FinOps leaders are becoming the ones who bring the right culture and proven practices to improve cloud ROI. The spread of cloud computing created a massive knowledge gap between technical and business teams. Finance teams find the cloud cost dynamics challenging, and engineers are only starting to feel accountable for the infra expenses they generate. FinOps emerged as the answer, and we provide tools that set organizations up for success.
How do you implement cloud FinOps without spending months on planning and team training? And even with team training, you’re still in a position where people have to routinely perform tasks they’re often not excited to do.
Here’s a two-step practical approach to implementing FinOps at your company, no matter the industry or size.
Is FinOps the ultimate remedy to cloud financial management?
Companies tend to go over their cloud budgets by 13% on average and waste 32% of their cloud spend.1
FinOps is here to address the most painful aspects of running applications in the cloud: cloud waste, overprovisioning, idle resources, and a lack of control over which teams use which resources.
Despite the relative newness of “FinOps,” monitoring and reporting on cloud expenses have likely been around since public cloud services became widely available. Organizations that migrated to public cloud soon found that while it may offer flexibility and speed, also comes with new cloud financial management challenges. There’s a lot of talk in the industry today about the cloud ROI and how unexpectedly low it can become.
To control cloud costs, many companies continue to use solutions that rely on manual tasks such as meticulous resource tagging or setting precise usage thresholds to avoid cost spikes.
There is no reason why cloud FinOps should continue this way; automation tools are already solving so many problems in our industry, so why not use them here too? After all, the ultimate goal of FinOps is to reduce cloud expenses. Cloud cost optimization solutions can bring teams to this stage within minutes.
Cloud cost visibility is the core of FinOps, and it brings serious cloud cost savings when combined with automation. Here’s how to implement it quickly.
FinOps step 1: Cloud cost visibility
A cost monitoring solution helps you build the following FinOps capabilities:
Keeping up with the cloud budget
Teams can always check the rate at which they’re spending the cloud budget and ensure they stay within its limits, much to the delight of the finance department. They can do this by checking daily or weekly spend and extrapolating it to get a realistic estimate of monthly costs.
Here’s an example of a daily cloud spend report from CAST AI, which helps to understand your burn rate:
Faster discovery of cost anomalies
How to discover unusual cost spikes as soon as they happen? Cloud providers usually update cost data once or twice a day, so don’t count on them.
Instead, a monitoring solution with real-time capabilities will show you everything you need to know on a dashboard or daily spend report. This is where you can catch these problems as soon as they emerge – and long before they snowball into serious issues.
More accurate cloud planning
Another perk of cloud cost monitoring is that teams can understand their real costs when planning budgets for cloud services. People often overprovision applications because they want to sleep well at night knowing their workloads are running smoothly. When they fail to request the provisioned capacity, the final cost of cloud resources is higher.
Compare the requested vs. provisioned CPUs to discover this gap and calculate how much you’re actually spending per single requested CPU to make your planning more realistic.
Here’s an example that shows the impact of cloud waste on any cloud budget:
Your cost per provisioned CPU is $2. But you end up using less than that, and your cost per requested CPU rises to $10. This means that you’re running your cluster for a price 5x higher than expected.
Faster issue investigation thanks to historical cost data
In a recent survey, 55% of engineers reported spending time each week on issues related to cloud costs.2 These ranged from unexpected spikes in costs to discrepancies between forecasted and actual expenses. For 11% of respondents, disruption caused by cost issues lasted one sprint or more!
By accessing historical data, you can quickly investigate any cost discrepancies and avoid losing time when all you want to do is work on strategic tasks. Read this to get a step-by-step guide to investigating a cost anomaly.
This is what the historical cost report looks like in CAST AI. You can see the average monthly cost, the average daily cost during that month, the average cost per CPU, and more.
Bonus tip: Share cost metrics with engineers to build a FinOps culture
The State of FinOps survey revealed that getting engineers to act on cost optimization recommendations is the biggest challenge for almost 40% of respondents.3
By providing cost-control metrics in a format that engineers prefer and use, you can spread awareness of infrastructure costs and allow them to make informed decisions about infrastructural investments.
Engineers are used to observability tools that offer real-time monitoring of the application’s performance. If you pick a solution that integrates with their existing operational tooling, adding costs to the mix is easy. This creates a common ground between technical and business teams, building a stronger FinOps culture where everyone feels responsible for managing costs.
Take a look at this article from our Engineering Manager, who shared a few best practices for sharing cost metrics in a standard observability tool Grafana: Control Cloud Costs and Build a FinOps Culture with Grafana
FinsOps step 2: Automated cloud cost optimization
As demand and utilization change rapidly in cloud-based applications, manual cost optimization becomes time-consuming and labor-intensive.
Automation is the way out. It lets teams achieve their goals around cloud financial management without the added effort from the engineering side of the company.
Here’s what automated cloud cost optimization can do for you:
- It selects the most cost-efficient instance types and sizes that fit the requirements of your applications,
- It automatically scales your cloud resources to handle spikes in demand,
- It eliminates all the idle resources such as virtual machines left running by accident,
- It rearranges workloads to fit into a smaller number of VMs for cost reduction,
- It automates spot instances to drive costs down and handles any interruptions gracefully.
Most importantly, all of these activities happen in real time. Implementing an automation solution helps your teams master the point-in-time nature of cloud optimization without the added workload of babysitting their infrastructure.
Case study: How Branch saved millions of dollars on the cloud by automating spot instances
Spot instances offer the highest discount on the price per compute hour, but the risk of downtime and the time investment to manage them made it impractical for the marketing automation leader Branch to continue using spot capacity.
The company started looking for a solution that would automate spot instance usage, offer real-time cost visibility, and provide the ability to provision the most cost-effective cloud resources.
By automating cloud cost management with CAST AI, Branch:
- gained the ability to securely deploy spot instances,
- reduced upfront reservation payments,
- improved real-time cost visibility,
- slashed cloud costs further thanks to automated provisioning of the most cost-effective EC2 compute resources.
The CAST AI Kubernetes Cost Optimization solution has been a big success for Branch, saving us several millions of dollars per year in AWS Cloud compute costs for our Kubernetes clusters while maintaining our reliability SLAs. The modest amount of effort by our team makes this one of the highest ROI cloud cost savings initiatives we’ve done at Branch.Mark Weiler, Senior VP of Engineering, Branch
Support your FinOps strategy with the right tooling
What options can you choose from to implement FinOps?
- Native cloud cost management tools – tools like AWS Cost Explorer are usually the entry point into the world of cloud costs for most teams. However, once your cloud footprint grows beyond a single cloud provider and service, native cost management tools fail to provide accurate data.
- Custom tools – some companies decide to build a homegrown cost monitoring solution, but there are a few risks that come with this choice.
- Third-party cost and optimization monitoring tools – you can choose from a range of modern solutions that handle cloud-native cost dynamics, bringing teams all the cost monitoring and optimization features that act on cloud resources in real time.
The approaches outlined above come with unique advantages and limitations, leading many teams to combine multiple legacy solutions for cost visibility and potential optimization.
Practical FinOps guide to resource grouping
Every major cloud provider offers services for grouping cloud resources. Azure has Resource Groups, Google Cloud uses Projects, and AWS offers the concept of Organizations.
Each grouping construct is tied to a billing account, including subscriptions, billing credit cards, etc. This lets various resource groups be billed separately, even within a single Landing Zone or Region.
At a lower level, each resource created within a Landing Zone must be tagged or labeled with an appropriate taxonomy. This is how you make sure that resource charges are allocated correctly within a group.
Note: It’s best to enforce mandatory labels from the onset in a Landing Zone. Landing Zone operations need to be governed by specific, immutable rules enforced as code (Policy as code). To set your cloud migration for success, establish a minimal set of policies based on cloud best practices and codify them.
4 FinOps questions to answer after a cloud migration
1. Was the migration cost-effective?
Is it cheaper to run your same workload in the cloud than it was before the migration? The best way to determine how cost-effective your cloud migration was is to compare total costs before and after the migration, workload by workload.
2. Can you attribute costs to specific units?
If the only insight you have is about general infrastructure costs, prepare for trouble. In the cloud, you need to have appropriate tools for cost reporting and attribution in place.
Why is that important? Because the cloud gives engineers the freedom to spin up resources on demand whenever they need them. If you can’t attribute costs to specific teams, projects, or business units, nobody will be accountable for your rapidly growing cloud bill.
What you need here is detailed cost allocation and reporting capabilities combined with a FinOps culture and awareness of costs among engineering teams.
3. Are cloud spend forecasts accurate when measured against actual costs?
Usage-based cloud spend is hard to predict. However, understanding your future resource needs helps keep these expenses in check.
The foundation of forecasting is your cost reports. Set up notifications and regularly check the resource utilization data you can use to estimate monthly spending.
Cloud spend modeling is another good approach. Analyze cloud provider pricing models and predict capacity requirements over time to compute the total cost of ownership.
You can also focus on finding resource utilization peaks. This is where periodic analytics and statistics reports can help you. Examine seasonal demand trends; if these patterns correspond to your peak resource usage, you’ll be well prepared to anticipate them.
4. Are you measuring the costs of the requested resources?
Many cloud budgets include only resource costs. It’s what you find on the pricing list published by cloud providers.
But this pricing may not reflect your actual costs.
The truth is that engineers tend to overprovision apps for optimal performance and availability. In the end, the application might not use all of the provisioned resources. That’s why it’s important to calculate the gap between provisioned and requested capacity for more accurate cost reporting and estimates.
Cloud cost visibility is the key first step to FinOps
FinOps is here to help organizations cope with growing usage, identify savings opportunities, eliminate wasted resources, and allocate costs to specific departments or groups. Whether you’re moving applications to the cloud or have been running them there for a while, FinOps is just as important.
Integrating several solutions into a single cloud cost monitoring and optimization approach is a typical practice among organizations.
If your application runs on Kubernetes, you can get started with a free Kubernetes cost monitoring tool from CAST AI. It will show you daily and monthly cloud costs with a breakdown into workloads, labels, and namespaces.
CAST AI clients save an average of 63% on their Kubernetes bills
Connect your cluster and see your costs in 5 min, no credit card required.
FinOps, or Cloud Financial Operations (a combination of “Finance” and “DevOps”), is a growing practice that helps organizations improve their cloud financial management. Here are the ten most frequently asked questions about FinOps:
FinOps is a set of best practices, principles, and processes aimed at optimizing cloud computing costs and aligning technology expenses with business value.
FinOps helps organizations manage cloud costs well, make decisions based on data, hold people accountable, and get the most out of their cloud investments for their business.
FinOps combines knowledge of technology, business, and finances to make it easier for teams to work together, keep an eye on how the cloud is being used, implement strategies to reduce costs and make the best use of available resources.
FinOps’ main principles are collaboration, cost transparency, continuous improvement, making decisions based on data, and allocating resources based on what’s best for the organization.
FinOps uses cross-functional teams made up of engineers, developers, product managers, finance people, and business leaders to make sure that costs are managed well and that business goals are being met.
The core components of FinOps include cost visibility and reporting, cost allocation and chargeback, optimization and cost reduction, and budgeting and forecasting.
To implement FinOps, you can start by putting together a FinOps team, figuring out how much you spend and use the cloud now, making sure costs are visible and reported, setting up cost allocation and chargeback systems, and constantly monitoring and optimizing cloud costs.
FinOps tools and technologies that are often used include cloud cost management platforms, cloud-native automation tools (like CAST AI), and tools that help you see how your data looks.
Success in FinOps can be measured by tracking key performance indicators (KPIs) such as cost savings, cost optimization, resource utilization, and alignment of cloud spending with business goals.
To learn more about FinOps, you can explore resources from the FinOps Foundation, attend FinOps-focused events and webinars, join FinOps communities, and follow industry experts and thought leaders in the space. And, of course, keep an eye on the CAST AI blog!
-  – Flexera 2022 State of the Cloud Report
-  – The State Of Cloud Cost Intelligence
-  – The State of FinOps 2022