With cloud utilization being a critical component of your company’s growth, FinOps should be a top consideration to ensure that cloud spend is most efficient for your organization… and does not get out of hand!
Wavestone’s cloud experts have put together time-tested measures to ensure you achieve excellent, cost-effective cloud outcomes.
Treat cloud cost data as a first-class metric
Positioning cloud cost data as first-class, business-critical metrics is crucial to strategic organizational decision-making, allowing you to:
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Give context for decision-making (e.g., including relationships – resource and assigned cost “buckets”)
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Clearly define good and bad outcomes (e.g., defined thresholds aligned with business objectives)
For cloud cost data, there are several key areas to consider as first-class metrics in your FinOps strategy:
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Cost per unit – The cost per unit helps you decide how to spend resources, figure out how to charge customers, and see the ROI of your cloud investments. Units can be products or services.
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Idle cost – The baseline cost for your cloud infrastructure when not loaded is a general measure of cloud efficiency.
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Shared infrastructure cost – Assign financial allocation appropriately to departments, programs, and projects based on who uses your cloud infrastructure when and for what purpose.
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Cost/load efficiency curve – Calculating your cost/load curve lets you see if costs grow at the same rate and pace as adding customers, units, or revenue. This is a scalability/elasticity efficiency view.
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Innovation/cost ratio – Factoring in costs during R&D activities allows for a more accurate estimate of costs during production.
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Software development life cycle cost optimization – Having the right cost data throughout the software development life cycle (SDLC) process allows for proactive cost optimization as solutions are delivered.
Establish your cloud KPIs early and be consistent in tracking them
When you establish top priority cloud KPIs early on – with the appropriate data gathering and presentation tools – they’re easier to expand, scale, and refine as needed. This also helps you to prioritize and manage what matters most.
Start as soon as your organization is planning to move to the cloud and establish a communications plan around KPIs (this will expand as stakeholders are added). Some of the cloud optimization KPIs to consider include:
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Cloud spend as a percentage of revenue
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Cost of revenue (curve) over time
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Number of ongoing compliance issues
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Effective cost per resource (e.g., spend over hours computing)
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Percentage of Critical Services availability
Establish your master account for cost monitoring
Ideally, a master payer account consolidates all your cloud cost metrics as part of the initial account setup. Subsequently, when adding accounts and members, make sure the cost data rolls into the master account.
Don’t forget context from CSP tools and other vendor tool sources such as dashboards, logs, and notifications mechanisms, which show what’s happening within the system and tie to billing and cost allocations.
Finally, start tracking cost history. Cost and usage reporting alongside continuous reviews of past spending deliver a greater context to identify cost anomalies.
Align your internal budgeting and escalation processes with business goals
Business and IT decision-makers must collaborate to understand their budgets and goals for each program, project, release, etc. For example, establish cost requirements based on how products or features will be developed and deployed.
Reference the requirements as a baseline during planning, development, and delivery, but factor in variances with context, such as change management around the solution architecture or target users. Your business goals will likely require additional considerations, such as speed, resiliency, and the user experience.
Define other cost metrics as needed based on your specific business model and goals
Besides the first-class metrics mentioned in point #1, each team across your organization may have specialized needs that impact their decision-making processes. There are potentially many other cloud cost metrics to consider, such as:
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Cost per feature
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Cost per customer and segment
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Cost per team
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Cloud revenue and cost
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Cost per cloud service
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Cost deviation
Get the right cost data to the right people at the right time
Different types of cost data are more valuable to different team members. For example, DevOps teams need to review and refine cost data by cloud resource and consumer teams to fix issues faster. On the other hand, Finance will be more interested in forward-looking projections.
You need to commit to a continual data improvement process to reduce extraneous data. Ensure cloud cost data can be queried and presented in relevant terms to answer the questions that matter.
Use data to optimize cloud costs at each stage of the SDLC
When the right teams have access to the right data at the right stage, they can pull the appropriate “levers” of cost controls, positively impacting product quality and the bottom line.
Product development stages and data uses:
#1
Planning – Define and establish the budget and roadmap based on cost data, minimize unexpected spend, and adjust the budget appropriately
#2
Design and build – Use relevant data to:
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Make cost-effective architectural and design decisions
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Refine planned spend and better understand the cost dynamics of the system
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Project the cost of the platform or app
#3
Deployment and operations – Quickly identify unpredicted or anomalous spend and adjust course
#4
Monitoring – At this stage, data should allow teams to:
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Continually assess cost by team, product, or feature
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Report on operations, including ROI, segmented by business program or initiative
Optimize cloud costs in order to optimize your business strategy
Cloud computing provides a robust metrics landscape, enabling improved strategic decision-making compared with traditional data center metrics.
The increased cost visibility, tracking, and allocation allow companies to develop their ideal business model and agilely unlock new opportunities. You can make cost transparency and maturing cost management processes your competitive advantage.
Grow your cloud cost optimization maturity
When pursuing a cloud cost optimization strategy, most organizations start with a FinOps launch followed by continual FinOps maturity cycles.
Here are some other recommendations to promote cross-organizational FinOps maturity:
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Start early and keep it simple for widespread adoption
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Emphasize FinOps KPIs that are most relevant to the business strategy
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Cultivate executive sponsorships while engaging Engineering and Finance leaders to champion adoption
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Execute a FinOps Maturity Assessment periodically to check on growth and to determine next steps
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Consider engaging an objective, experienced third-party organization like Wavestone to help you baseline, regularly assess, and improve your company’s FinOps capabilities, including organizational structure, processes, metrics reporting, tools, and skillsets
Read our strategy brief, Optimizing Your Cloud Costs with FinOps Best Practices, for an in-depth look at better financial governance and control in a cloud-first model.
GET THE BRIEF
Keith Worfolk
Principal Consultant
Keith is a customer-focused IT executive, innovation expert, and trusted industry advisor with a consistent record of delivering forward-looking enterprise solutions, software, platforms (PaaS, SaaS), and big data and BI/analytics (DaaS) solutions via secure and scalable architectures for growing organizations.
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