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![Executive Summary
Cloud Cost Optimization, or FinOps, is the
evolutionary offshoot of cloud computing that
will help shape the software development
industry in the near future.
Most corporate IT infrastructures have
transitioned from on-premise deployment to
cloud, hybrid, and multi-cloud environments.
But as companies increase spending on cloud
services, right-sizing and right-costing have
become increasingly important. It is for that
reason that businesses need to incorporate
FinOps best practices into its overall strategy.
The sums it up
neatly: “The higher the [cloud] spend, the
greater the need [for optimization].”. Larger
enterprises spend millions of dollars on cloud
expenses. With FinOps, these costs can be
reduced drastically. Studies have shown that
cloud spend on Amazon EC2 instance usage
can be reduced by 72%, while the
implementation of Amazon EC2 Spot can
reduce bills by 90% due to the presence of a
sizable bottom line catalyst. Companies that
fail to implement FinOps will face significant
financial losses and a build up of inefficient
architectures.
2021 State of FinOps Report
While will define
the sector in countries outside of the USA and
Europe, cloud users in developed countries
benefit from global competition among major
cloud storage providers: AWS, Microsoft
Azure, and GCP. Third-party cloud cost
management software vendors like Apptio,
Flexera, VMware, and CloudCheckr offer
additional flexibility for users, bridging the
gaps in multi-cloud and hybrid environments
while reducing vendor lock-in risks.
FinOps engineers need to instill a culture of
cloud cost optimization by implementing agile
forecasting, introducing regular technical and
financial reviews, and chairing monthly
governance committees.
This cloud cost management white paper
provides an in-depth synopsis of the status
quo in CCMO [Cloud Cost Monitoring and
Optimization], as well as an overview of the
major tools and techniques.
regional cloud ecosystems
3
FinOps Cloud Cost Optimisation Cloud Cost Management](https://image.slidesharecdn.com/whitepaper-cloudcostoptimization-220113152725/75/Cloud-Cost-Optimization-Whitepaper-3-2048.jpg)
![FinOps Platforms and Tools Used
Primary Tools of the Trade
FinOps Tool Kit 0%
7
AWS Cost Explorer
Azure Cost Management
GCP Cost Tools
Home Grown Tool
CloudHealth [VMWare]
Cloudability [Apptio]
Other
Splunk
Datalog
Cloudcheckr
Cloud Custodian
[CapitalOne]
KubeCost
Spot [NetApp]
Flexera Optima
{RightScale]
Densify
Backstage [Spotify]
Cloudwize
Pyracloud
[SoftwareONE]
Pileus
Opsani
AWS Cost Explorer
Cloudability [Apptio]
CloudHealth [VMWare]
Azure Cost Management
Home Grown Tool
GCP Cost Tools
Other
74%
48%
27%
26%
25%
25%
17%
11%
10%
6%
6%
4%
3%
3%
2%
1%
1%
1%
1%
1%
28%
19%
17%
15%
12%
6%
3%
Cloudability by Aptio
Snow Commander by Snow Software
Flexera One by Flexera
CloudHealth by VMware
Third-Party Cloud Optimization Tools
Leaders
Flexera
VMware
Apptio
Replex
Nutanix
Turbonomic
Densify
Cloud
Checkr
Strong
Performers
Contenders
Challengers
Stronger
current
offering
Weaker
current
offering
Weaker
strategy
Market presence
Stronger
strategy](https://image.slidesharecdn.com/whitepaper-cloudcostoptimization-220113152725/75/Cloud-Cost-Optimization-Whitepaper-7-2048.jpg)
![With over 92% of IT organizations using some form of cloud computing environment, on-premise deployment
is on the brink of extinction. The growth of cloud services has also led to growing cloud-related costs for companies.
A survey from IDG found that of the respondents said their biggest cloud challenge was controlling cost. .
As a result, Cloud Cost Optimization is becoming increasingly important for IT companies.
These graphs offer a quick snapshot of the state of FinOps in 2021.
40%
Worlwide market share of leading cloud infrastructure service providers in Q1 2021*
Q1 2021 cloud
infrastructure service
revenue
*Includes platform as a service (Paas) and infrastructure as a service (IaaS) as well as hosted private cloud services
$39 billion (+37% vs. Q1 2020)
Global Cloud Market share by provider, Q1 2021 [Synergy Research Group]
9
3.1 Cloud Adoption and FinOps Statistics
Amazon Leads $150-Billion Cloud Market
1
32%
20%
9%
6%
5%
3%
2%
2%
Global cloud services market spending by segment, 2015-2020 [IT Candor]
2
In billion U.S. dollars Software-as-a-Service Infrastructure-as-a-Service Platform-as-a-Service
Jan.-Mar. 2020
200
100
0
250
150
50
2015 2016 Jan.-Jun. 2018 2019
52
58
28
14 33
56
110
125 124
79
47 50
85
35
22](https://image.slidesharecdn.com/whitepaper-cloudcostoptimization-220113152725/75/Cloud-Cost-Optimization-Whitepaper-9-2048.jpg)
![8% use on premise deployment
92% of IT organization have some
cloud computing and storage
environments
Cloud computing technology adoption [IDG]
10
3
92%
8%
Controlling cloud costs
Data privacy and security challenges
Securing/protecting cloud resources
Governance/compliance
Lack of cloud security skills/expertise
Integrating cloud resources with on-premises system
Lack of cloud management skills/expertise
Migrating data or applications to the cloud
Managing cloud resources
Lack of cloud development skills/expertise
Cultural resistanceto cloud adoption
Mismatch between cloud service offering and business
requirements
No significant challenges
No significant challenges
Other
Cost and Security: Top Public Cloud Challenges [IDG]
4
40%
38%
31%
30%
30%
29%
28%
26%
25%
24%
23%
21%
16%
6%
5%
What challenges do FinOps teams face? [FinOps Foundation]
5
39%
33%
26%
24%
23%
22%
11%
7%
7%
Getting Engineers to take Action
Dealing with shared costs
Accurate Forecasting
Reducing waste or unused resources
Full allocation of Costs
Alligning Finance to Tech Tearms
Container costs
Other
NoN-IaaS costs like SaaS](https://image.slidesharecdn.com/whitepaper-cloudcostoptimization-220113152725/75/Cloud-Cost-Optimization-Whitepaper-10-2048.jpg)
![Sky Group saved $3.8 million in just one year
Arup saved $4.4 million over 3 years thanks to cost
avoidance practices using Snow
WildLife Studios saved millions of dollars annually
after reducing AWS spend by 45%
The AWS Instance Scheduler tool usage can help companies cut cloud costs by as much as . The tool works by
optimizing scheduling so that you pay for capacity only when it's being used, not during idle periods.
, a Google Cloud Platform suite BI tool, helps companies increase sales revenue by an average of 26% and
reduce churn rate by 7%, according to a report from Forrester.
With dozens of methods and best practices on how to save on cloud spend, the use cases below illustrate the scale
of the potential savings.
70%
Looker
Sky Group, a large European media company, had
been using cloud computing services for several years
when it started to consider
due to mounting bills.
cloud finance management
The newly formed FinOps team used Google Cloud’s
Billing Tool to analyze, monitor, and review cloud
spending. Almost instantly, the team found
optimization opportunities in BigQuery, Compute
Engine and Cloud Storage that were worth $1.5
million.
Further investigation and FinOps activities lead to
$3.8 million in cost reductions across different cloud
service vendors.
Arup, a multinational architecture and engineering
firm with over 16,000 employees and a complex
ecosystem of cloud services used across multiple
departments and branches. The company used Snow
Commander software to manage its licencing and
measure cloud computing consumption.
The business managed to save $4.4 million in the first
three years of using Snow Commander. Further
savings accrued as FinOps became a bigger part of the
company ethos.
WildLife Studios, a Brazilian mobile gaming company,
saw its due to a growing number
of mobile games under development, increasing
Monthly Active Users [MAU], and a spike in global
target geographies.
The AWS Cost &Usage Report helped WildLife
Studios understand how it was using individual AWS
services, how much those services cost, and which
business units were spending the most.
The AWS Cost Explorer tool was coupled with a
custom analytical software solution designed by the
company, which helped WildLife Studio better
understand its Amazon EC2 Reserved Instances
usage.
Ultimately, the company reduced AWS spending by
45%, which translated to several million dollars
annually.
cloud costs skyrocket
11
XALTEnergy saved 26% on its Microsoft EA Renewal
license
XALT Energy, a global leader in energy storage tech,
used Crayon optimization services to compile an
assessment of its needs. From there, XALT reviewed
several subscription scenarios, aligning its business
needs with the subscription options.
The company ultimately signed a three year licensing
agreement with Microsoft at a rate that was
lower than its previous provider.
26%
Global semiconductor manufacturer saved 22% in
licensing fees with Snow Optimizer
A global semiconductor manufacturer a 20
year old SAP system from a multi-stage string of
acquisitions. The system came with exorbitant
licensing costs.
Using Snow, the company audited its users
permissions and utilization, as well as performed a
deep-dive into licensing fees and their consumption.
As a result, the company was able to right-size and
right-cost its package of SAP products, saving several
million Euros in license cost avoidance and another
€600,000 in maintenance fees.
inherited
3.2Cloud Cost Management:Average Savings and Use
Cases](https://image.slidesharecdn.com/whitepaper-cloudcostoptimization-220113152725/75/Cloud-Cost-Optimization-Whitepaper-11-2048.jpg)
![The IT domain has yet to overcome the stigma associated with cost cutting, which can make cloud cost optimization
difficult to implement.
FinOps practitioners often need to fight an uphill battle, encouraging everyone from DevOps to Legal to
understand and incorporate the principles of cloud cost management at every stage of the process.
These methods can be used on an ongoing basis during quarterly FinOps committee meetings, annual self-audit or
reviews, or as part of an initial FinOps strategy design process.
FinOps cloud cost monitoring and optimization techniques revolve around three major pillars
Only pay for what you actually use at any second based on actual consumption report
Negotiate the best price for the right product with the right vendo
Build new architectures and maintain them with cloud cost awareness and mindset
While right-sizing and right-costing are two major methods used to manage cloud costs, the techniques below are
part of a larger arsenal of cloud finance management tools.
13
4.1 Feasibility Analysis
The first phase of any FinOps consultancy service is a
needs assessment. This is an in-depth audit that helps
companies understand the status quo in terms of
cloud vendors currently used, subscription plans,
actual utilization levels, and their alignment with their
stated business objectives.
The FinOps Foundation investigated that companies
with larger cloud computing capacities also have a
greater potential for cloud spend savings. Moreover,
as cloud computing and storage needs grow, it
becomes more feasible to launch a FinOps team or
hire independent Cloud Cost Management experts.
A quick feasibility study can take up to a week, while a
detailed analysis may require a month or more of
research.
4.2 Vendor Selection
AWS, Google GCP, Microsoft Azure, Oracle, and
Alibaba are just a few of the cloud vendors with
extensive assortment of services and tools. Apart from
them, newcomers like Cloudability, Snow
Commander, and Flexera have emerged on the
market.
When choosing the cloud vendor, it’s important to
consider factors like current verifiable consumption,
scaling ambitions, cloud services mix, business units,
location, and usage frequency.
Also, the same service from the same provider can
vary in cost significantly depending on where the
servers are based. If latency is of no significance [e.g.
the cloud is used for deep archiving purposes], a
company can choose the cheapest option, regardless
of the location.
However, production-related processes should be
allocated to nearby centers to ensure fast response
times.
4.3 Subscription Plans
and License Reviews
Asset management solutions offer a complete
overview of all software products, their licensing
plans, users, and utilization.
An audit of current subscription plans and licenses can
identify invalid, idle, or outdated users, consolidate
prices and align the actual software consumption with
up-to-the-minute business needs.
4.4 Cloud Services
Consumption Monitoring
and Management
Both right-sizing and right-costing require a company
to understand its actual cloud computing consumption
before it can resize its cloud service or renegotiate its
contract with a cloud services provider.
All major cloud suppliers, as well as some third-party
solutions, offer an extensive suite of proprietary
insight tools — these include Amazon CloudWatch,
Microsoft Cloud Monitoring, Google Cloud
Monitoring, AppDynamics, SolarWinds etc.
These dashboards offer visibility into logging
possibilities, alerts and metrics that can help reduce
MTR [Mean Time to Recover], identify and prevent
issues, and optimize resources.](https://image.slidesharecdn.com/whitepaper-cloudcostoptimization-220113152725/75/Cloud-Cost-Optimization-Whitepaper-13-2048.jpg)
![14
4.5 Right-sizing
Right-sizing is a Cloud Cost Optimization
technique that matches cloud computing
power to actual consumed capacity, as
opposed to assumed capacity.
Overprovisioning is the opposite of right-
sizing. It occurs when companies buy plans
with too much capacity and end up
overpaying for an idle workload.
Right-sizing is one of the major FinOps methods. It
helps companies resize cloud plans to better match
workload requirements, using the following steps:
Identification of the actually consumed memory,
CPU [Central Processing Unit], disk, and network
performance based on real-life data over a
sustained period of time
Research, evaluation and selection of available
compute instance families and types with provider
of choice across multiple parameters
Aligning workload with the most optimal compute
instance.
For the users of the market-leader Amazon cloud
services, choosing Reserved Instances instead of
on-demand capacity is one of the methods of
right-sizing. AWS Cost Explorer offers data on
real consumption across services to estimate the
correct required capacity.
Some examples of AWS right-sizing techniques
include:
Elasticity as a characteristic of a cloud
environment is another leverage used to match
demand and capacity. AWS Instance Scheduler
helps cut actual consumption on weekends, out-
of-office hours, and public holidays to avoid
overprovisioning.
Using an auto-scaling feature for scaling DB
usage. This is based on CloudWatch reports on
consumed read and write capacity units and helps
reduce costs for DataBase products.
Removing Idle Load Balancers is another common
right-sizing method. Users identify the load
balancers with Request Counts of <100 in a week
and delete them
4.6 Right-costing
Right-costing is the second-most impactful
FinOps method. It involves a company
taking proactive measures to streamline
licensing and subscription plan costs
through vendor negotiations, as well as
thorough pricing plan research and license
mergers.
This method has a myriad of subtechniques, ranging
from simply requesting a discount to selecting a plan
based on location, idle user deletion, volume-based
discounts, and reserved instances services.
Right-costing is best done after right-sizing, when the
plan itself is based on actual consumption, not
assumed consumption.
4.7Hybrid Benefits Rights
Hybrid benefits rights is a cloud spend optimization
technique within right-costing. This approach
suggests that companies may use their on-premise
license for cloud purposes. Some
will also have dual-use rights that enable a
smooth transfer from on-prem to the cloud
deployment.
hybrid benefit rights
plans
4.8Cloud Storage
Management
Cloud services are designed to cater to a specific task
requirement and are priced accordingly. Putting a
correct estimate on your storage needs parameters
will lead to significant monthly savings, as deep-
archiving and production-intensive storage are priced
differently.
It’s often best to select the optimal cloud service
based on access frequency [production-hot vs.
archive-cold], data API cost and transfer price. For
example, S3standard is used for backup and recovery,
while S3Glacier Archive is designed for deep, long-
term archiving.](https://image.slidesharecdn.com/whitepaper-cloudcostoptimization-220113152725/75/Cloud-Cost-Optimization-Whitepaper-14-2048.jpg)
![Only 4% of FinOps Report respondents said they used primarily on-prem deployment, while 31% reported being
fully cloud deployed [either cloud-born or fully transitioned to it]. The majority [65%] used some form of a hybrid
environment.
20
39% public cloud-first
26% public cloud use with primarily on-prem deployment
15.5% all in cloud
15.5% born in cloud
4% primarily on-prem deployment
Spurred by unsparing competition on both global and
regional levels, cloud service vendors continuously
develop new instruments enabling users to better
control, optimize, plan and build their software
ecosystems. Vendor lock-in risks are no longer a major
concern, while hybrid and multi-cloud environments
are ubiquitous.
Furthermore, third-party vendors provide additional
support to the Cloud Cost Optimization domain by
developing new cross-vendor products that enable
coverage of the multi-cloud, multi-platform and hybrid
environments.
This expansive array of tools available for Cloud Cost
Monitoring and Management is further supplemented
by the foundational work of FinOps Foundation, which
offers framework educational and networking
resources for the industry.
23%
17%
16%
15.5%
15.5%
9%
2%
2%
Public Cloud-First, but still hybrid
(on-prem traditional data center)
Public Cloud use, but primarly
on-prem traditional data center
Public Cloud-First, but still hybrid
(on-prem private cloud)
Born in public cloud (never in data
center)
All in public Cloud (was in data
center, now all in cloud)
Public Cloud use, but primarily
on-prem private cloud
Primarily on-premises private cloud
Primarily on-premises traditional
data center
This highly competitive terrain serves as the powerful
vehicle and catalyst, helping companies around the
world drive cloud costs down through various cost
saving, cost avoidance, and cost reduction techniques.
However, companies need to proactively recognize and
embrace opportunities preemptively provided by
suppliers. It’s up to users to start saving on cloud costs
and avoid bills from piling up.
Overprovisioning, deficient communication between
teams, poor monitoring, low observability, discordant
purchasing of multiple teams, substandard Cloud
Finance Management awareness, and a dire lack of
FinOps expertise are only a few of the challenges faced
by pioneers in Cloud Cost Optimization.](https://image.slidesharecdn.com/whitepaper-cloudcostoptimization-220113152725/75/Cloud-Cost-Optimization-Whitepaper-20-2048.jpg)
![Executive Summary
Cloud Cost Optimization, or FinOps, is the
evolutionary offshoot of cloud computing that
will help shape the software development
industry in the near future.
Most corporate IT infrastructures have
transitioned from on-premise deployment to
cloud, hybrid, and multi-cloud environments.
But as companies increase spending on cloud
services, right-sizing and right-costing have
become increasingly important. It is for that
reason that businesses need to incorporate
FinOps best practices into its overall strategy.
The sums it up
neatly: “The higher the [cloud] spend, the
greater the need [for optimization].”. Larger
enterprises spend millions of dollars on cloud
expenses. With FinOps, these costs can be
reduced drastically. Studies have shown that
cloud spend on Amazon EC2 instance usage
can be reduced by 72%, while the
implementation of Amazon EC2 Spot can
reduce bills by 90% due to the presence of a
sizable bottom line catalyst. Companies that
fail to implement FinOps will face significant
financial losses and a build up of inefficient
architectures.
2021 State of FinOps Report
While will define
the sector in countries outside of the USA and
Europe, cloud users in developed countries
benefit from global competition among major
cloud storage providers: AWS, Microsoft
Azure, and GCP. Third-party cloud cost
management software vendors like Apptio,
Flexera, VMware, and CloudCheckr offer
additional flexibility for users, bridging the
gaps in multi-cloud and hybrid environments
while reducing vendor lock-in risks.
FinOps engineers need to instill a culture of
cloud cost optimization by implementing agile
forecasting, introducing regular technical and
financial reviews, and chairing monthly
governance committees.
This cloud cost management white paper
provides an in-depth synopsis of the status
quo in CCMO [Cloud Cost Monitoring and
Optimization], as well as an overview of the
major tools and techniques.
regional cloud ecosystems
3
FinOps Cloud Cost Optimisation Cloud Cost Management](https://crownmelresort.com/image.slidesharecdn.com/whitepaper-cloudcostoptimization-220113152725/75/Cloud-Cost-Optimization-Whitepaper-3-2048.jpg)
![FinOps Platforms and Tools Used
Primary Tools of the Trade
FinOps Tool Kit 0%
7
AWS Cost Explorer
Azure Cost Management
GCP Cost Tools
Home Grown Tool
CloudHealth [VMWare]
Cloudability [Apptio]
Other
Splunk
Datalog
Cloudcheckr
Cloud Custodian
[CapitalOne]
KubeCost
Spot [NetApp]
Flexera Optima
{RightScale]
Densify
Backstage [Spotify]
Cloudwize
Pyracloud
[SoftwareONE]
Pileus
Opsani
AWS Cost Explorer
Cloudability [Apptio]
CloudHealth [VMWare]
Azure Cost Management
Home Grown Tool
GCP Cost Tools
Other
74%
48%
27%
26%
25%
25%
17%
11%
10%
6%
6%
4%
3%
3%
2%
1%
1%
1%
1%
1%
28%
19%
17%
15%
12%
6%
3%
Cloudability by Aptio
Snow Commander by Snow Software
Flexera One by Flexera
CloudHealth by VMware
Third-Party Cloud Optimization Tools
Leaders
Flexera
VMware
Apptio
Replex
Nutanix
Turbonomic
Densify
Cloud
Checkr
Strong
Performers
Contenders
Challengers
Stronger
current
offering
Weaker
current
offering
Weaker
strategy
Market presence
Stronger
strategy](https://crownmelresort.com/image.slidesharecdn.com/whitepaper-cloudcostoptimization-220113152725/75/Cloud-Cost-Optimization-Whitepaper-7-2048.jpg)
![With over 92% of IT organizations using some form of cloud computing environment, on-premise deployment
is on the brink of extinction. The growth of cloud services has also led to growing cloud-related costs for companies.
A survey from IDG found that of the respondents said their biggest cloud challenge was controlling cost. .
As a result, Cloud Cost Optimization is becoming increasingly important for IT companies.
These graphs offer a quick snapshot of the state of FinOps in 2021.
40%
Worlwide market share of leading cloud infrastructure service providers in Q1 2021*
Q1 2021 cloud
infrastructure service
revenue
*Includes platform as a service (Paas) and infrastructure as a service (IaaS) as well as hosted private cloud services
$39 billion (+37% vs. Q1 2020)
Global Cloud Market share by provider, Q1 2021 [Synergy Research Group]
9
3.1 Cloud Adoption and FinOps Statistics
Amazon Leads $150-Billion Cloud Market
1
32%
20%
9%
6%
5%
3%
2%
2%
Global cloud services market spending by segment, 2015-2020 [IT Candor]
2
In billion U.S. dollars Software-as-a-Service Infrastructure-as-a-Service Platform-as-a-Service
Jan.-Mar. 2020
200
100
0
250
150
50
2015 2016 Jan.-Jun. 2018 2019
52
58
28
14 33
56
110
125 124
79
47 50
85
35
22](https://crownmelresort.com/image.slidesharecdn.com/whitepaper-cloudcostoptimization-220113152725/75/Cloud-Cost-Optimization-Whitepaper-9-2048.jpg)
![8% use on premise deployment
92% of IT organization have some
cloud computing and storage
environments
Cloud computing technology adoption [IDG]
10
3
92%
8%
Controlling cloud costs
Data privacy and security challenges
Securing/protecting cloud resources
Governance/compliance
Lack of cloud security skills/expertise
Integrating cloud resources with on-premises system
Lack of cloud management skills/expertise
Migrating data or applications to the cloud
Managing cloud resources
Lack of cloud development skills/expertise
Cultural resistanceto cloud adoption
Mismatch between cloud service offering and business
requirements
No significant challenges
No significant challenges
Other
Cost and Security: Top Public Cloud Challenges [IDG]
4
40%
38%
31%
30%
30%
29%
28%
26%
25%
24%
23%
21%
16%
6%
5%
What challenges do FinOps teams face? [FinOps Foundation]
5
39%
33%
26%
24%
23%
22%
11%
7%
7%
Getting Engineers to take Action
Dealing with shared costs
Accurate Forecasting
Reducing waste or unused resources
Full allocation of Costs
Alligning Finance to Tech Tearms
Container costs
Other
NoN-IaaS costs like SaaS](https://crownmelresort.com/image.slidesharecdn.com/whitepaper-cloudcostoptimization-220113152725/75/Cloud-Cost-Optimization-Whitepaper-10-2048.jpg)
![Sky Group saved $3.8 million in just one year
Arup saved $4.4 million over 3 years thanks to cost
avoidance practices using Snow
WildLife Studios saved millions of dollars annually
after reducing AWS spend by 45%
The AWS Instance Scheduler tool usage can help companies cut cloud costs by as much as . The tool works by
optimizing scheduling so that you pay for capacity only when it's being used, not during idle periods.
, a Google Cloud Platform suite BI tool, helps companies increase sales revenue by an average of 26% and
reduce churn rate by 7%, according to a report from Forrester.
With dozens of methods and best practices on how to save on cloud spend, the use cases below illustrate the scale
of the potential savings.
70%
Looker
Sky Group, a large European media company, had
been using cloud computing services for several years
when it started to consider
due to mounting bills.
cloud finance management
The newly formed FinOps team used Google Cloud’s
Billing Tool to analyze, monitor, and review cloud
spending. Almost instantly, the team found
optimization opportunities in BigQuery, Compute
Engine and Cloud Storage that were worth $1.5
million.
Further investigation and FinOps activities lead to
$3.8 million in cost reductions across different cloud
service vendors.
Arup, a multinational architecture and engineering
firm with over 16,000 employees and a complex
ecosystem of cloud services used across multiple
departments and branches. The company used Snow
Commander software to manage its licencing and
measure cloud computing consumption.
The business managed to save $4.4 million in the first
three years of using Snow Commander. Further
savings accrued as FinOps became a bigger part of the
company ethos.
WildLife Studios, a Brazilian mobile gaming company,
saw its due to a growing number
of mobile games under development, increasing
Monthly Active Users [MAU], and a spike in global
target geographies.
The AWS Cost &Usage Report helped WildLife
Studios understand how it was using individual AWS
services, how much those services cost, and which
business units were spending the most.
The AWS Cost Explorer tool was coupled with a
custom analytical software solution designed by the
company, which helped WildLife Studio better
understand its Amazon EC2 Reserved Instances
usage.
Ultimately, the company reduced AWS spending by
45%, which translated to several million dollars
annually.
cloud costs skyrocket
11
XALTEnergy saved 26% on its Microsoft EA Renewal
license
XALT Energy, a global leader in energy storage tech,
used Crayon optimization services to compile an
assessment of its needs. From there, XALT reviewed
several subscription scenarios, aligning its business
needs with the subscription options.
The company ultimately signed a three year licensing
agreement with Microsoft at a rate that was
lower than its previous provider.
26%
Global semiconductor manufacturer saved 22% in
licensing fees with Snow Optimizer
A global semiconductor manufacturer a 20
year old SAP system from a multi-stage string of
acquisitions. The system came with exorbitant
licensing costs.
Using Snow, the company audited its users
permissions and utilization, as well as performed a
deep-dive into licensing fees and their consumption.
As a result, the company was able to right-size and
right-cost its package of SAP products, saving several
million Euros in license cost avoidance and another
€600,000 in maintenance fees.
inherited
3.2Cloud Cost Management:Average Savings and Use
Cases](https://crownmelresort.com/image.slidesharecdn.com/whitepaper-cloudcostoptimization-220113152725/75/Cloud-Cost-Optimization-Whitepaper-11-2048.jpg)
![The IT domain has yet to overcome the stigma associated with cost cutting, which can make cloud cost optimization
difficult to implement.
FinOps practitioners often need to fight an uphill battle, encouraging everyone from DevOps to Legal to
understand and incorporate the principles of cloud cost management at every stage of the process.
These methods can be used on an ongoing basis during quarterly FinOps committee meetings, annual self-audit or
reviews, or as part of an initial FinOps strategy design process.
FinOps cloud cost monitoring and optimization techniques revolve around three major pillars
Only pay for what you actually use at any second based on actual consumption report
Negotiate the best price for the right product with the right vendo
Build new architectures and maintain them with cloud cost awareness and mindset
While right-sizing and right-costing are two major methods used to manage cloud costs, the techniques below are
part of a larger arsenal of cloud finance management tools.
13
4.1 Feasibility Analysis
The first phase of any FinOps consultancy service is a
needs assessment. This is an in-depth audit that helps
companies understand the status quo in terms of
cloud vendors currently used, subscription plans,
actual utilization levels, and their alignment with their
stated business objectives.
The FinOps Foundation investigated that companies
with larger cloud computing capacities also have a
greater potential for cloud spend savings. Moreover,
as cloud computing and storage needs grow, it
becomes more feasible to launch a FinOps team or
hire independent Cloud Cost Management experts.
A quick feasibility study can take up to a week, while a
detailed analysis may require a month or more of
research.
4.2 Vendor Selection
AWS, Google GCP, Microsoft Azure, Oracle, and
Alibaba are just a few of the cloud vendors with
extensive assortment of services and tools. Apart from
them, newcomers like Cloudability, Snow
Commander, and Flexera have emerged on the
market.
When choosing the cloud vendor, it’s important to
consider factors like current verifiable consumption,
scaling ambitions, cloud services mix, business units,
location, and usage frequency.
Also, the same service from the same provider can
vary in cost significantly depending on where the
servers are based. If latency is of no significance [e.g.
the cloud is used for deep archiving purposes], a
company can choose the cheapest option, regardless
of the location.
However, production-related processes should be
allocated to nearby centers to ensure fast response
times.
4.3 Subscription Plans
and License Reviews
Asset management solutions offer a complete
overview of all software products, their licensing
plans, users, and utilization.
An audit of current subscription plans and licenses can
identify invalid, idle, or outdated users, consolidate
prices and align the actual software consumption with
up-to-the-minute business needs.
4.4 Cloud Services
Consumption Monitoring
and Management
Both right-sizing and right-costing require a company
to understand its actual cloud computing consumption
before it can resize its cloud service or renegotiate its
contract with a cloud services provider.
All major cloud suppliers, as well as some third-party
solutions, offer an extensive suite of proprietary
insight tools — these include Amazon CloudWatch,
Microsoft Cloud Monitoring, Google Cloud
Monitoring, AppDynamics, SolarWinds etc.
These dashboards offer visibility into logging
possibilities, alerts and metrics that can help reduce
MTR [Mean Time to Recover], identify and prevent
issues, and optimize resources.](https://crownmelresort.com/image.slidesharecdn.com/whitepaper-cloudcostoptimization-220113152725/75/Cloud-Cost-Optimization-Whitepaper-13-2048.jpg)
![14
4.5 Right-sizing
Right-sizing is a Cloud Cost Optimization
technique that matches cloud computing
power to actual consumed capacity, as
opposed to assumed capacity.
Overprovisioning is the opposite of right-
sizing. It occurs when companies buy plans
with too much capacity and end up
overpaying for an idle workload.
Right-sizing is one of the major FinOps methods. It
helps companies resize cloud plans to better match
workload requirements, using the following steps:
Identification of the actually consumed memory,
CPU [Central Processing Unit], disk, and network
performance based on real-life data over a
sustained period of time
Research, evaluation and selection of available
compute instance families and types with provider
of choice across multiple parameters
Aligning workload with the most optimal compute
instance.
For the users of the market-leader Amazon cloud
services, choosing Reserved Instances instead of
on-demand capacity is one of the methods of
right-sizing. AWS Cost Explorer offers data on
real consumption across services to estimate the
correct required capacity.
Some examples of AWS right-sizing techniques
include:
Elasticity as a characteristic of a cloud
environment is another leverage used to match
demand and capacity. AWS Instance Scheduler
helps cut actual consumption on weekends, out-
of-office hours, and public holidays to avoid
overprovisioning.
Using an auto-scaling feature for scaling DB
usage. This is based on CloudWatch reports on
consumed read and write capacity units and helps
reduce costs for DataBase products.
Removing Idle Load Balancers is another common
right-sizing method. Users identify the load
balancers with Request Counts of <100 in a week
and delete them
4.6 Right-costing
Right-costing is the second-most impactful
FinOps method. It involves a company
taking proactive measures to streamline
licensing and subscription plan costs
through vendor negotiations, as well as
thorough pricing plan research and license
mergers.
This method has a myriad of subtechniques, ranging
from simply requesting a discount to selecting a plan
based on location, idle user deletion, volume-based
discounts, and reserved instances services.
Right-costing is best done after right-sizing, when the
plan itself is based on actual consumption, not
assumed consumption.
4.7Hybrid Benefits Rights
Hybrid benefits rights is a cloud spend optimization
technique within right-costing. This approach
suggests that companies may use their on-premise
license for cloud purposes. Some
will also have dual-use rights that enable a
smooth transfer from on-prem to the cloud
deployment.
hybrid benefit rights
plans
4.8Cloud Storage
Management
Cloud services are designed to cater to a specific task
requirement and are priced accordingly. Putting a
correct estimate on your storage needs parameters
will lead to significant monthly savings, as deep-
archiving and production-intensive storage are priced
differently.
It’s often best to select the optimal cloud service
based on access frequency [production-hot vs.
archive-cold], data API cost and transfer price. For
example, S3standard is used for backup and recovery,
while S3Glacier Archive is designed for deep, long-
term archiving.](https://crownmelresort.com/image.slidesharecdn.com/whitepaper-cloudcostoptimization-220113152725/75/Cloud-Cost-Optimization-Whitepaper-14-2048.jpg)
![Only 4% of FinOps Report respondents said they used primarily on-prem deployment, while 31% reported being
fully cloud deployed [either cloud-born or fully transitioned to it]. The majority [65%] used some form of a hybrid
environment.
20
39% public cloud-first
26% public cloud use with primarily on-prem deployment
15.5% all in cloud
15.5% born in cloud
4% primarily on-prem deployment
Spurred by unsparing competition on both global and
regional levels, cloud service vendors continuously
develop new instruments enabling users to better
control, optimize, plan and build their software
ecosystems. Vendor lock-in risks are no longer a major
concern, while hybrid and multi-cloud environments
are ubiquitous.
Furthermore, third-party vendors provide additional
support to the Cloud Cost Optimization domain by
developing new cross-vendor products that enable
coverage of the multi-cloud, multi-platform and hybrid
environments.
This expansive array of tools available for Cloud Cost
Monitoring and Management is further supplemented
by the foundational work of FinOps Foundation, which
offers framework educational and networking
resources for the industry.
23%
17%
16%
15.5%
15.5%
9%
2%
2%
Public Cloud-First, but still hybrid
(on-prem traditional data center)
Public Cloud use, but primarly
on-prem traditional data center
Public Cloud-First, but still hybrid
(on-prem private cloud)
Born in public cloud (never in data
center)
All in public Cloud (was in data
center, now all in cloud)
Public Cloud use, but primarily
on-prem private cloud
Primarily on-premises private cloud
Primarily on-premises traditional
data center
This highly competitive terrain serves as the powerful
vehicle and catalyst, helping companies around the
world drive cloud costs down through various cost
saving, cost avoidance, and cost reduction techniques.
However, companies need to proactively recognize and
embrace opportunities preemptively provided by
suppliers. It’s up to users to start saving on cloud costs
and avoid bills from piling up.
Overprovisioning, deficient communication between
teams, poor monitoring, low observability, discordant
purchasing of multiple teams, substandard Cloud
Finance Management awareness, and a dire lack of
FinOps expertise are only a few of the challenges faced
by pioneers in Cloud Cost Optimization.](https://crownmelresort.com/image.slidesharecdn.com/whitepaper-cloudcostoptimization-220113152725/75/Cloud-Cost-Optimization-Whitepaper-20-2048.jpg)
Uploaded byDevPro3
Cloud Cost Optimization Whitepaper
The document outlines the importance of cloud cost optimization, or finops, as a crucial part of corporate IT strategy amidst increasing cloud spending. It emphasizes the need for best practices in managing cloud expenses, highlighting significant potential savings from effective implementations, and incorporates statistics and case studies from various companies. Furthermore, it details the phases, methodologies, and tools involved in the finops cycle, advocating for continuous monitoring and cross-departmental collaboration.
In this document
Powered by AI
Introduction to cloud cost optimization focusing on FinOps. It highlights high-ROI opportunities for scale-ups.
Overview of FinOps, its importance in cloud strategies, and the evolution of cloud cost management.
Detailed explanation of FinOps phases, stakeholders, and tools used for managing cloud expenditures.
Current state of the cloud optimization industry, highlighting the prevalence of cloud computing and challenges in cost management.
Real-world examples where companies achieved significant savings through various cloud optimization practices.
Techniques for effective cloud cost management including right-sizing, right-costing, and implementing cloud-native architecture.
Importance of establishing effective FinOps teams and strategies in scale-ups to manage cloud costs efficiently.
Step-by-step algorithms for forming internal FinOps teams and hiring cloud cost management companies.
Statistics and challenges related to the adoption of FinOps practices, highlighting trends in cloud deployment.
Overview of Dev.Pro as a software engineering services firm specializing in cloud and DevOps solutions.
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Cloud Cost Optimization Whitepaper
- 1. Cloud Cost Optimization: High-ROIBoosters for Scale-Ups
- 2. Executive Summary FinOps Fundamentals CloudCost Optimization: The State of the Industry Cloud Cost Optimization Methods Who is FinOps Core? Phases of the Cloud Cost Optimization Cycle Cloud Cost Management Tools by Major Vendors Cloud Adoption and FinOps Statistics Cloud Cost Management: Average Savings and Use Cases Feasibility Analysis Vendor Selection Subscription Plans and License Reviews Cloud Services Consumption Monitoring and Management Right-sizing Right-costing Hybrid Benefits Rights Cloud Storage Management Cloud-Native Architecture for Future Software Expansion 3 2.1 3.1 4.1 5.1 5.2 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 3.2 2.2 2.3 8 12 4 5 6 6 9 11 13 13 13 13 14 14 14 14 15 Cloud Cost Management Strategies for Scale-ups Endnotes Algorithm for Internal Cloud Cost Management Team Roll-Out Algorithm for Hiring a Cloud Cost Management Company 16 19 17 18
- 3. Executive Summary Cloud CostOptimization, or FinOps, is the evolutionary offshoot of cloud computing that will help shape the software development industry in the near future. Most corporate IT infrastructures have transitioned from on-premise deployment to cloud, hybrid, and multi-cloud environments. But as companies increase spending on cloud services, right-sizing and right-costing have become increasingly important. It is for that reason that businesses need to incorporate FinOps best practices into its overall strategy. The sums it up neatly: “The higher the [cloud] spend, the greater the need [for optimization].”. Larger enterprises spend millions of dollars on cloud expenses. With FinOps, these costs can be reduced drastically. Studies have shown that cloud spend on Amazon EC2 instance usage can be reduced by 72%, while the implementation of Amazon EC2 Spot can reduce bills by 90% due to the presence of a sizable bottom line catalyst. Companies that fail to implement FinOps will face significant financial losses and a build up of inefficient architectures. 2021 State of FinOps Report While will define the sector in countries outside of the USA and Europe, cloud users in developed countries benefit from global competition among major cloud storage providers: AWS, Microsoft Azure, and GCP. Third-party cloud cost management software vendors like Apptio, Flexera, VMware, and CloudCheckr offer additional flexibility for users, bridging the gaps in multi-cloud and hybrid environments while reducing vendor lock-in risks. FinOps engineers need to instill a culture of cloud cost optimization by implementing agile forecasting, introducing regular technical and financial reviews, and chairing monthly governance committees. This cloud cost management white paper provides an in-depth synopsis of the status quo in CCMO [Cloud Cost Monitoring and Optimization], as well as an overview of the major tools and techniques. regional cloud ecosystems 3 FinOps Cloud Cost Optimisation Cloud Cost Management
- 4.
- 5. Cloud Cost Optimization,or FinOps, is a new, fast-growing field. Before we dive into the details, we will first examine the field of FinOps, the major process stakeholders, the phases of the process, and tools used to streamline and control cloud expenditures. While the concept of FinOps is still relatively new, different terms are used to describe it, most commonly: FinOps, CCMO, Cloud Cost Management, Cloud Economics, Cloud Cost Optimization. 5 What is FinOps? Organizations use different names for the practice: 37% - FinOps 16% - Cloud Financial Management 25% - Cloud Cost Management Other: Cloud Economics, Cost Optimization, “It doesn’t have a name yet” This whitepaper might be of interest to these participants in the FinOps structure of any company. Such a list of stakeholders ensures the involvement of all concerned departments at all levels: from system architecture design to procurement and rate negotiations. 2.1 Who is FinOps Core? Technical: Engineers, Ops, Lead Software Engineer, Cloud Architect Executives: Head of Infrastructure, CTO, CIO Business: Product Owner Legal: Chief Legal Executive Financial Reps: CFO, Financial Planning Procurement: Global T echnology Procurement FinOps Practitioners: FinOps Analyst, Director of Cloud Optimization FinOps Practitioners / Center of Excellence T ech / engineering Product owner Executive suite Finance R ate N egotiation Infrastructure Changes
- 6. 2.2 Phases ofCloud Cost Optimization Cycle FinOps is an operational model for a company’s entire cloud-based infrastructure. As a result, cloud cost optimization requires continuous monitoring, regular reviews, and the simultaneous involvement of many stakeholders. There are four main stages of the FinOps cycle that all companies involved in cloud cost awareness undergo on a regular basis. They are: All of these stages involve revisiting a company's tools, subscriptions, consumption, and structure on a recurring schedule. 6 Measure, Audit and Analyze Inform, Educate and Promote Optimize and Negotiate Operate and Reinforce IT Cost Assessment Program Google Cloud Console Google Data Studio Billing APIs Google Cloud Cost Management AWS Cost Explorer AWS Pricing Calculator AWS Cost Anomaly Detection AWS Cost and Usage Report AWS Service Catalog EC2 Auto Scaling AWS Compute Optimizer AWS Operations Conductor AWS Savings Plan AWS Instance Scheduler AWS Cloud Optimization Tools Azure Pricing Calculator Total Cost of Ownership (Tco) Calculator Azure VMware Solution Azure Hybrid Benefit Visual Studio Azure Cloud Cost Management and Billing Measure, Audit and Analyze Inform, Educate and Promote Optimize and Negotiate Operate and Reinforce 2.3Cloud Cost Management Tools by MajorVendors: FinOps tools are designed by cloud service providers, as well as third-party companies. These software solutions let users monitor actual consumption of cloud storage, schedule instances, choose subscription plans, and monitor bills for anomalies. The landscape for FinOps tools is highly competitive, leading major vendors to develop tools that are suitable for multi-cloud usage. Third-party tools are also compatible across all platforms. The major Cloud Cost Optimization tools are:
- 7. FinOps Platforms andTools Used Primary Tools of the Trade FinOps Tool Kit 0% 7 AWS Cost Explorer Azure Cost Management GCP Cost Tools Home Grown Tool CloudHealth [VMWare] Cloudability [Apptio] Other Splunk Datalog Cloudcheckr Cloud Custodian [CapitalOne] KubeCost Spot [NetApp] Flexera Optima {RightScale] Densify Backstage [Spotify] Cloudwize Pyracloud [SoftwareONE] Pileus Opsani AWS Cost Explorer Cloudability [Apptio] CloudHealth [VMWare] Azure Cost Management Home Grown Tool GCP Cost Tools Other 74% 48% 27% 26% 25% 25% 17% 11% 10% 6% 6% 4% 3% 3% 2% 1% 1% 1% 1% 1% 28% 19% 17% 15% 12% 6% 3% Cloudability by Aptio Snow Commander by Snow Software Flexera One by Flexera CloudHealth by VMware Third-Party Cloud Optimization Tools Leaders Flexera VMware Apptio Replex Nutanix Turbonomic Densify Cloud Checkr Strong Performers Contenders Challengers Stronger current offering Weaker current offering Weaker strategy Market presence Stronger strategy
- 8. Cloud Cost Optimization: The Stateof the Industry
- 9. With over 92%of IT organizations using some form of cloud computing environment, on-premise deployment is on the brink of extinction. The growth of cloud services has also led to growing cloud-related costs for companies. A survey from IDG found that of the respondents said their biggest cloud challenge was controlling cost. . As a result, Cloud Cost Optimization is becoming increasingly important for IT companies. These graphs offer a quick snapshot of the state of FinOps in 2021. 40% Worlwide market share of leading cloud infrastructure service providers in Q1 2021* Q1 2021 cloud infrastructure service revenue *Includes platform as a service (Paas) and infrastructure as a service (IaaS) as well as hosted private cloud services $39 billion (+37% vs. Q1 2020) Global Cloud Market share by provider, Q1 2021 [Synergy Research Group] 9 3.1 Cloud Adoption and FinOps Statistics Amazon Leads $150-Billion Cloud Market 1 32% 20% 9% 6% 5% 3% 2% 2% Global cloud services market spending by segment, 2015-2020 [IT Candor] 2 In billion U.S. dollars Software-as-a-Service Infrastructure-as-a-Service Platform-as-a-Service Jan.-Mar. 2020 200 100 0 250 150 50 2015 2016 Jan.-Jun. 2018 2019 52 58 28 14 33 56 110 125 124 79 47 50 85 35 22
- 10. 8% use onpremise deployment 92% of IT organization have some cloud computing and storage environments Cloud computing technology adoption [IDG] 10 3 92% 8% Controlling cloud costs Data privacy and security challenges Securing/protecting cloud resources Governance/compliance Lack of cloud security skills/expertise Integrating cloud resources with on-premises system Lack of cloud management skills/expertise Migrating data or applications to the cloud Managing cloud resources Lack of cloud development skills/expertise Cultural resistanceto cloud adoption Mismatch between cloud service offering and business requirements No significant challenges No significant challenges Other Cost and Security: Top Public Cloud Challenges [IDG] 4 40% 38% 31% 30% 30% 29% 28% 26% 25% 24% 23% 21% 16% 6% 5% What challenges do FinOps teams face? [FinOps Foundation] 5 39% 33% 26% 24% 23% 22% 11% 7% 7% Getting Engineers to take Action Dealing with shared costs Accurate Forecasting Reducing waste or unused resources Full allocation of Costs Alligning Finance to Tech Tearms Container costs Other NoN-IaaS costs like SaaS
- 11. Sky Group saved$3.8 million in just one year Arup saved $4.4 million over 3 years thanks to cost avoidance practices using Snow WildLife Studios saved millions of dollars annually after reducing AWS spend by 45% The AWS Instance Scheduler tool usage can help companies cut cloud costs by as much as . The tool works by optimizing scheduling so that you pay for capacity only when it's being used, not during idle periods. , a Google Cloud Platform suite BI tool, helps companies increase sales revenue by an average of 26% and reduce churn rate by 7%, according to a report from Forrester. With dozens of methods and best practices on how to save on cloud spend, the use cases below illustrate the scale of the potential savings. 70% Looker Sky Group, a large European media company, had been using cloud computing services for several years when it started to consider due to mounting bills. cloud finance management The newly formed FinOps team used Google Cloud’s Billing Tool to analyze, monitor, and review cloud spending. Almost instantly, the team found optimization opportunities in BigQuery, Compute Engine and Cloud Storage that were worth $1.5 million. Further investigation and FinOps activities lead to $3.8 million in cost reductions across different cloud service vendors. Arup, a multinational architecture and engineering firm with over 16,000 employees and a complex ecosystem of cloud services used across multiple departments and branches. The company used Snow Commander software to manage its licencing and measure cloud computing consumption. The business managed to save $4.4 million in the first three years of using Snow Commander. Further savings accrued as FinOps became a bigger part of the company ethos. WildLife Studios, a Brazilian mobile gaming company, saw its due to a growing number of mobile games under development, increasing Monthly Active Users [MAU], and a spike in global target geographies. The AWS Cost &Usage Report helped WildLife Studios understand how it was using individual AWS services, how much those services cost, and which business units were spending the most. The AWS Cost Explorer tool was coupled with a custom analytical software solution designed by the company, which helped WildLife Studio better understand its Amazon EC2 Reserved Instances usage. Ultimately, the company reduced AWS spending by 45%, which translated to several million dollars annually. cloud costs skyrocket 11 XALTEnergy saved 26% on its Microsoft EA Renewal license XALT Energy, a global leader in energy storage tech, used Crayon optimization services to compile an assessment of its needs. From there, XALT reviewed several subscription scenarios, aligning its business needs with the subscription options. The company ultimately signed a three year licensing agreement with Microsoft at a rate that was lower than its previous provider. 26% Global semiconductor manufacturer saved 22% in licensing fees with Snow Optimizer A global semiconductor manufacturer a 20 year old SAP system from a multi-stage string of acquisitions. The system came with exorbitant licensing costs. Using Snow, the company audited its users permissions and utilization, as well as performed a deep-dive into licensing fees and their consumption. As a result, the company was able to right-size and right-cost its package of SAP products, saving several million Euros in license cost avoidance and another €600,000 in maintenance fees. inherited 3.2Cloud Cost Management:Average Savings and Use Cases
- 12.
- 13. The IT domainhas yet to overcome the stigma associated with cost cutting, which can make cloud cost optimization difficult to implement. FinOps practitioners often need to fight an uphill battle, encouraging everyone from DevOps to Legal to understand and incorporate the principles of cloud cost management at every stage of the process. These methods can be used on an ongoing basis during quarterly FinOps committee meetings, annual self-audit or reviews, or as part of an initial FinOps strategy design process. FinOps cloud cost monitoring and optimization techniques revolve around three major pillars Only pay for what you actually use at any second based on actual consumption report Negotiate the best price for the right product with the right vendo Build new architectures and maintain them with cloud cost awareness and mindset While right-sizing and right-costing are two major methods used to manage cloud costs, the techniques below are part of a larger arsenal of cloud finance management tools. 13 4.1 Feasibility Analysis The first phase of any FinOps consultancy service is a needs assessment. This is an in-depth audit that helps companies understand the status quo in terms of cloud vendors currently used, subscription plans, actual utilization levels, and their alignment with their stated business objectives. The FinOps Foundation investigated that companies with larger cloud computing capacities also have a greater potential for cloud spend savings. Moreover, as cloud computing and storage needs grow, it becomes more feasible to launch a FinOps team or hire independent Cloud Cost Management experts. A quick feasibility study can take up to a week, while a detailed analysis may require a month or more of research. 4.2 Vendor Selection AWS, Google GCP, Microsoft Azure, Oracle, and Alibaba are just a few of the cloud vendors with extensive assortment of services and tools. Apart from them, newcomers like Cloudability, Snow Commander, and Flexera have emerged on the market. When choosing the cloud vendor, it’s important to consider factors like current verifiable consumption, scaling ambitions, cloud services mix, business units, location, and usage frequency. Also, the same service from the same provider can vary in cost significantly depending on where the servers are based. If latency is of no significance [e.g. the cloud is used for deep archiving purposes], a company can choose the cheapest option, regardless of the location. However, production-related processes should be allocated to nearby centers to ensure fast response times. 4.3 Subscription Plans and License Reviews Asset management solutions offer a complete overview of all software products, their licensing plans, users, and utilization. An audit of current subscription plans and licenses can identify invalid, idle, or outdated users, consolidate prices and align the actual software consumption with up-to-the-minute business needs. 4.4 Cloud Services Consumption Monitoring and Management Both right-sizing and right-costing require a company to understand its actual cloud computing consumption before it can resize its cloud service or renegotiate its contract with a cloud services provider. All major cloud suppliers, as well as some third-party solutions, offer an extensive suite of proprietary insight tools — these include Amazon CloudWatch, Microsoft Cloud Monitoring, Google Cloud Monitoring, AppDynamics, SolarWinds etc. These dashboards offer visibility into logging possibilities, alerts and metrics that can help reduce MTR [Mean Time to Recover], identify and prevent issues, and optimize resources.
- 14. 14 4.5 Right-sizing Right-sizing isa Cloud Cost Optimization technique that matches cloud computing power to actual consumed capacity, as opposed to assumed capacity. Overprovisioning is the opposite of right- sizing. It occurs when companies buy plans with too much capacity and end up overpaying for an idle workload. Right-sizing is one of the major FinOps methods. It helps companies resize cloud plans to better match workload requirements, using the following steps: Identification of the actually consumed memory, CPU [Central Processing Unit], disk, and network performance based on real-life data over a sustained period of time Research, evaluation and selection of available compute instance families and types with provider of choice across multiple parameters Aligning workload with the most optimal compute instance. For the users of the market-leader Amazon cloud services, choosing Reserved Instances instead of on-demand capacity is one of the methods of right-sizing. AWS Cost Explorer offers data on real consumption across services to estimate the correct required capacity. Some examples of AWS right-sizing techniques include: Elasticity as a characteristic of a cloud environment is another leverage used to match demand and capacity. AWS Instance Scheduler helps cut actual consumption on weekends, out- of-office hours, and public holidays to avoid overprovisioning. Using an auto-scaling feature for scaling DB usage. This is based on CloudWatch reports on consumed read and write capacity units and helps reduce costs for DataBase products. Removing Idle Load Balancers is another common right-sizing method. Users identify the load balancers with Request Counts of <100 in a week and delete them 4.6 Right-costing Right-costing is the second-most impactful FinOps method. It involves a company taking proactive measures to streamline licensing and subscription plan costs through vendor negotiations, as well as thorough pricing plan research and license mergers. This method has a myriad of subtechniques, ranging from simply requesting a discount to selecting a plan based on location, idle user deletion, volume-based discounts, and reserved instances services. Right-costing is best done after right-sizing, when the plan itself is based on actual consumption, not assumed consumption. 4.7Hybrid Benefits Rights Hybrid benefits rights is a cloud spend optimization technique within right-costing. This approach suggests that companies may use their on-premise license for cloud purposes. Some will also have dual-use rights that enable a smooth transfer from on-prem to the cloud deployment. hybrid benefit rights plans 4.8Cloud Storage Management Cloud services are designed to cater to a specific task requirement and are priced accordingly. Putting a correct estimate on your storage needs parameters will lead to significant monthly savings, as deep- archiving and production-intensive storage are priced differently. It’s often best to select the optimal cloud service based on access frequency [production-hot vs. archive-cold], data API cost and transfer price. For example, S3standard is used for backup and recovery, while S3Glacier Archive is designed for deep, long- term archiving.
- 15. 15 4.9 Cloud-Native Architecturefor Future Software Expansion One of the main purposes of introducing Cloud Cost Optimization as an operating framework into an enterprise is to instill a FinOps-minded culture. It’s only natural that all future applications and software solutions would be built in a cloud-native framework. When elasticity and multi-tenancy characteristics are embedded in new cloud-native architecture, the possibilities for cost savings on cloud spend increase notably.
- 16. Cloud Cost Management Strategies forScale-ups
- 17. Any company withcloud infrastructure should be aware of Cloud Cost Management and the need for a FinOps audit. The more cloud services, subscriptions, and subsidiaries a company has, the more urgent the need. For enterprises, it’s essential to create an internal FinOps department. For scale-ups, the need for a dedicated FinOps team grows as cloud consumption increases. Smaller firms might be able to manage with a once-a year audit and implementation plan. For those looking to establish an internal CCMO department or opting to outsource FinOps to a qualified managed IT service provider, here are some steps to follow. Establish an internal FinOps team with regular meetings and a c-suite-level FinOps committee. Ensure ongoing education for all interested team members, which may include free courses offered by the FinOps Foundation. Alternatively, look for a vendor that provides Cloud Cost Optimization services or a FinOps extension team. Develop a roadmap that prioritizes quick-to- implement optimization steps and allows enough time and resources for a smooth employment of less actionable, yet high-ROI, measures. Start actioning a plan with regular reviews and adjustments as business requirements change. Roll out a company-wide CCMO awareness plan with incentives for interdepartmental collaboration and cost-saving initiatives. Set up a FinOps center of excellence that will be responsible for advancing the culture of mindful cloud cost management in your company. 17 5.1 Algorithm for Internal Cloud Cost Management Team Roll-Out Due to the novelty of the realm, there are not many Cloud Cost Management best practices. However, these milestone actions can help set up a successful FinOps team: Define a person or group of colleagues with enough knowledge of the cloud services infrastructure and company finance to chair the project. Hold a meeting that includes representatives of the DevOps, Finances, purchasing, business owners, and legal department to openly discuss trends, status quo of cloud spend, and future plans. Assign an internal audit of the cloud expenses, licenses, subscription plans, and consumption to the newly-formed DevOps practitioners. Provide tools necessary to perform the audit — be it a trial period for a third-party tool or vendor cost calculators or explorers. Upon audit completion, review right-sizing saving opportunities first, followed by right-costing techniques. These may include contract renegotiations, license regrouping, and subscription plan streamlining. Estimate if the savings arising from the optimization efforts are worth establishing a permanent FinOps department or if one-time outsourcing is the best path forward for the enterprise with your cloud needs. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
- 18. 18 Provide equal accessto actual consumption reports and dashboards to shortlisted candidates for preparatory work. Inquire about use cases and relevant portfolio experience to align the final decision based on proven expertise as well as commercial estimate and RFP responses. Conduct a final video interview with the top two companies to select a vendor by a group of internal FinOps enthusiasts and concerned C-level executives. 5. 6. 7. 4. 5.2 Algorithm for Hiring a Cloud Cost Management Company The complexity of cloud services and their pricing, as well as the potential savings that arise from implementing stringent FinOps operational models, may prompt larger businesses to commission a Cloud Cost Management from an expert vendor. The following steps will help companies select a high-quality supplier for this critical mission: 1. 2. 3. Appoint the person in charge of the FinOps project internally based on the skills, experience, and willingness to evolve in the field. Use vendor-developed tools to conduct a basic internal audit of cloud costs. This will help you speak knowledgeably about your requirements with potential suppliers. Compile a shortlist of 5-7 vendors from different locations for a diverse budget offering. Send out an RFP to the pre-selected pool of vendors with basic information about your tech stack so they can reply with commercial estimates as well as potential savings they discern from the initial information.
- 19.
- 20. Only 4% ofFinOps Report respondents said they used primarily on-prem deployment, while 31% reported being fully cloud deployed [either cloud-born or fully transitioned to it]. The majority [65%] used some form of a hybrid environment. 20 39% public cloud-first 26% public cloud use with primarily on-prem deployment 15.5% all in cloud 15.5% born in cloud 4% primarily on-prem deployment Spurred by unsparing competition on both global and regional levels, cloud service vendors continuously develop new instruments enabling users to better control, optimize, plan and build their software ecosystems. Vendor lock-in risks are no longer a major concern, while hybrid and multi-cloud environments are ubiquitous. Furthermore, third-party vendors provide additional support to the Cloud Cost Optimization domain by developing new cross-vendor products that enable coverage of the multi-cloud, multi-platform and hybrid environments. This expansive array of tools available for Cloud Cost Monitoring and Management is further supplemented by the foundational work of FinOps Foundation, which offers framework educational and networking resources for the industry. 23% 17% 16% 15.5% 15.5% 9% 2% 2% Public Cloud-First, but still hybrid (on-prem traditional data center) Public Cloud use, but primarly on-prem traditional data center Public Cloud-First, but still hybrid (on-prem private cloud) Born in public cloud (never in data center) All in public Cloud (was in data center, now all in cloud) Public Cloud use, but primarily on-prem private cloud Primarily on-premises private cloud Primarily on-premises traditional data center This highly competitive terrain serves as the powerful vehicle and catalyst, helping companies around the world drive cloud costs down through various cost saving, cost avoidance, and cost reduction techniques. However, companies need to proactively recognize and embrace opportunities preemptively provided by suppliers. It’s up to users to start saving on cloud costs and avoid bills from piling up. Overprovisioning, deficient communication between teams, poor monitoring, low observability, discordant purchasing of multiple teams, substandard Cloud Finance Management awareness, and a dire lack of FinOps expertise are only a few of the challenges faced by pioneers in Cloud Cost Optimization.
- 21. FinOps teams usuallyevolve on the cross-roads of DevOps, finance, purchasing or cloud analytics. Once the understanding of the significant weight of the issue is realized, company leadership can appoint an appropriate candidate to drive a FinOps transformation. Just like DevOps has evolved to become a norm in the matter of a decade, FinOps will likely rapidly speed toward mass adoption. Early adopters that embrace a cloud cost conscious culture will gain a competitive advantage that will define and shape tomorrow’s leaders. 21 39% 33% 26% 24% 23% 22% 11% 7% 7% Getting Engineers to take Action Dealing with shared costs Accurate Forecasting Reducing waste or unused resources Full allocation of Costs Alligning Finance to T ech T earms Container costs Other NoN-IaaS costs like SaaS
- 22. 22 FinOps Foundation Stateof FinOps report 2021: Cloud Zero: FinOps Training: Strategies for a Successful Cloud Cost Management Practice Amazon EC2 Instance Types: Amazon Cost Management Tools: Google Cost Management: Microsoft Azure: Densify: TechRadar: Snow Commander: Crayon: Apptio: Google: Gartner: Deloitte: Finance Online: Forrester: VMware: Amazon: Deloitte: Opsani: Data Center Knowledge: https://data.finops.org/ https://www.cloudzero.com/webinar/cloud-cost-metrics https://www.youtube.com/watch?v=o5Ak13zCG9s https://aws.amazon.com/ec2/instance-types/ https://aws.amazon.com/aws-cost-management/ https://cloud.google.com/cost-management https://docs.microsoft.com/en-us/azure/cost-management-billing/cost-management-billing-overview https://www.densify.com/solutions/roles/finance https://www.techradar.com/best/best-cloud-storage-management-service https://www.snowsoftware.com/products/snow-spend-optimizer https://www.crayon.com/cost-optimization https://www.apptio.com/solutions/cloud-cost-optimization/ https://cloud.google.com/blog/topics/cost-management/principles-of-cloud-cost-optimization https://www.gartner.com/en/newsroom/press-releases/2021-06-28-gartner-says-worldwide-iaas-public-cloud-services- market-grew-40-7-percent-in-2020 https://www2.deloitte.com/content/dam/Deloitte/us/Documents/about-deloitte/us-cloud-value-calculator-infographic.pdf https://financesonline.com/cloud-computing-statistics/ https://reprints2.forrester.com/#/assets/2/82/RES157473/report https://www.vmware.com/be/cloud-solutions/multi-cloud-ops/optimize.html https://docs.aws.amazon.com/wellarchitected/latest/cost-optimization-pillar/cloud-budgets-and-forecasts.html https://d1.awsstatic.com/WWPS/pdf/AWS_MAD_Deloitte_TCO_paper.pdf https://opsani.com/resources/finops-101/ https://www.datacenterknowledge.com/cloud/survey-most-companies-are-failing-cloud-cost-management Sources used: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22.
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