While the pressure is on for organisations to embrace the myriad benefits and opportunities for transformation and innovation that cloud brings, there’s also an undercurrent of despair. It seems that the much-touted predictability of cloud costs isn’t all it’s been made out to be.
A central failing of most cloud services is that they bill customers for resources that are never used or fully utilised – so costs spiral out of control. Gartner’s report on ‘How to Manage and Optimise Costs of Public Cloud IaaS and PaaS’ estimates that as much as 70% of cloud costs are wasted. (Take a moment to read that again: 70%!).
Many organisations reliant on their cloud infrastructures have learned the hard way to expect the unexpected – on a regular basis. They’re challenged by OPEXs that vary from month to month, unregulated cloud costs delivering surprising price hikes, and the need to scale their requirements up and down constantly.
If those challenges sound familiar, and you count yourself amongst those organisations looking for ways to reduce cloud costs and eliminate waste, you’re not alone.
A sharp new focus on cloud cost optimisation
It’s no surprise that the appetite for transformation using cloud technology continues to grow. The 2022 Cloud Infrastructure Report found that 63% of the IT and business decision-makers (all responsible for significant public cloud infrastructure investments) that they surveyed say that they plan to increase their use of cloud technology.
While many intend to ramp up cloud utilisation, 50% of respondents also called out optimising their cloud costs to improve ROI as a transformational goal for 2022. And 62% plan to focus on and improve cost management capabilities for their cloud infrastructure (which makes it one of the top priorities for decision-makers alongside security, automation, resource inventory, and utilisation).
However, this new determination to address organisational costs comes alongside a drop in confidence in visibility into public cloud costs. Last year, 31% were ‘very’ confident in their visibility. This year it’s dropped to just 21%. And the inability to monitor and optimise their public cloud costs is a major issue for 70% of those surveyed.
While signalling a clear intention to optimise their cloud spend, it’s clearly a struggle for many organisations to make headway. Although 91% use cloud purchase options, such as reserved instances or savings plans, most – and we are talking 68% here – report they aren’t using them effectively. For example, they are finding that committing for a 1- or 3-year period to the discounts promised through reserved instances can be a false economy. What may start by saving money now, may create significant inefficiencies later.
Likewise, spot instances which fire-sale spare computing capacity can offer dramatically lower prices (with discounts up to 90%), but availability can be terminated at short notice. Which isn’t ideal if your workload is critical. Rightsizing is another trap for even the savviest technology or business team and requires constant finetuning – especially in a complex, multi-cloud environment.
So, what are the options to effectively control cloud costs and eliminate waste?
FinOps, and why it’s so hot right now
In this cloud context, FinOps is the acronym for Finance and DevOps. The FinOps Foundation defines FinOps as “an evolving cloud financial management discipline and cultural practice that enables organisations to get maximum business value by helping engineering, finance, technology and business teams to collaborate on data-driven spending decisions.”
FinOps is a worldwide movement rather than a set of proprietary processes. It’s gained considerable traction in its first decade with its rate-optimisation analysis approach to technology, using real-time reporting and just-in-time processes in conjunction with teams working collaboratively.
The desired outcome of investing in a FinOps practice is to promote the cost accountability and business agility needed to control and optimise cloud costs without sacrificing speed or innovation.
So, what – when done well – does FinOps deliver?
A mature FinOps practice will help your organisation to accelerate how quickly you realise value from your investment. So, your ROI is faster. It will drive financial accountability and visibility, meaning you’ll always know how much you’re spending and where. It will provide transparency and granular reporting, enabling your organisation to optimise cloud usage and become cost-efficient.
And because FinOps is a cross-organisation initiative (from finance to product, to engineering and more), it builds trust and collaboration. Lastly, it identifies and controls the dreaded sprawl of uncontrolled (and often unknown) cloud spending.
This quote from the FinOps Foundation sums up successful FinOps outcomes beautifully: “If it seems that FinOps is about saving money, then think again. FinOps is about making money.”
You’re not alone
It must be noted that while 96% of all respondents in the report cited earlier acknowledge that they view FinOps as important to cloud success, in actuality, only 10% have a mature FinOps practice in place. So, there’s still a long way to go.
It doesn’t need to be a solo journey, though. In fact, it shouldn’t be unless you are determined to take your eye off the ball of what your organisation does to stay in business. (And we’d suggest that your future is probably not in cloud optimisation).
For those companies that have already adopted FinOps (whether it’s a work-in-progress or fully-fledged practice), 83% have chosen to leverage the skills, knowledge, abilities, and advanced optimisation technology of their Managed Service Partner (MSP). They look to their MSP to lead, support or collaborate with their internal teams in varying degrees, or in some cases, to manage the FinOps practice in its entirety.
Due to their investment in proven, innovative cost optimisation technology and years of expertise, your MSP can fast-track your FinOps practice’s ability to drive down cloud costs and eliminate overspending and waste – and start talking about a positive ROI.