(Excerpt from the article of the same name in the Lünendonk-Magazin „Cloud Transformation: Business und IT auf dem Weg in die Zukunft“; available in German language only)
The path to the cloud is in full swing. Companies are promising themselves growth, efficiency and new business models. However, in many cases, the overview of cloud costs is also lost. Enthusiastically, teams in many companies began to drive the cloud transformation forward. However, many soon noticed an enormous increase in costs. There was no immediate way out because business-critical applications could no longer simply be moved.
Financial Operations, or FinOps, addresses this shortcoming and is a process model that helps companies optimize cloud spending. To do this, it builds a bridge between financial processes and cloud operations and addresses the following three aspects in particular: Visibility, accountability and optimization.
The first step is to use tools and processes to bring more transparency to cloud usage and associated costs. Analyzing the reports from the tools provides much more insight into where and how cloud resources are being used.
In addition, FinOps is also a process model that promotes enterprise-wide accountability for cloud costs by involving all teams: This includes business, procurement, finance and technology teams, as well as other relevant stakeholders, gaining more control over their cloud spend. Through dynamic and regular monitoring and data-driven analysis, FinOps can also regularly adjust and optimize the allocation of cloud resources.
Why is cost management difficult in the cloud?
In general, the following challenges arise in cost management:
1.Transparency of expenses
Cloud environments can span multiple providers, regions and services, making it difficult to gain comprehensive visibility. Comprehensive insight across dimensions such as cloud service usage, applications, departments and projects is difficult in a hybrid and multi-cloud environment. Tools and metrics are often limited to single cloud platforms and it is difficult to provide “end-to-end” visibility into costs.
2.Cost optimization
Optimizing cloud costs requires in-depth knowledge of services, pricing models and configurations, as well as the necessary monitoring and governance mechanisms to realize potential savings. Large providers such as AWS have more than 30 tools/modules that can be used for specific aspects of cost optimization.
3. Cost allocation
Cost allocation can be disorganized and error-prone due to a lack of transparency and an inefficient allocation strategy. Because the link between the use of cloud services and the owners of those services at the application, department and project level is often missing, companies cannot allocate large portions of cloud expenses to their originators and ultimately to the corresponding products.
4. Cost forecasting and budgeting
Cloud costs vary due to fluctuations in demand, changing service prices and usage patterns, making cost forecasting difficult. Different pricing models such as on-demand, reserved and spot instances increase the complexity of such forecasts.
5. Governance & Compliance
The lack of appropriate governance policies and associated controls can lead to waste in the cloud and even pose legal problems for companies. Previous governance frameworks are also hardly suitable for dynamic spending models. Rather, they focus on guardrails and approval processes, but this limits the added value of cloud usage.
6. Cost optimization culture
An often missing culture to take responsibility for costs leads to additional expenses in the cloud.
