Exploring Cloud Cost Optimization with FinOps

Understanding FinOps

FinOps, though defined differently by various entities, is universally recognized as a cultural activity at its core.

Cross-functional teams from data engineering, finance, product management, and other departments collaborate to accelerate product delivery while enhancing financial control and predictability.

Operating in the cloud presents a unique set of challenges, including unpredictable costs that are more difficult to understand compared to traditional on-site systems, where the cost of software production can be traced back to physical equipment.

As workloads grow, most cloud service providers offer a pay-as-you-go model, allowing services to scale almost without limits. Yet, complexities can arise with multi-tenant systems and containerized infrastructure, such as Kubernetes, obfuscating cloud costs and complicating allocation.

This results in two main effects:

• Finance departments struggle to understand how money is spent in the cloud.
• Software development teams and engineers remain unaware of how their activities impact cloud costs.

Hence, FinOps is vital and was designed to help organizations navigate these challenges and begin to comprehend their cloud expenses.

5 Best Practices for Reducing Cloud Costs with FinOps

1. Establish Your FinOps Team

The most crucial step in implementing a FinOps strategy is the formation of a dedicated FinOps team. This might include part-time, cross-functional staff and should serve as a governing body that develops KPIs and metrics to help teams understand the company's unit economics and offer best practices. This team typically reports to the executive leadership and should include representatives from finance, product, and technology or engineering, depending on their involvement in cloud operations.

2. Enhance Organizational Cloud Visibility

Teams whose activities affect cloud costs often have a limited understanding of the drivers of these costs. Hence, it's critical to promote cloud cost awareness among all parties involved with the cloud. These teams need visibility and a clear understanding of how their actions influence cloud expenses. Different groups may perceive cloud costs differently, so it's important to communicate cost information in terms they understand.

3. Define a Single Source of Truth

Establish a single point of reference for all your cloud cost data. While AWS Cost Explorer may be the go-to tool for teams first using AWS, it has its limitations. In larger companies, different teams may use different products, leading to inconsistencies in the numbers as each team perceives cost from a unique perspective. A solution like CloudZero can address this issue.

4. Develop Cost Savings and Waste Reduction Strategies

After setting up the three preceding components, focus on easy-to-achieve cost optimization strategies such as reserved instances (RIs) and savings programs. Depending on the services you use, you might also consider private pricing agreements.

Your final cost-saving strategy could involve re-architecting your application to leverage native AWS services and yield further savings. However, this should only be done once you've set up a governing body that provides best practices and you've achieved cost visibility.

5. Understand Cloud Efficiency

Reducing costs solely for the sake of saving money may not be the best use of your engineering team's time as the cloud is designed to foster innovation. Similarly, if your business is growing and introducing new features, increased cloud spending isn't necessarily a bad thing. What's crucial is understanding how efficiently you're using the cloud within your business context.

Concluding Remarks

Over the past few years, the power and impact of cloud technologies have grown. Succeeding with FinOps requires a shift in perspective, emphasizing the need to improve and broaden insight into overall cloud cost and efficiency. Accurate reporting, forecasting, and budget management are also critical. While FinOps involves cost control, including procurement processes, governance, and restrictions, it's more than just that.