It has been a tough few years for businesses and consumers alike. Inflation is at a 40 year high across many developed countries, and governmental bodies, such as the Bank of England, are continuing to increase interest rates in an attempt to combat inflation.
The causes of the crisis are complex and wide-ranging. Some of the factors that significantly influenced the recent economic decline are related to the COVID-19 pandemic that caused businesses to close, people to lose their jobs, and consumer spending to decline; with mounting government debt caused by the heavy borrowing needed to finance stimulus packages and bailouts. In addition, the war in Ukraine has caused energy prices to rise, supply chains to be disrupted, and investor confidence continue to decline.
The butterfly effect of the economic decline has led to the ‘BigTech’ firms laying off tens of thousands of employees, with some banks, such as Silicon Valley Bank and Credit Suisse, getting into real financial difficulty that has resulted in failure or acquisition.
So how has this whole situation affected the wider base of firms that continue to operate, trade, and embrace the cloud?
Reducing cloud costs
Many organisation are seeking to reduce costs and are increasingly looking at optimising their spend on cloud services using a fairly new approach known as FinOps. FinOps is a public cloud management discipline that enables organisations to derive the maximum business value from cloud by helping technology, finance, and business teams to collaborate on data-driven spending decisions.
Flexera found in their
State of the Cloud Report 2023 that 82% of organisations have ‘managing cloud spend’ as their top priority, just ahead of
‘security’ at 79%. The report also identified that whilst there has been a
39% increase in the amount of budget dedicated to cloud year-on-year, some
28% of cloud spend actually goes to waste. I believe that a focus on reducing waste and controlling cloud costs is now at the heart of the approach taken by many organisations that have begun to embrace the use of cloud computing.
In this context, the role of FinOps is critically important since it helps organisations derive the maximum value from their cloud investments. It does so by providing a framework for managing cloud costs, optimising cloud usage, and aligning cloud spending with business objectives. Some of the benefits of adopting a FinOps approach include:
- Reduced cloud costs. FinOps can help organisations reduce their cloud costs, by identifying and eliminating waste, optimising cloud usage, and negotiating better rates with cloud providers. Organisations are then able to invest in innovation projects, utilising the savings made by implementing efficient cost reductions.
- Improved decision-making. FinOps helps organisations make better decisions regarding their cloud investments, by providing visibility into cloud costs and usage.
- Increased agility. FinOps helps organisations be more agile, by providing them with the tools and processes they need to manage their cloud resources quickly and easily.
- Improved compliance. FinOps helps organisations comply with regulations by providing them with the tools and processes they need to track and manage their cloud usage.
To be successful, the primary principles of FinOps that should be adopted are as follows:
- Data-driven – FinOps teams need to use data to make decisions about cloud costs. This data is used to track cloud usage, identify waste, and optimise cloud costs.
- Collaborative – FinOps requires collaboration between engineers, finance and other stakeholders.
- Continuous – FinOps requires regular reviews and updates to ensure that cloud costs are aligned with business objectives.
- Scalable – FinOps must be scalable, in order to meet the needs of growing organisations.
- Sustainable – FinOps is a long-term initiative. To be truly sustainable, cloud costs must be aligned with business objectives to ensure that the organisation is gaining the maximum value from its cloud investments.
The four steps for FinOps success
Finally, a four step FinOps Maturity Model that can be used to implement FinOps:
Level 1 (Observation) : Level 2 (Distribution) : Level 3 (Reduction) : Level 4 (Optimisation)