As businesses tighten their belts and adapt to challenging market conditions, protecting cloud investments should remain a top priority. When properly used, FinOps strategies enable and empower businesses to optimize their costs in an economic downturn and continue to innovate and position themselves for when more favorable conditions reemerge.
IT and cloud businesses are not immune to the challenges and setbacks of macroeconomic conditions, but these businesses tend to have favorable outlooks on a larger scale. TechRepublic reports that while cloud providers may stumble in short-term earnings, strained IT spending of other companies will lead to greater near-term demand resilience for Iaas and Paas during economic uncertainty.
In the 2022 State of the Cloud Report, for the sixth year in a row, all respondents reported that optimizing the existing use of the cloud is their top initiative, highlighting a critical need for businesses to tap into the power of FinOps teams and strategies to improve cost savings initiatives across their cloud environments.
What is FinOps?
FInOps is an evolving cloud financial management discipline and cultural practice that enables organizations to gain maximum business value from their cloud environment through the collaboration of engineering, finance, technology, and business teams on data-driven spending decisions, cost optimization, and cloud financial management. FinOps may look like shorthand for Financial Operations, but the term originates from Finance and DevOps.
Whether an organization calls it FinOps or not, may businesses are likely already practicing and actively looking to implement more FinOps strategies for cost optimization.
The FinOps Foundation defines the following as the principles of FinOps:
- Teams need to collaborate
- Everyone takes ownership for their cloud usage
- A centralized team drives FinOps
- Reports should be accessible and timely
- Decisions are driven by the business value of cloud
- Take advantage of the variable cost model of the cloud
With these FinOps principles in mind, the following strategies, can help recession-proof your AWS cloud investment.
Define Objectives & Metrics
As with any initiative or business strategy undertaking, FinOps decisions should begin with defining the objectives. Define your organization’s desired and intended outcome, whether it is to save money, reduce the risk of human error, save time to increase employee productivity, or build transparency into processes. Once your organization defines objectives for DevOps practices, then key metrics can be set for measuring the value of FinOps. As reported in the 2022 State of the Cloud Report, the top metrics for assessing progress against cloud goals were cost efficency/savings (74%), delivery speed of new products/services (68%), and increased speed of innovation (48%). Once objectives and metrics are decided, it is critical to have them be visibly available to the FinOps team and organization for cross-funcitonal team alignment.
Standardize Cloud Visibility for Performance and Cost Optimization
FinOps demands a single source of truth for cloud costs, allowing an organization to focus on the usage of their environment, not exclusively the dollar amount. Without considering usage, invoices will still creep. Adopting a single tool or platform that will give each member of the team the comprehensive utilization and cost information they need to make decisions. A standardized source for cloud costs will also help your organization define governance and controls for cloud usage while continuously improving efficiency and innovation.
The platform can be native to a specific cloud, such as AWS Cost Explorer, or a platform that integrates with your environment, such as CloudHealth by VMware. CloudHealth by VMware extends from what is available in native tools, including more actions related to cost and security (e.g., the ability to manage Reserved Instance purchases better, identify resources suitable for scheduling, and migrate older data to lower tiers of storage). Regardless of the platform, a comprehensive and collaborative single source of truth will enable your organization to maintain the performance of your cloud environment.
Businesses should utilize cloud provider and partner discounts such as reserved instances (RIs) and financial engineering programs. RIs are ideal for steady and predictable usage. For example, an Amazon Reserved Instance is a billing discount that allows you to save on your Amazon EC2 usage costs. When you purchase a Reserved Instance, you can set attributes such as instance type, platform, tenancy, Region, or Availability Zone. RIs can help you save significantly on your Amazon EC2 costs compared to on-demand instance pricing.
AWS partners, like Mission, offer financial engineering programs that help businesses save money on AWS by providing the insights, tooling, and methodologies for cloud cost efficiency. Financial engineering programs will often provide immediate cost savings opportunities and buy and manage RIs on your behalf, reducing your organization’s financial risk and transferring day-to-day management from your internal teams. An AWS partner can help your business navigate optimization requirements to save on AWS spend in the immediate and long-term future.
Designate a FinOps Team & Practice
Companies who may not have the resources available to enable FinOps strategies internally, especially during a difficult economy, should consider engaging with a AWS partner with FinOps capabilities to meet their FinOps objectives. Working with a cloud partner can be more predictable for companies to maintain business continuity and establish a centrailized team to drive FinOps.
Working with a cloud partner for FinOps can help speed up delivery, since they already have the needed technical expertise and relevant certifications. The area of FinOps is very much a part of the IT and cloud skills gaps that have emerged with the rise of cloud technologies and adoptions. Whether you are looking for dedicated resources, a fractional team of shared resources, or services to fulfill a scope of work, maintain momentum in your cloud transformation by engaging with cloud services partners.
According to Quarterly Five Fifty from McKinsey, the economic value of cloud technologies estimate an average rise in 2030 EBITDA of more than 20% across industries, but many companies are just beginning to scratch the surface of their cloud potential. Restrategizing during economic difficulty does not mean that your cloud environment has to suffer. In fact, it can be an opportunity to look at your usage directly to continually monitor performance for cost optimization and management, opening doors for continued investments even during an economic downturn which can lead to continued innovation and business momentum.
Interested in learning more about FinOps? Take a look at what the Mission FinOps team does to help customers with the financial management of their AWS environment, and check out our AWS Cost Optimization and Governance and AWS Cloud Management offerings.