When organizations migrate their applications and workloads to the cloud, the financial meter starts running, and cloud costs can escalate quickly if you don’t have a finOps team that can lay a solid cost management foundation.
However, managing and allocating these cloud costs to derive meaningful business value can become a convoluted task. embracing a FinOps (Financial Operations) approach that simplifies these challenges, while aiding organizations in identifying cost-saving opportunities and operational efficiencies.
In this article, we explore how to achieve visibility and financial control over cloud spending using a FinOps approach.
Initial Steps in Cloud Migration
Irrespective of the cloud service provider (CSP) you intend to migrate to, each and every one of them has a cloud adoption framework (CAF) that will guide you in taking the very important steps required to maximize the value of the cloud, the six perspectives of cloud adoption framework talks about your Strategy, planning, Readiness, Adoption, Governance, and Management.
Every cloud migration journey is unique since no two businesses are identical. Nonetheless, there are concrete steps organizations can take to ensure financial prudence in their cloud migration journey.
- Build a Business Case: The first step is to establish a solid business case for transitioning to the cloud. This entails comparing on-premises costs with those of cloud service providers to pinpoint cost-saving and performance-enhancing opportunities.
- Address Stranded Costs: Avoid leaving functional servers idle in your data center. Coordinate cloud migrations with hardware end-of-life cycles to maximize existing hardware and software investments without unnecessary upgrades.
- Select the Right Migration Path: Determine the optimal migration path for each workload using the six Rs:
- Retire: Consider retiring end-of-life workloads.
- Repurchase: Explore cost-effective software-as-a-service (SaaS) alternatives.
- Rehost (aka Lift and Shift): Move workloads as-is to cloud-based infrastructure-as-a-service (IaaS) platforms.
- Replatform: Modify workloads for platform-as-a-service (PaaS) solutions.
- Rearchitect: Rebuild workloads for peak cloud performance.
- Retain: Keep workloads on-premises for compliance or data ownership reasons.
- The transition from CapEx to OpEx: The shift from capital expenses (CapEx) to operational expenses (OpEx) requires a FinOps approach to manage the financial aspects effectively.
Continuous Financial Management
Implementing a FinOps approach is crucial because cloud migration is an ongoing process. Costs accumulate as each application is migrated to the cloud, necessitating precise cost allocation and mapping to business outcomes. Here’s why FinOps is essential:
- Accurate Cost Allocation: Allocate all cloud costs accurately, including shared, support, transfer, and container costs, to understand the business value of each cloud application and workload.
- Include SaaS Costs: Consider Software-as-a-Service (SaaS) costs, which constitute a substantial portion of cloud spending. Identify all SaaS applications used across the organization to avoid redundant spending and optimize licensing.
- Holistic License Management: Leverage technology to regain control over SaaS procurement, determine usage levels, and optimize spending through license consolidation and renegotiations.
- Consolidation Opportunities: Identify opportunities to consolidate applications and determine the most financially advantageous platform, be it on-premises or in the cloud.
The Promise of FinOps
If your organization is expanding and managing the cloud cost is becoming a headache consider third-party tools like Apptio Cloudability, Cloud Zero, Cubecost, etc, they are pivotal in a FinOps practice because they provide visibility into cloud costs.
This is a critical starting point for effective cost management, Improved visibility will ensure alignment with the organization’s cloud strategy, when everyone is aligned and tracking common performance indicators, the organization can maximize purchases and ensure decisions align with cloud ROI goals.
FinOps is an ongoing effort to rightsize and optimize cloud usage, drive efficiency, and maximize ROI from a unit economics perspective. It’s crucial to articulate cloud strategy’s alignment with business objectives throughout the organization to assess the impact of any change before implementation.
Getting the Most from Cloud Investments
When it comes to FinOps practice, cost savings aren’t always the ultimate, but maximizing the value of the cloud to align with business goals and objectives is the priority using FinOps core principles, capability and lifecycle will give you visibility to your cloud spending and proper cost allocation.