10 Tips to Optimize Your Cloud Investment Using FinOps

FinOps is a growing field that focuses on optimizing and managing the financial aspects of an organization's cloud infrastructure and services. FinOps is a portmanteau of “Finance” and “DevOps”, stressing the communications and collaboration between business and engineering teams. With the increasing adoption of cloud computing, FinOps has become a critical aspect of an organization's overall financial strategy.

Today, companies are faced with ever-increasing pressures to control and optimize costs, and are trying to balance those pressures against driving cloud transformations that can keep them competitive in their market. FinOps can help your business relieve cost pressure that can be better invested in your innovation roadmap.

One of the main goals of FinOps is to understand cloud spend and make informed decisions on rightsizing and architecture design that can drive efficiency and positively impact your budget. In simple terms, it's ensuring that every dollar spent on cloud computing drives specific and measurable business value. So, understanding if you are using the right resources for your business requirements is a core function of FinOps. Here are 10 steps to achieve this goal:

1. Cost visibility and reporting: To effectively optimize cloud spend, you first need a clear understanding of where your money is going. This means tracking your costs and usage across all your cloud resources and services. There are several tools available that can help you do this, including AWS Cost Explorer, Azure Cost Management and Google Cloud's Cost Management.
2. Implementing a cloud governance policy: A cloud governance policy is a set of rules and best practices that an organization follows to optimize its cloud spend. This can include things like setting budget alerts, establishing cost optimization targets and defining resource tagging standards. By implementing a cloud governance policy, you can ensure that your organization is consistently working to optimize its cloud spend.
3. Rightsizing: It’s essential to ensure that the resources you are using in the cloud are the right fit for your workloads. Over-provisioning resources can lead to unnecessary costs, while under-provisioning can lead to performance issues. To find the right balance, you can use tools like AWS Trusted Advisor,  Azure Cost Management, or  Google Cloud Operations Suite to identify resources that are either over or under-utilized. You can then adjust the size of your resources to better match your workloads.
4. Automating cost optimization: There are several tools and techniques that can help you optimize your cloud spend automatically. For example, you can use AWS EC2 Auto Scaling,  Azure Autoscale or Google Managed Instance Groups (MIGs) to automatically scale your resources up or down based on demand. This can help you avoid paying for resources that aren’t being used and help ensure that you have enough resources to meet your workload requirements.
5. Resource tagging: Properly tagging your resources can help you get a better understanding of your costs and make it easier to identify areas where you can optimize spend. For tagging to be effective, you must have a strategy that drives consistency and effectiveness. Tagging allows you to categorize your resources based on factors like cost center, application or environment. This can help you identify resources that are costing more than necessary and take action to optimize them. Simple things like tag key/value normalization go a long way.
6. Utilizing spot instances: If you have workloads that aren’t time-sensitive and can handle interruptions, you can take advantage of spot instances. These are instances that are available at a discounted price, but can be terminated by the cloud provider if the demand for on-demand instances increases. By using spot instances, you can significantly reduce your cloud spend without sacrificing performance.
7. Implementing a data lifecycle management strategy: Stale or sub-optimal storage consumption can lead to a significantly higher public cloud bill at the end of each month. Reduce these costs by automating snapshot retention or leveraging tiering capabilities on object storage.
8. Managing cloud egress fees: With cloud data transfers, you don’t pay for data when it goes in; the transfer charges occur when data goes out. Understand and engineer your data transfers. Data transfers out of your cloud can add up quickly. 
9. Avoiding early lock-in to commitment discounts: Address architecture and rightsizing before exploring sustained use or commitment discounts. This sounds simple, but companies can get caught up chasing a quick win, lock in a commitment discount via a reserved instance or savings plan, and discover that all they’ve managed to do is make waste slightly less expensive.
10. Evaluating workload needs: Consider multicloud architecture, including public hyperscalers and hosted private clouds. Hyperscale public clouds aren’t always the right answer. Look at your workloads and your business needs, then engineer appropriately. Factor items like regulatory compliance, latency, security, cost stability, talent availability, portability and resiliency into your decision making.

In summary, FinOps is a critical aspect of managing an organization's cloud infrastructure and services. In a multicloud environment, FinOps enables decision making around longer-term reservations, and the discount options available for term ownership — and allows a comparison between cloud providers. This can be especially important for common functions e.g., containers or high-performance computing (HPC).

By following the 10  best practices above, you can significantly reduce your cloud spend and optimize your organization's financial performance while improving its agility and speed.

For more information about FinOps, drop me a line, or go to the FinOps Foundation at www.finops.org .

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