FinOps Strategies to Optimize Your Cloud Spend
Cloud computing has revolutionized the way businesses operate, providing a scalable and cost-effective solution to store, process, and manage data. But the cost of using cloud services can quickly add up, especially if you are not actively monitoring and managing your expenses. The cloud is notorious for hidden costs, unexpected charges, and waste, which can quickly erode your budget and impact your bottom line. That is why it is crucial to take control of your cloud expenses and optimize your usage and spending.
To optimize cloud spending, businesses need to implement efficient monitoring and optimization strategies. These include identifying idle resources, implementing autoscaling policies, leveraging reserved instances for long-term usage, setting spending limits, and monitoring usage trends.
However, controlling escalating cloud spending can be a challenge for organizations.
Lack of Visibility: A Major Challenge in Cloud Spending
Cloud service providers determine the costs for their clients by considering several factors, including networking, computing, and storage. These components are critical in ensuring the seamless delivery of cloud services, and as such, they often come with hardware, software licenses, resources, and maintenance costs. Cloud service providers must achieve a balance between these expenses and the pricing of their services, which ultimately affects their profitability.
Yet, Over 30 percent of cloud spend is wasted, according to a Flexera report.
One of the major challenges organizations face is a lack of visibility into department-level cloud spend, which makes it difficult to identify inefficiencies and optimize spending. It can lead to:
- Lack of cross-functional collaboration between IT, finance, and business teams. This can lead to the misalignment of cloud goals, budgets, and accountability.
- Lack of granular cost views of the cloud environment by project, department, or purpose. Making it challenging to allocate costs for shared resources and identify unused or underutilized resources.
- Lack of governance and accountability. Overprovisioning of resources can lead to cloud sprawl and waste, resulting in significant additional costs for the organization. It is important to monitor cloud usage and optimize resource allocation to avoid these costs and ensure that cloud resources are used effectively across the organization.
- Lack of forecasting and optimization capabilities. Organizations may find it challenging to plan, select the optimal pricing model, and leverage discounts or spot instances that can affect their forecasting and optimization capabilities.
Implementing a Cloud FinOps Strategy
According to KPMG’s report Taking control of cloud costs: The FinOps imperative, FinOps can help organizations save up to 40 percent on their cloud costs by implementing best practices, such as rightsizing, spot instances, reserved instances, and tagging. Although FinOps is not a new approach, it has recently gained popularity and adoption due to the increasing complexity and cost of cloud spending. FinOps is not focused on reducing cloud spend to the lowest possible amount, but rather on making data-driven decisions and aligning those decisions with business goals and objectives. Cloud FinOps enables organizations to break down cloud spending by department, project, or service and make it visible to the responsible teams. It enables:
- Improved decision-making by using data-driven insights to inform cloud spending decisions.
- Cost optimization with Cloud FinOps creates a culture of accountability around cloud spending, encouraging teams to take ownership of their cloud costs and achieve better value for money from their investments.
- Shadow IT cost management by tagging resources to classify and track them by project, department, or purpose.
- Better visibility by tracking cloud usage at a granular level, monitoring cloud spend on an ongoing basis, and disposing of unused resources.
5 Cloud FinOps Strategies to Optimize Your Cloud Spend
Implementing an effective FinOps strategy is critical for any organization seeking to optimize cloud spending. While the benefits of such a strategy are manifold, there are certain key strategies that must be implemented to achieve optimal results.
- Choose a pricing model that suits your needs and budget. Cloud vendors usually offer two charging models: pay-as-you-go and reserved instances. Pay-as-you-go lets you pay only for the resources you use, while reserved instances let you pay upfront for a fixed amount of resources at a discounted rate. Committed or contract-based discounts can help organizations save money on their cloud spend.
- Tag resources to classify and track them by project, department, or purpose. This can help you allocate costs per unit for shared resources, improve accountability, and identify unused or underutilized resources. By tracking cloud usage at a granular level, organizations can identify areas where resources are being underutilized or overutilized and reallocate funds accordingly.
- Set up alerts on anomalies to monitor and control your cloud spending. Organizations can use native or third-party tools to set thresholds and notifications for unusual spikes or drops in their cloud usage or billing. Tracking cloud spend against budgeted amounts can help organizations stay on top of their cloud costs and identify areas where spending is exceeding expectations.
- Dispose of unused resources to avoid paying for idle or unnecessary capacity. Organizations can use automation tools to schedule start and stop times for their instances, delete unattached volumes or snapshots, and terminate zombie assets. With clear insight into how cloud resources are being used, organizations can identify opportunities to optimize costs and reallocate resources to more profitable areas. For example, if an organization can see that a particular cloud service is underutilized, it may be able to reallocate those resources to a more profitable area of the business. Alternatively, if they identify a service that is in high demand, they may be able to increase their investment in that area, leading to increased revenue.
- Choose the right cloud FinOps partner that has experience in cloud cost optimization. It is recommended that organizations choose a cloud FinOps partner with experience in cloud cost optimization. A good Cloud FinOps partner not only addresses cost optimization, but also helps organizations achieve the right balance between cost, agility, and quality. They can help organizations free up IT teams’ time by handling the day-to-day cloud cost optimization tasks. This allows the IT teams to focus on innovation, drive business outcomes, and improve ROI from cloud investments.
Managing your cloud expenses requires a proactive approach, proper planning, and constant monitoring. By implementing the strategies we have discussed above, you can take control of your cloud costs and optimize your spending to get the most out of your investment. Remember to always keep an eye on your cloud usage patterns to identify areas where you can cut back or adjust your resource allocations. Finally, do not be afraid to seek help from cloud cost optimization experts who can offer valuable insights and tools to help streamline your cloud usage and minimize your expenses.
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