The FinOps Paradox: Expensive waste or wasting expense?By Industry Contributor 23 August 2023 | Categories: news
By Mpho Mathapo, Cloud Advisory and Consulting Executive at BCX
Cloud computing has become increasingly important to the modern business which has made it critical for companies to focus on cost management throughout their cloud adoption approaches and strategies. Organisations across all levels of cloud adoption maturity need to remain aware of how much they spend on cloud, and this is where a good FinOps practice becomes crucial. It allows for organisations to manage cloud costs effectively regardless of their setup and strategy.
FinOps is a tool that brings ‘finance, technology and business together to master the unit economics of cloud’. When cloud costs become difficult to manage or start exceeding budgets, organisations recognise the need for a structured approach to cost optimisation. FinOps offers a framework to address these challenges systematically. McKinsey has found that companies with an effective FinOps strategy can reduce the cost of their cloud by up to 30%. However, FinOps is not a cure for all the expensive multi-cloud and hybrid cloud ills. As Gartner points out, FinOps runs the risk of doing the opposite of what it is designed to do - it can waste money rather than reduce waste. A successful approach to FinOps should come with the three Cs of success - culture, commitment, and context.
Context matters, and this introduces the first of the three Cs of FinOps. FinOps, says Gartner, is not for every organisation. Yes, it is a cost optimisation model that offers immense visibility and control over hybrid and multi-cloud spend, but it is only applicable to organisations that use self-service, spend significant sums of money on cloud services and architecture, and have infrastructure-hungry applications. To really benefit from the in-depth practice and capabilities of FinOps, organisations need to be deeply immersed in the cloud, so any cost shift has a significant impact on the bottom line.
The second C is commitment. In its recent analysis of FinOps and how important it is to avoid the common potholes on the road to successfully leveraging its capabilities, McKinsey found that companies often fall into two common traps - a wait-and-see strategy and slow engagement from leadership. Both can have a significant long-term impact on the effectiveness of the company’s cloud investment and its FinOps strategy. If the organisation commits to FinOps from the outset, and if this is driven by leadership, then the capabilities it introduces to cloud optimisation, cost management and overall value are baked into the business. The longer the business waits to embark on a FinOps strategy, the more difficult it will be to change the third C - culture.
Deloitte believes that FinOps must go beyond just a cloud optimisation methodology. It has to be immersed within the culture of the business if it wants to succeed. It requires that the organisation shift its view from seeing FinOps as a cloud or technology problem solver and rather see it as a tool that empowers comprehensive business transformation. FinOps is a cultural shift within the business that can be hard to achieve if it is wedged into a cloud-shaped crack or doesn’t come with commitment and collaboration.
With these three Cs in place, organisations can achieve impressive financial accountability within their hybrid and multi-cloud environments. By blending multi-functional teams and technologies and tapping into the support from forward-thinking technology vendors, companies can unlock that elusive cloud optimisation door and clamber out of the pit of unexpected costs and poor cloud consumption visibility. FinOps empowers the business to move at the speed it needs thanks to the Crawl/Walk/Run methodology and allows for a non-linear approach to its implementation based on the maturity and mindset of the organisation. It is not laser-focused on the Run phase, but rather on giving the organisation the tools it needs to shift its investments and FinOps capabilities as its scope requires. Designed to help the business find value, reduce waste, and optimise its cloud investments, FinOps can redefine how your business manages its cloud investments.
Stepping into a FinOps future only asks that the organisation recognise where it stands across culture, commitment, and context to avoid it becoming yet another wasted expense.
Companies keen to take advantage of FinOps best practices can enlist cloud advisory services, particularly those of multi-cloud cloud solutions vendors, with experience across various cloud platforms to gain a neutral, but informed expert view on how they can incorporate FinOps as a key part of their cloud management strategies.
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