How Finops is Revolutionizing Hybrid Cloud Management
In reaction to the escalating economic pressures of 2024, organizations worldwide are relying on their tech leaders more and more to oversee cloud optimization priorities. Amidst this, FinOps, or the financial (operations) management for cloud computing, has emerged as a critical tool for effectively optimizing cloud costs.
Highlighted in the State of FinOps '24 report, the focus for businesses has shifted from “empowering engineers to take action” to “reducing waste and managing commitment-based discounts.” Conducted by the FinOps Foundation since 2020, the annual survey gathers insights on key priorities, industry trends, and the trajectory of FinOps practices. Its participants collectively spend $55 billion on cloud services, representing a substantial global cloud expenditure segment. So, their voice is important.
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FinOps: The Fuel for Hybrid Cloud Success
The cloud’s journey from a mere buzzword to an essential business facilitator is significant.
Economic downturns often accelerate the shift towards public cloud adoption as organizations seek to reduce fixed IT expenses and capitalize on the pay-as-you-go model. However, the allure of cost savings can mask the complexities of cloud cost management. [451 Cloud research].
Through the adoption of a hybrid cloud operating model, organizations are dismantling silos, streamlining processes, and fostering cross-functional teamwork. The “cloud as an operating principle” encourages teams to swiftly experiment, evolve, and deliver value—accelerating market entry and keeping pace with changing customer needs.
But while hybrid cloud environments promise agility and control, challenges in cost optimization, data management, and governance remain. Take the pay-as-you-go model, for example. Initially seen as a cost-saving strategy where users pay only for the resources they consume, monitoring and managing it effectively has proven challenging. While Gartner’s historically reported that data center cost management typically accounts for peak capacity and usage, we expect that as cloud usage grows, so will the sources of cloud spending. Organizations are finding it difficult to track, manage, and optimize resources cost-effectively. This is where FinOps has become a pivotal force.
By providing financial accountability and optimizing cloud spending, FinOps empowers organizations to make strategic investments, drive innovation, and achieve business success. The significant contribution of FinOps to organizational success is a testament to the evolution of the cloud from a technical destination to an effective operating principle.
FinOps, Hybrid Cloud, and Data Platforms: A Powerful Trifecta
The convergence of FinOps, hybrid cloud, and data platforms is reshaping the technological landscape. By aligning financial goals with technology initiatives, organizations can make informed decisions about where to deploy workloads—on-premises or in the cloud, in the most strategic and cost-effective way.
Data platforms play a pivotal role in this equation. They provide a unified view of data across hybrid environments, enabling organizations to extract valuable insights and optimize resource utilization. By integrating data management, governance, and analytics, data platforms empower businesses to make data-driven decisions and drive innovation.
The interplay between these three elements is crucial for success. Data platforms are critical components of a successful FinOps strategy. By consolidating data, improving data quality, and enabling data-driven decision-making, data platforms empower organizations to optimize cloud spending and achieve their financial goals. By working in harmony, these components create a powerful synergy that can accelerate digital transformation.
FinOps as a Catalyst for Innovation
Beyond serving as an effective cost-saving measure, FinOps can be a catalyst for innovation. By optimizing cloud spending, organizations free up resources to invest in emerging technologies and explore new business opportunities.
When FinOps is integrated into the organizational culture, it fuels a data-driven mindset. By understanding the cost implications of different technology choices, teams can make more informed decisions when allocating resources. FinOps can also enable agility that drives rapid experimentation and innovation.
By aligning financial goals with strategic objectives, FinOps empowers organizations to make bold investments in technology and talent, driving sustainable growth and competitive advantage.
The Rise of FinOps
Emerging from the convergence of finance and the DevOps software development model, FinOps was conceived in 2014 by a collective of cloud specialists grappling with the same cloud cost management hurdles. FinOps is defined by the FinOps Foundation as a framework designed to enhance the efficiency and effectiveness of cloud cost management. It cultivates valuable collaboration across finance, engineering, and operations, enabling a comprehensive understanding of cloud expenses, pinpointing improvement opportunities, and implementing cost-saving strategies. Contrary to the belief that it’s solely about cost-cutting, FinOps is fundamentally about revenue generation. It’s centered on eliminating obstacles, empowering teams, and facilitating strategic investment discussions.
FinOps continues to gain momentum as a vital component of cloud operating models. According to McKinsey, organizations that adeptly employ FinOps can achieve a 20% – 30% reduction in cloud expenses. Forecasting is a crucial element of FinOps. Organizations that can accurately anticipate their cloud spending are better positioned to leverage the right public cloud tools and resources provided by public cloud vendors. Such predictability instills confidence in leadership, allowing engineers the freedom to innovate, which in turn drives superior business results.
The most widely adopted forecasting method involves manually tweaking forecast figures, which is also the simplest to implement. However, there’s a growing desire for features that utilize cost-related KPIs, improve the handling of cost data delays, and allow for automatic adjustments based on changing parameters.
Since 2023, Artificial Intelligence/Machine Learning (AI/ML) has captured the spotlight. Within the realm of FinOps, AI/ML emerged in a dual capacity, per the State of FinOps ‘24:
- AI for FinOps: Implementing AI/ML to enhance FinOps methodologies.
- FinOps for AI: Streamlining the costs associated with AI/ML services within FinOps frameworks.
The State of FinOps ‘24 survey also indicates that automation has seen the most significant uptick as a secondary priority—particularly among entities with modest to moderate cloud expenditures. This trend and a heightened emphasis on optimization suggest that FinOps teams are intent on harnessing automation to amplify optimization efforts while minimizing resource input. Thereby achieving efficient scalability.
Business leaders know from experience that it’s easy to overspend on cloud services when you have limited visibility and predictability on utilization. FinOps addresses this issue and lowers the total cost of ownership by mapping spend data, tagging and allocating shared costs equitably, and recommending data-driven cost take-out measures.
The Future of FinOps
FinOps is rapidly evolving, with an increasing focus on sustainability and environmental impact. As organizations embrace ESG initiatives, FinOps can play a crucial role in measuring and reducing the carbon footprint of cloud operations. I can touch on that in my next post.
To wrap things up, FinOps is more than a cost-saving measure; it's a strategic imperative. By aligning financial goals with technology initiatives, organizations can unlock the full potential of hybrid cloud and data platforms, driving business success and sustainability.
Explore how we can help you achieve a flexible hybrid cloud ecosystem that meets your needs now – and in the future.
Additional Sources
- ANALYSTS REPORT: Improving Operational Excellence While Migrating to A Hybrid Cloud, Multicloud World
- WEBINAR SERIES: Beyond Boundaries: The Ultimate Hybrid Cloud
- INSIGHTS ARTICLE: From Hype to Hybrid, Part 1: The Realities of Cloud Adoption
