This AWS webinar featuring an expert panel from Fidelity, Pearson and Apptio explains how to establish a FinOps practice.
It explains FinOps best practices for building and maturing a FinOps team in your organization, and shares lessons learned from AWS customers about the real-world challenges of building a practice.
From 1m:25s, Jennifer Hays, Head of Engineering Efficiency and Assurance for Fidelity, begins the session by introducing the FinOps Foundation, a project of the Linux Foundation, intended to provide a professional community for FinOps practitioners.
As cloud adoption increases, it is associated costs start to become material to all their different organizations. And for most, cloud usage will continue to increase over the next several years.
We learned yesterday that only five to 10% of IT is now operating in the cloud. So now is the right time for each organization to learn about good cloud financial management.
In addition, in this economic uncertainty, the ability to manage costs and, if necessary, drastically reduce your costs become vital to companies who are struggling, who are struggling economically, or who want to take a competitive advantage.
We can all agree that the cloud is critical to organizations by giving unprecedented access to the technology that drives efficiency and innovation. Still, there are new complicating factors about the cloud and the reality of the cloud economy.
Major factors about the cloud and economy
From 13m:45s Ashley Hromatko, Director of FinOps for Pearson, walks through their vast AWS estate and how they are applying FinOps practices to manage its’ costs.
First, they have decentralized procurement. Traditionally, findings happened in silos within an organization. But now, every developer who has access to a keyboard has the opportunity to commit your company to spending.
This can be downright frightening to finance and procurement organizations as they no longer have control over how much money is being spent in the cloud, and the processes they have used to control the budget are no longer valid.
Add to that, and the cloud is variable. Every month, every minute. Add that to the variable cloud spend. So, you could have variable spending every month, every day, every minute, right? Even some services, every second. And there are over a million skews for cloud services.
This complexity makes it very difficult to predict and forecast budget in spending, which again means that your internal controls on how companies look and manage their budgets are no longer valid. And then, they have instant access to resources that enables innovations, but it also leads to inefficiency and ineffective use of resources as there are very few controls about how people can actually start up and utilize the resources.
IT organizations and their consumption
The real question from an IT organization is, “Do you have the management techniques to be able to control your resource utilization and your consumption of resources in the cloud?”
Most IT organizations don’t have this muscle. They have never had to develop this muscle in on-premise data centers because their procurement teams always did it. And so, the cloud becomes financially important, and cloud cost optimization becomes very important for companies to deliver good products and services. But luckily, there’s also a new operating model, right?
For the cloud to help address these realities and unlock the opportunities to drive efficiency and to use the transparency of near real-time data to drive decisions, use, improve and arm your products and services.
So FinOps is the answer, right?
Putting FinOps into Practice
From 29m:45s Eugene Khvostov, VP Product and Engineering for Apptio, explains the details of putting FinOps into practice.
It is an involving cloud financial management discipline and cultural practices that enable organizations to get maximum business value by helping technology, finance, and business teams to collaborate on data-driven decisions.
This aligns the whole organization with coming together and focusing on what is essential and ordering to drive business value, not just IT costs.
Phases of FinOps
FinOps is a flywheel. So, we think of it in three different phases. It’s about taking small steps that mature each other, and generate the energy to continue to mature your organization.
- The first phase of it is the informed phase. You start your journey by understanding your cloud span, structuring your accounts, and tagging costs to gain meaningful visibility in allocating your costs. The key to this is that you bring spending to your teams that are meaningful for them and have a good discussion about value.
- Next, you move into the optimization phase. Once you understand your costs and have them aligned to something meaningful for your organization, you look to empower your financial and ITI organizations to identify and measure efficiency and optimization opportunities.
- Then make goal-based decisions on those opportunities. Now there are hundreds of different opportunities for cloud optimization.
Some things like reserved instance purchases or savings plans will give you almost immediate and significant discounts on highly used services. But there are also things we learned about over the last two days.
Let’s think about the Graviton 3 processor that just came out with the new C7 or G7 services. If we think about the 475 different options for computing, all of those give you different options to become highly efficient and effective with your computing.
It’s not about selecting one, and it’s about selecting the best service for your organization. This goes ahead and takes another opportunity for you to utilize a different service for you to reduce your costs.
Amazon has reduced costs several thousand times by offering either a new service with a new capability that allows you differentiation or by offering the better version of service at a reduced rate, which was what we saw with the G3. So, there are many different ways that you can optimize, and sometimes this feels very overwhelming to an organization.
What is the critical point to maximizing the AWS Cloud spend?
The key to this is to start small and to start somewhere, to choose a place, use the data, to figure out where you’re spending the most money and that you could have the most type of opportunity.
FinOps has always talked about leading with the data. They have access to a significant amount of data on usage and cost through cloud service providers. You will be utilizing that to help you identify.
There are a lot of different parts of your organization that is going to be impacted. And so, we highlight that there are four personas that are usually included in your FinOps team.
The first is the executives. And then finance and procurement, we’ll all need to know how we are going to forecast, that we’re going to budget and that we’re going to address the variable nature of the spend that is coming in. And then the engineering and operations organizations.
To build this FinOps practice, we had to figure out our objectives and our 30, 60, and 90day playbook? So, we needed to first start by defining our core competencies. Who were we, and who were we not? Because that’s a big question. And to figure out a communication strategy.
There is no single silver bullet; the one-time thing you can do will allow you to get the most out of your cloud spending for the fullness of time.
You have to be able to tag everything, and you have to make sure that everybody tags appropriately. And the second is that there’s human error involved, right? Design-tags are freeform, meaning somebody might type TMA with a capital T or lowercase T. Those are different tags.
Cloudability and its purpose
So, Cloudability allows you to use an area called business mappings. You create your own custom dimensions, synthetic tags if you will, based on rules that you create.
It could be based on the AWS tags, it could be other data that you bring in, and that automatically allocates those costs.
Well, Cloudability SaaS would be a very similar process that Cloudability follows, meaning, integration with a few providers, for example, your SSO provider, will immediately show you the entire list of applications that your organization has with the associated costs are there, who’s responsible for those costs, allows you to model that, and also provides you optimization recommendations for an unused license.
FinOps Agreements and Opportunities
From the FinOps perspective, you are not allowed to actually talk about your agreements with the various providers. That is one of the rules of the foundation itself.
However, what they do talk about though is other types of opportunities and the fact that you should be in negotiations with your cloud service provider; some people don’t know that is an option. And also, the purchases that you can make either through a savings plan or advanced reserved instance purchases and other ways that you can negotiate with the providers in order to get better rates.