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Why is Traditional Budgeting making way for FinOps?
Cloud financial management has become prevalent in recent times due to the huge surge in public cloud adoption. While technology teams work in agile mode to attain product goals, cost implications arising from an aggressive GTM timeline can spiral out of control quickly and in a lot of cases silently. In recent times, there is a clear need to not only monitor cloud cost usage but to also ensure that it is in line with budgets and spending quotas decided by the CFO or CAO.
Organizations have quickly realized that the traditional way of budgeting and forecasting cost needs an overhaul if they are adopting the cloud in a big way. Finance teams have evolved to comprehend that incorporating a traditional capital expenditure (CapEx) and operational expenditure (OpEx) for budgeting will now have to rely purely on the variable OpEx due to the pay-as-you-go benefit of the cloud. At the same time engineering teams have begun to gain more control on cloud accounts thereby enabling them for instant provisioning of infrastructure and platform services. Hence the whole procurement lifecycle has been shortened to move to an on-demand mode.
In order to tackle this disruption, a need has risen for organizations small and big to get the finance, business, IT, engineering and operations teams to collaborate for better accountability on cloud spends and to move towards a more streamlined budgeting and cost controlling strategy.
This collaboration and the resulting framework to manage cloud expenditure is called FinOps.
There are some common industry realized practices which have been identified and which companies can adhere to:
- Propagate responsibility of awareness regarding cost implications of cloud usage across technology teams irrespective of role and designation. Attaining a cost aware culture within the organization is as important as good DevOps or agile processes and should be part of project execution hygiene.
- Collect and measure pre-defined metrics and quantifiable KPIs with associated cost at all levels of organizational hierarchies. This data collection will pave the way to validate and infer if value-based objectives for the organization are being met. An effective way to enable a granular level of information collection can be via mandatory resource tagging and labelling policies. Such governance policies help imbibe discipline at the same time enable the engineering efforts to carry on unhindered.
- Use reporting solutions and/or tools to visualize the cloud spending trends and forecasting cost. Insights on unused or underutilized resources can easily be obtained or mined in real time via APIs or billing data dumps from the cloud providers themselves. Querying for usage and spends with filters on accounts, business teams, departments and projects should provide a holistic as well as segregated views of organization-wide spending. Alerting mechanisms can be built in for real-time notifications on violations of predefined governance policies. Such tools also help immensely not only in decision making for engineering heads but also for strategic planning by the executive body.
- Optimize on costs by making some informed decisions to eliminate or modify cloud resources, services or databases which are not providing the benefits from a cloud standpoint. This is an important step and should be performed in the same cadence as sprint ceremonies.
- Actions performed can be moved to an optimal capacity for VM or database instances to cut down on cost resulting from waste or over provisioning, moving to a fixed reserved capacity to avail of long term committed discounts, choosing the right type of cloud service. It could also lead to moving to a multi-cloud or hybrid-cloud approach. Most clouds also keep reduction in prices based on newer and more efficient resource or service offerings. These can be leveraged effectively to provide additional cost reductions.
Leveraging cloud cost optimization tools such as CloudGain can help you delve deeper in AWS and Azure accounts in real time and gain better insights on spending patterns. Besides dashboards which provide cloud account-based views, there are also recommendations on actions and customizable reports.
Please visit https://www.gslab.com/cloudgain for more information on CloudGain.