AWS Knowledge
Master Cloud Costs: 5 Essential FinOps Practices
Piyush Kalra
May 12, 2024
In the battlefield of businesses, mastering cloud cost is no more of a luxury; rather, it becomes a need. More and more companies are shifting toward cloud services to upscale their operations; however, the real challenge comes in terms of the expenses associated with this. This is where FinOps, or Financial Operations, fits in. FinOps provides a structured approach to managing and optimizing cloud costs to ensure that the business derives full value from its investment. In this article, we would cover the five essential FinOps practices to master cloud costs and outclass every competition.
Introduction to FinOps and Its Significance
FinOps, otherwise called Financial cloud operations, is the practice of bringing together the finance, technology, and business groups to provide governance and optimize cloud spending. This approach gives organizations multi-discipline capabilities to provide financial accountability and transparency over their cloud usage. With FinOps, businesses will be better placed to make data-driven decisions that drive growth with improved operational efficiency.
Understanding the Challenges in Controlling Cloud Expenditure
Prior to our deep dive into the core FinOps practices, it becomes very critical to understand the challenges that exist for organizations in controlling cloud expenditure. These include:
No Visibility: Most organizations do not have a clear understanding of their spending on clouds and, hence, are unable to identify cost-saving opportunities.
Complex Pricing Models: Cloud service providers keep coming up with different pricing models that are tricky to administer.
Unpredictable Costs: Cloud costs can increase uncontrollably if the monitoring and controls are not proper.
Waste of resources: Over-provisioning and underutilization may lead to huge wastage and rise in costs incurred on the cloud resources.
The Five Essential FinOps Practices for Mastering Cloud Costs
To meet these challenges, here are the five FinOps practices that set the stage for success:
1. Tagging Strategies for Cost Allocation
One should have proper tagging strategies for effective cost allocation. This basically categorizes the use of resources across departments, projects, or cost centers at a granular level, giving insights into an organization's cloud spending. Better visibility of cost drivers with this approach enables more effective tracking and management, which in turn helps better decision-making.
Implementation Tip: Apply a consistent, standardized tagging convention across all cloud environments for coherence and easier management.
Example: Suppose you have the following three cloud tagging strategies:
“Project_Marketing"
"Department_Sales"
"Environment_Testing"
These tags can facilitate cost tracing by particular projects, departments, and environments. You would be able to see how much the Marketing project costs, what is spent by the Sales department, or the expenses for your Testing environment. This refines your ability to perform:
Know where your money is spent
Plan budgets better
Identify areas where overspending might occur
Tags are consistent across all of your cloud resources, keeping things organized and easy to analyze.
2. Right-Size Infrastructures for Use Optimisation and Cost Savings
Rightsizing involves either increasing or decreasing cloud resources in accordance with usage realities. This practice helps businesses eliminate wastage and allows them to pay only for what they use.
Implementation Tip: Periodically review resource utilization to gain insights for performance improvement and cost optimization.
Example: If a virtual machine is underutilized, then it might be downscaled to a smaller instance size for cost savings.
3. Setting up Budgets and Alerts for Controlled Spending
Setting budgets and alerts is, therefore, very proactive in terms of handling cloud costs. This helps organizations avoid surprising expenses since it sets spending limits and allows real-time notifications so that one stays within the budget.
Implementation Tip: Configure budgets and set up alerts at multiple thresholds to be sent with the use of cloud cost management tools.
Example: It can be supported by the monitoring of spending through tools like AWS Budgets and generate alerts whenever they cross predefined limits, similar to what can be done with Google Cloud Budget Alerts.
4. Utilizing Reserved Instances and Savings Plans
Reserved Instances and Savings Plans offer high savings when committing to long-term cloud usage. They reduce the hour rate for a level of committed usage compared to on-demand pricing.
Implementation Tip: Consider using historical usage data to determine the right level of commitment for RIs and Savings Plans.
Example: AWS Savings Plans and Azure Reserved VM Instances allow flexibility in the arenas of cost savings based on use patterns. To understand better, refer to our article on AWS Saving Plan vs Reserved Instances: What is the difference?
5. Continual Improvement through Monitoring and Analysis
Monitoring the use of cloud resources and their associated costs is a continuous process and one that needs to be carried out if optimization is to take place. Trends, inefficiencies, and other opportunities can only be identified by measuring performance metrics, studying cost data, and applying relevant insights toward improvement.
Implementation Tip: Cloud monitoring tools will help to track usage and costs in real-time and give actionable insights.
Example: AWS Cost Explorer and Pump + Billing provide complete reports and optimization recommendations for spending on the cloud.
Tools and Technologies to Support FinOps Practices
Implementation of FinOps practices requires proper Finops tools and technologies. Among the most popular ones are the following:
Pump: A tool aimed at the optimization of cloud costs through auto-rightsizing and resource management that lets one pay for what is needed.
AWS Cost Explorer: Run a detailed breakdown of your costs and usage and get recommendations for cost savings.
Google Cloud Cost Management: Budgeting, forecasting, and cost allocation enable the management of cloud spending.
Azure Cost Management + Billing: Get visibility into the costs and usages of your clouds and get optimization recommendations.
CloudHealth by VMware: End-to-end cloud management platform to manage all aspects of cost, security, and governance within multi-cloud environments.
Get Started With Pump
Check out Pump if you're looking for a full-suite tool to help deploy and optimize your cloud costs. Pump is an AI FinOps Team providing the right tools to startups and businesses so that you can save up to 60% on cloud costs with group buying and AI-driven optimizations. Using Pump, you can:
Leverage Group Buying Power: Join a collective company to enjoy the rates that only big business used to benefit from.
Automate Cost Savings: An AI feature that allows identifying cost-saving opportunities or automating an application cost across the most extensive types of cloud.
Gain Financial Accountability: Make IT financially accountable—put transparency and control into your cloud spend with granular reporting and insights.
To get started with Pump, follow these steps:
Sign Up: Follow this to the Pump website and sign up.
Connect Your Cloud Account: Connect your AWS account and let Pump analyze your usage to identify savings.
Conclusion
The mastery of cloud costs is key to any business that seeks to get the most value from every cloud investment and hence be competitive in the marketplace. Some FinOps practices to implement for greater financial accountability and efficiency within an organization would be tagging strategies, rightsizing, budgeting, RIs and Savings Plans, and continuous monitoring. Embed them into your strategy for managing clouds to tap the full potential of your clouds and power business growth.
Ready to take the next step? See what an AI-powered FinOps solution from Pump can do for you, and optimize your cloud costs today.
Stay ahead in the cloud game, and make sure your business thrives in this digital era.
