In recent years, cloud adoption services have accelerated, with companies increasingly moving from traditional on-premises hosting to public cloud solutions. However, the rise of hybrid and multi-cloud patterns has led to challenges in optimizing value and controlling cloud expenditure, resulting in a shift from capital to operational expenses.
According to a Gartner report, cloud operational expenses are expected to surpass traditional IT spending, reflecting the ongoing transformation in expenditure patterns by 2025. FinOps is an evolving cloud financial management discipline and cultural practice that aims to maximize business value in hybrid and multi-cloud environments. But without a thorough understanding, adopting FinOps can be challenging. To maximize benefits and realize the potential of FinOps, organizations must forge a clear path and avoid common mistakes.
Enhanced capabilities to drive growth
FinOps is closely intertwined with DevOps and can represent a radical transformation for many organizations. It necessitates a revised approach to cost and value management, challenging organizations to move beyond their comfort zones and embrace continuous innovation. To achieve this, development teams, product owners, finance, and commercial departments must come together to rethink and reimagine how they collaborate and operate. This collective effort is essential for fostering a culture of innovation and driving meaningful change throughout the organization.
FinOps enables your organization to control costs and enhance consistency by managing average compute costs per hour, reducing licensing fees, decreasing total ownership costs, and tracking idle instances. It also drives improved outcomes and performance through enhanced visibility and planning, which includes comparing actual spending against forecasts, ensuring that architecture aligns with business and technological objectives, and increasing automation.
These improvements lead to faster decision-making, quicker demand forecasting, and more efficient “go” or “no-go” decision processes for business cases. Also, FinOps helps align business and IT goals, fostering an environment where enterprise goals are interconnected, and business cases are developed with clear, quantifiable benefits. This alignment ensures that both existing and new capabilities are enhanced, supporting strategic growth and innovation.
Challenges and common mistakes when adopting FinOps
Organizations should develop a phased approach over time instead of attempting to implement everything from day one. Having the right people, processes, and technology in place is essential for validating changes and understanding their impact on the consumption model and usability.
It’s crucial to lay out a clear journey path by defining the current state, establishing the future state, and devising a transition plan from the current to the future state with a clear execution strategy. To ensure repeatability across different organizations or business units within your organization, it’s essential to establish well-defined design principles and maintain consistency in adoption. Monitoring key performance indicators (KPIs) is essential to track progress effectively.
Many organizations are already considering FinOps approaches today, although often not in the most cost-effective manner. Rather than addressing root causes, they apply temporary fixes that result in ongoing challenges. These temporary fixes include:
- Periodic Reviews: IT teams convene periodically to address performance issues stemming from sizing or overspending, often in response to complaints from finance teams. However, this reactive approach perpetuates firefighting rather than proactive self-optimization.
- Architecture Patterns: Regular updates to architectural patterns based on new features and native services from hyperscalers may inadvertently introduce complexity without clear metrics for success.
- External SMEs: Bringing in external subject matter experts for reviews incurs significant costs and requires effort to bring them up to speed. Relying on this approach contributes to ongoing expenses without sustainable improvements.
To avoid these pitfalls, it’s crucial to establish well-defined KPIs, benchmarking, and processes for real-time insights and measurable outcomes.
While some organizations assign FinOps responsibility to a centralized team for monitoring spending and selecting cloud services. This approach can create silos and hinder visibility into planned changes, leading to dissatisfaction and downstream impacts on service delivery. Federating FinOps activities across the organization ensures broader participation and diverse skills, promoting collaboration and avoiding silos.
The next steps in your FinOps journey
Regardless of where you are in your cloud journey, it is never too late to adopt best practices to make your cloud consumption more predictable. IBM Consulting®, along with Apptio as a product, can help you adopt the right architectural patterns for your unique journey.
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