The multi-cloud approach has become the ideal operations model for modern organizations. However, migrating processes and applications to the cloud entails so many moving parts, departments, and resources. It is now imperative for enterprises that rely on the cloud to optimize their consumption of cloud resources and services. But that, in itself, is a challenge. This challenge has ushered in a new discipline: FinOps or financial operations.

 

But what is FinOps, exactly? This article will explore the following:

What is FinOps?

  • FinOps Definition
  • Why Does FinOps Matter?

Cloud Spend: The FinOps Driver

  • Cloud Spend: More Than Anticipated
  • 5 Reasons For High Cloud Costs
  • FinOps More Crucial as Cloud Usage Grows

The Foundations of a FinOps Strategy

  • The FinOps Team
  • Key Principles to a FinOps Framework
  • The FinOps Lifecycle

FinOps 2.0: Autonomous FinOps

  • What does FinOps 2.0 Entail?

Pepperdata’s Autonomous FinOps for Kubernetes

What is FinOps?

FinOps Definition

FinOps is a term born from two different disciplines – finance and DevOps. It is a budding approach to managing and optimizing cloud spending across different teams within an organization.

According to The FinOps Foundation, FinOps is both a financial management discipline and cultural practice designed to help enterprises to maximize the cloud’s value to their business by enabling engineering, finance, technology, and business teams to collaborate on data-driven spending decisions. As FinOps is still an emerging methodology, it is iterative in nature and currently evolving.

Why does FinOps Matter?

FinOps attempts to bring the rigor of financial accountability to the variable cost model of the cloud. FinOps gathers finance, technology and business to develop and master a shared understanding of cloud economics. Through this cross-department collaboration, an organization works to create and implement a viable operating model for efficient cloud usage.

Put simply, FinOps is a set of best practices designed to streamline and optimize the management of cloud computing and all related operations within an enterprise. It is basically a team sport across an organization. Cross-functional teams — Engineering, Finance, Product Development, Research, etc. — must be engaged in the process to ensure faster product delivery while achieving predictability and keeping operational costs under control.

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Cloud Spend: The FinOps Driver

Cloud Spend: More Than Anticipated

Gartner projects that cloud spending will grow by 20% to $500B by 2022. Yet while almost two-thirds of respondents expected to realize cost savings by moving to the cloud, only 46% were achieving that outcome.

Over one-third of organizations say they have exceeded their cloud spend by as much as 40%. Organizations migrate to the cloud with the promise of lower operational expenses, enhanced efficiencies, and more substantial output.

Unfortunately, while the move from on-premises to the public cloud has unleashed innovation and agility, it has also resulted in unpredictable bills and runaway costs.

5 Reasons For High Cloud Costs

Almost every factor that makes the cloud attractive for application development can also drive cost overruns. When rolled into high-level themes, such factors include:

  1. Poor cloud visibility
    IT teams struggle to optimize cloud performance and monitor costs when they don’t have visibility into their cloud infrastructure and processes. Containers further aggravate the cost visibility problem because their multi-tenant, ephemeral nature is a black box for cost apportioning.
  2. Unused instances
    Pay-as-you-go cloud computing is attractive to developers because it offers on-demand fast, easy, and resource provisioning. Ordering new and extra provisions is a simple process, accomplishable in a few clicks. This enables applications to handle traffic uptick and provide users superior agility when launching new IT projects and services. But, unfortunately, this seamless on-demand ordering can lead to DevOps teams forgetting the instances and the resources they paid for.
  3. Unhealthy instances
    When instances stop functioning and become impaired, usually, these are tagged as unhealthy and are automatically deleted and replaced with new ones. The problem is that unhealthy instances still receive traffic and requests until the system’s load balancer recognizes its unhealthy state. If these instances are deleted without analyzing the traffic they received during its unhealthy state, then crucial, high-value data may have gone to waste.
  4. Wrong instance sizing
    Rightsizing ensures that cloud computing instances (containers, VMs, or bare metal) have sufficient compute resources, such as CPU, storage, RAM, and network. Reserving resources is crucial to achieving optimal performance in all instances.

    • However, inaccurate sizing of instances will lead to two main consequences:- Overallocation of cloud resources. This results in cloud resources being inefficiently utilized, and organizations end up paying for these unused resources.
    • Underallocation is the complete opposite. Instances run out of resources because users fail to provision the right amount. This leads to downtime and other performance issues of hosted projects.
  5. Ungoverned autoscaling
    Autoscaling allows organizations to horizontally scale cloud services, like instances, virtual machines, pods, and services depending on their traffic requirements, resource consumption forecasts, and more. However, ungoverned autoscaling based on non-optimal configurations can lead to over-provisioning, further driving cloud spending.

FinOps More Crucial as Cloud Usage Grows

The rise of cloud computing has disrupted the way modern businesses operate. Failing to adopt a cloud-first approach will put any organization behind the competition or even out of it.

Cloud computing and its sister technologies are imperative for today’s enterprises to grow, thrive, and succeed. However, embracing the cloud also means a new emphasis on cloud cost management.

Because everyone can access the cloud and procure services and resources without control and oversight, it has resulted in the loss of centralized procurement. This creates holes in financial accountability.

Complex pricing by cloud service providers adds to these issues, leading to rapid financial waste due to overprovisioning and underprovisioning of cloud services and resources and redundant cloud computing usage.

FinOps helps enterprises achieve that balance. Moreover, as cloud computing grows and the adoption of hybrid and multi-cloud models intensifies, the role of FinOps in modern organizations will become more pronounced and crucial.

FinOps aims to help organizations enjoy the advantages of the cloud — agility, scalability, on-demand resource consumption, and decentralized control — while pushing productivity and innovation without unnecessary costs.

In an ideal enterprise, FinOps is not a cost center but rather a revenue center. This occurs when FinOps teams can accurately forecast the ROI of a given project. When FinOps can determine the difference between good and bad cloud spend, and the enterprise can calculate the financial benefits of a project relative to its cost, FinOps can pay for itself and then some.

The Foundation of a FinOps Strategy

It can be challenging to start a FinOps strategy from the ground up. FinOps is still an emerging methodology, and every strategy is iterative. There is no universal template for success.

Planning a FinOps strategy entails a massive amount of time, effort, and collaboration across different departments, intending to create a transparent accountability process designed to maximize every dollar spent on the cloud. And every strategy begins with the team.

The FinOps Team

FinOps is a team sport, and collaboration across an enterprise toward the enterprise’s goals — with a balance of empathy for one another’s goals — is essential to FinOps success. While there are no fixed requirements for FinOps team members or its composition, the FinOps Foundation identifies the five major stakeholders, also referred to as personas, that typically collaborate in a FinOps environment:

Executives. These people are typically C-suite execs (CIO, CTO, or a head of Cloud Center of Excellence) representing the business side. They focus on team efficiency, accountability, budget management, and transparency.

Product Owners. These individuals are usually the department heads or project leaders who head the creation, deployment, and management of cloud workloads of their organization. These can also include a director of cloud optimization, a cloud analyst, or a business operations manager.

Engineering. As the technical experts, the engineering team comprises software engineers, systems engineers, cloud architects, and engineering managers. They translate requirements and budgets into actionable cloud environments. The engineering team also handles the bulk of technical work like troubleshooting, automation, and optimization.

Finance & Procurement. Finance experts like procurement specialists, financial planners, and business financial advisors help set the budget, take care of the accounting, and conduct cloud forecasting.

Practitioners. FinOps practitioners are specialized but new positions dedicated to facilitating FinOps projects and initiatives. They lead collaboration efforts and guide other FinOps team members via best practices and prescriptive activities.

Operate. Enterprises implement a basic FinOps strategy at first and then constantly measure their performance and alignment based on speed, quality, and spending. As they go along, they build a culture of FinOps. This includes creating and maintaining a Cloud Cost Center of Excellence built around business, financial, and operational stakeholders who also describe and set the most viable and appropriate governance policies and models.

 

Group 2613

The FinOps Foundation has laid out the principles of the FinOps framework through its members’ combined expertise and experience.

As the FinOps model is constantly changing, so are its principles. Initially announced in 2019, these principles have slightly changed over time as new technologies and trends emerged, like hybrid and multiple clouds.

Team collaboration. Every department needs to communicate and collaborate and operate using a centralized set of best practices to achieve efficiency and continuous collaboration.

Accountability. Users should own their cloud usage and manage their consumption against their budget. Visibility into cloud spending at all levels is imperative—monitor team-level goals to empower accountability.

One FinOps Team. There should only be one FinOps team to govern and manage transactions, discounts, and other dealings with Cloud Providers.

Accessible and Timely Reports. Immediate access to feedback encourages efficient behavior, while visibility helps determine if resources are under or over-provisioned.

Business Value-Driven Decisions. All cloud-related decisions should be strategic and give more weight to achieving business goals. To achieve this, FinOps teams should perform trending and variance analysis to identify causes of increased costs. Internal team benchmarking is necessary to discover and implement best practices. Industry peer-level benchmarking helps gauge performance against the competition.

Use the Variable Cost Model of The Cloud. Rightsizing instances and services allow for more appropriate resourcing levels. Likewise, comparing pricing between services and resource types empower better decision-making.

The FinOps Lifecycle

Frame 7

There are three phases to the FinOps lifecycle – inform, optimize, and operate.

Inform. The first stage of the FinOps lifecycle is about empowerment through gathering and analyzing all the critical information to drive strategic and correct business decision-making. Next, the Inform phase ensures the enterprise has the accurate information and insights to fuel its allocation, benchmarking, budgeting, and forecasting.

Optimize. Equipped with the correct information and fueled by highly actionable insights, organizations and teams proceed to optimize their cloud footprint. This is done by entering into better deals with cloud providers to rightsizing instances and automating the elimination of wasteful use of resources.

FinOps 2.0: Autonomous FinOps

Today’s FinOps solutions enable enterprises to align the rigor of financial accounting with the variable cost model of the cloud. However, although such tools are an excellent place for organizations struggling to get started on the ‘inform’ phase of the life cycle, they fall short in driving usage reduction because of engineering pushback for spending their precious time on cost optimization.

FinOps 2.0 is emerging as the next generation of FinOps to overcome these challenges. There is a need for remediation that can run autonomously and continuously to optimize data infrastructure. This capability is called automated remediation by Forrester or Augmented FinOps by Gartner.

FinOps2.0 automates traditional DevOps concepts of agility, continuous integration and deployment, and end-user feedback to financial governance, budgeting, and cost optimization through the application of artificial intelligence (AI) and machine learning (ML) practices (Gartner Hype Cycle for Emerging Technologies 2022).

What Does FinOps 2.0 Entail?

Key capabilities of FinOps 2.0 include:

  • Intelligent observability of cloud clusters resulting in tailored, intelligent recommendations to optimize cloud spend.
  • Autonomous remediation of cloud spend so that business objectives can be achieved without budget overruns.
  • Deep insight into cloud spend anomalies, along with autonomous remediation of such anomalies.
  • A shifting of an organization’s posture from reacting to monthly cloud bills to proactive determination of true spend and identification of areas of waste.
  • An ability to calculate the true price/performance ratio of a cloud project, which Gartner has called “the only metric that matters.”

Frame 5

Pepperdata’s Autonomous FinOps for Kubernetes

Visibility, automation, and tailored scalability are essential to supporting and improving your organization’s FinOps strategy. Your enterprise’s legacy monitoring tools can’t handle the constant tuning of cloud infrastructure, applications, and processes. To effectively manage your cloud spend and avoid cloud bill shock, your organization requires more than just traditional cloud cost monitoring.

Kubernetes, in particular, delivers operations teams unparalleled control and automation. It aids in on-prem-to-cloud migration and is rapidly becoming essential for cloud performance. By 2025, more than 75% of global organizations will be running containerized applications in production, significantly increasing from fewer than 35% in 2019.

The combination of FinOps and Kubernetes offers enormous potential benefits for application development but also poses massive new challenges regarding cloud cost visibility, allocation, analysis, planning, and reporting.

Pepperdata provides solutions that help businesses regain control of runaway cloud costs. It is the first company to offer an autonomous solution for optimizing Big Data workloads on-premises and public clouds.

Pepperdata is also the first company to provide an autonomous solution for optimizing Kubernetes clusters in public clouds. As enterprises move more workloads to containers on Kubernetes, they must have a way to automate away some of the tedium associated with ensuring those workloads run efficiently.

Frame 8

FinOps 1.0 tools provide a barrage of optimization suggestions, but these recommendations are often unrealized because engineering teams find them too burdensome to implement at scale.

With a FinOps 2.0 solution like Pepperdata’s Autonomous Optimization, such concerns are no longer an issue. Instead, the AI engine takes care of all the hard work — identifying opportunities for savings, recommending changes that can be made without impacting performance or reliability, and implementing those changes autonomously across an organization’s entire Kubernetes infrastructure.

With Autonomous FinOps, FinOps teams can facilitate their FinOps lifecycle — from gathering information to fueling optimization efforts and discovering new practices to achieve business goals.

A FinOps culture is now imperative as cloud computing grows. Discover how Pepperdata can support your FinOps strategy and help your organization maximize the cloud to its fullest potential without compromising control, speed, and innovation.

 

To learn more about how Pepperdata achieves these results, please visit pepperdata.com/kubernetes.

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