The cloud has long been promoted and sold – quite successfully, you might add – as some kind of magical solution that helps companies save money on capital investment, allowing them to invest instead in more innovative projects with potentially higher business value. And so it does. For the most part, anyway. But like any other technology – or magical solution, for that matter – the cloud itself, financially rewarding as it may be, does not come for free. And if not managed properly, both from a technical and a financial perspective, migrating to the cloud could turn out to be a costly move.
According to a Gartner research paper on Cloud IaaS (Infrastructure as a Service), two out of three companies (64%) expect to make drastic savings by migrating to a public cloud service. However, the actual average savings from adopting cloud services amount to just 16%, which hardly qualifies as substantial, let alone ‘drastic’ for most companies
It’s the business case.
That percentage is but an average, however, and there are actually companies out there that manage to make up to 50% savings. These are the companies that realise that cloud migration requires a solid adaptation of processes, skills and tools, not to mention a considerable amount of preparation, if it is to deliver. Establishing a detailed business case with guidelines has allowed these companies to estimate not only the advantages and profits of their cloud migration, but also any financial savings to be gained from it and the necessary actions to achieve them.
These same companies also realise that cloud migration involves a paradigm shift, both in terms of operations and finances. In recent years, this realisation has given rise to a brand new discipline and function, known as FinOps (short for Financial Operations). As a discipline, centred on both technical and financial operations management, FinOps brings together a set of skills, practices and tools that aim to measure cloud usage and optimise cloud costs. As a function, it is a mix of engineer and architect profiles with skills in finance.
Cloud cost optimisation.
With its on-demand resources, the cloud naturally encourages an increase in usage. This can go so far as to encourage unjustified, unnecessary and often excessive expenses. For an example, you only have to think of a test environment which is quickly set up and then never decommissioned. Or an infrastructure running 24/7, whereas the business application it hosts only runs during work hours. In isolation, these unnecessary expenses can have a small impact on overall cloud costs. However, built up over time, they can become very costly for businesses.
It will come as no surprise then that a FinOps Manager’s main mission is to identify, measure and avoid such unnecessary or excessive cloud spending. This requires, first and foremost, an efficient cloud cost management, including all the necessary tools for controlling cloud usage. FinOps Managers should also aim to optimise the use of their organisation’s cloud resources and efficiently delegate them to their users. Last but not least, they should try to raise cloud cost awareness within the organisation and educate their colleagues on the issue, for instance by sharing best practices.
To find out more about these three main FinOps aims (educate, control and optimise), as well as other FinOps issues, please check the blog posts of our Cloud Experts