V8.TECH Executive Explains How to Manage Cloud Operations Costs.
The explosion in the use of cloud applications and infrastructure has turned on a warning sign in companies. It is increasingly common for cloud administrators and financial managers to express their concerns about rising costs and how to better manage cloud spending.
For these hosted services, companies only pay for what they consume, with no minimum or maximum charge. Costs, therefore, are variable and this creates a headache for managers: how to manage cloud operations costs?
With the advantages and benefits of the cloud, most companies run various systems and departmental applications in this environment. Generally, IT is responsible for providing the infrastructure for departments and business areas. These, in order to have greater productivity and performance, request an increase in consumption capacity, which generates an increase in expenses.
What is happening is that IT managers end up having a “little surprise” at the end of each month when invoices from cloud providers arrive.
Before the cloud, in the on-premise environment, it was necessary to control whether there was enough resources (CPU, memory and disk) to scale the business. With the cloud, good cost planning and governance require the manager to know if the cost is rising (or not) at the same speed as the growth (or decrease) of the company's revenue and profit.
From this concern, which is one of the main concerns of IT managers today, FinOps emerged, a practice that brings a mindset that brings together technology, finance and business teams around financial responsibility for cloud spending.
This methodology, in short, helps companies to make financial analyzes on top of the cost of cloud management, identifying how much it costs to support a cloud infrastructure and projecting cost reductions. According to Gartner, managing financial costs with FinOps can save up to 70% in costs.
FinOps is a way to drive efficiencies, streamline operations and provide insights that help managers predict cloud spending. Providing better management and optimization of cloud costs, the methodology is ideal for helping companies keep their cloud costs under control.
Consumption of cloud resources always changes, according to what is used by the business areas. Predictability here, at least for most organizations, practically does not exist. And this is a problem for IT, after all, it is from the budget of the area that payments for cloud consumption of companies come out.
If taken into account the current scenario of unstable economy, in addition to issues such as inflation, interest rates, variation in currency quotations (many cloud providers charge in dollars) and taxes, forecasting cloud spending for the coming months or years is a task arduous.
With a strong basis for controlling the use of resources, this methodology correlates consumption with financial metrics, not only in total, but also by area or “application owner”.
Financial predictability and improved management
In addition to taking financial and business variations into account, when adopting the FinOps practice, the objective is not only to reduce costs in the short and medium term, but also to improve governance. , managing the cost per application.
The IT area cannot predict what it will spend in a granular way, that is, predict how much each application will spend. Each needs to be a cost center and a resource center.
Very few companies have this maturity, but the ideal is to have several cost centers (it can be by business area, department, business arm, etc.) so that it is possible to control all these resources and in multicloud environments.
In addition, it is necessary to have a unique way of doing FinOps for companies that work with different cloud providers and that run applications in the provider's own clouds, marketed with monthly and annual deductibles. In these cases, appropriate financial management is also necessary to avoid running out of expenses with the franchise.
In a company with a certain maturity of FinOps, surprises in the cloud account drastically decrease. Each requesting directorate or business area becomes responsible for its own expenses and the infrastructure directorate begins to have more arguments to justify when the IT budget increases more than expected.
With FinOps, companies are able to optimize the resources used with cloud services, reducing or eliminating throttling or overhead. In addition, another important benefit is the incorporation of a collaborative internal culture to increase the transparency of cloud costs and investments.
*By Vinicius Hoffmann, FinOps leader at V8.TECH.