FinOps: an industry primer
For digital-intensive businesses who live in fear of that next cloud services bill, FinOps offers a proactive solution, anticipating and integrating dynamic cloud usage into the development cycle. What are the key tenets of FinOps, and how can it radically improve your transformation efforts?
It’s been a difficult time for the telecoms industry, to say the least – despite weathering the worst of COVID-19, service providers are reporting greatly diminished operating profits. This downturn is leaving the transformation efforts of the sector largely in the dust as other industries race ahead in cloudifying their services and applications.
Fortunately for telcos, FinOps (that’s Financial Operations) promises a path back to profitability through the cloud and cloud-enabled services.
The benefits of moving critical workloads to the cloud have been much hyped – massive cost savings being one – though it isn’t without its difficulties, as taking your eye off the ball can lead to quite a billing fright months or years down the line, with businesses reportedly overspending on cloud by an average of 23%, according to Flexera’s State of the Cloud 2020 report.
FinOps is about adding the principles of financial planning and cloud management to DevOps, ending the operational gulf between these teams.
According to the FinOps Foundation, a non-profit trade association established in 2019, it
enables… a combination of systems, best practices, and culture – to increase an organization’s ability to understand cloud costs and make tradeoffs.
More than just shaving off a few small savings here and there, FinOps combines your business’ technical and financial teams, working together to integrate intelligent cloud solutions within development procedures as standard.
They define the FinOps journey as one composed of three distinct phases: Inform, Optimise and Operate.
After ensuring that your cloud spend is visible and accountable to all in the Inform stage, Optimise is the meat of the sandwich, encouraging and empowering your team to identify efficiencies to be made. Finally, Operate defines the processes which ensure these optimisations are achieved.
A report by the FinOps Foundation focused on Kubernetes expenditure among surveyed users found that companies are finding it increasingly difficult to predict spend on the platform as it continues to creep up; 44% of respondents were relying on monthly estimates, while 24% don’t keep an eye on their Kubernetes spending at all.
Not expecting the unexpected when it comes to cloud spend can have expensive consequences further down the line.
In 2019, Pinterest found itself having to pay over double what it expected to Amazon Web Services, having agreed initially to prepay $170 million a year on cloud services until 2023 – but an unforeseen spike in traffic around the Christmas period saw this spend rise by $20 million, a significant mark-up.
Had Pinterest anticipated such periods of increased use and accommodated for it, this coal-in-the-stocking of a cloud bill could have been avoided.
By keeping your own cloud development and deployments agile, your business can take advantage of the variability of cloud expenditure, turning instability into an advantage.
FinOps should not be about simply making quick cuts to cloud expenditure, but making valuable savings and meaningful cultural and procedural shifts in your business. The fundamental steps to integrating FinOps into your business include:
- Benchmarking and tracking performance, and costing each phase accordingly.
- Real-time decision-making, actively identifying the key factors driving or diminishing your cloud usage and your routes to optimisation. Based on your history of spend, FinOps can pre-allocate your cloud resources and estimate spend accordingly.
- A collaborative, cross-functional team; FinOps is nurtured and directed from above, although some organisations may seek to formally introduce FinOps as policy.
5G, edge computing, network slicing – without the cloud, and smart cloud spending, none of these disruptive technologies can be realised and implemented. And with cloud waste hitting over $14 billion in 2019, plus the added downside of consuming more energy and producing greater CO2 emissions, the need to streamline has never been more urgent.
By investing in a FinOps strategy, and allotting the requisite spending, service providers can create a high-revenue enterprise service for customers, while modernising their infrastructure to lower outgoings and streamline their business operations.