

On the other hand, suppose you need to make necessary – but relatively minor – product updates. The iron triangle tells you to extend the timeline or narrow the range to avoid unnecessary spending.

3. Create incentives

It’s always easier to spend money that isn’t yours. Instead of allocating your entire cloud costs to IT, set up a chargeback model that divides it across departments. Seeing cloud usage as the largest line item on their team’s operating budget motivates managers to control costs.

One way to reduce cloud spend at the departmental level is to set KPIs for optimized code and workloads that hold individual employees accountable for their share of cloud usage. Linking finops best practices to performance targets will help you make faster progress.

4. Enable automation

As your finops framework matures, you can leverage automation to streamline workflows. For example, you can preconfigure different instance types that are aligned with business priorities.

You can also automate how servers are tagged and, for larger workloads, enter justifications for how the migration and higher spend align with your business goals. By setting up these workflows, your finops team can control spend without hindering developers’ ability to act quickly.

5. Keep optimizing

Creating a finops culture of responsibility is an ongoing journey. As technology evolves and your cloud usage grows, you may need to reevaluate priorities and adjust processes and KPIs accordingly.

Successful finops requires continuous improvement to ensure alignment and control cloud spend without sacrificing flexibility.

Stay agile while keeping cloud spend under control

The cloud is here to stay. However, excessive cloud spending doesn’t have to be. Optimize cloud usage by implementing finops strategies to create a culture of responsibility in your organization. When everyone – from leadership to entry-level employees – is working towards the same goals, you can achieve agility and innovation in the cloud without overspending.

Dan Ortman is the director of finops services at SoftwareONE.