Introduction to FinOps on AWS

As more and more organisations embrace cloud computing for quicker innovation and efficiencies at scale, controlling and managing cloud costs have grown high to keep financial resources sustainable. That is where FinOps comes in. FinOps, an abbreviation for Financial Operations, is a framework designed to enable the organizations in the optimization of cloud financial management, establishing accountability, and driving cost efficiency. AWS is among the leading cloud providers that offers numerous tools and best practices in enabling integration of FinOps at the core of cloud strategies.

In this article, we take a deep dive into FinOps on AWS, ranging from essential FinOps principles and the FinOps lifecycle to AWS tools and services that support FinOps and best practices for driving cost efficiency.

What is FinOps?

FinOps is a cultural and operational model that unites finance, technology, and business teams around effective cloud expense management. It's a shift away from the traditional budgeting approach, gaining real-time insight into cloud spending and creating a close collaborative space where teams come forward to manage the costs together. The philosophy of FinOps rests on making informed, data-driven decisions to realize maximum business value from cloud spending.

The Three Core Principles of FinOps

Visibility and Real-Time Reporting

FinOps advocates for a line-of-sight approach to cloud costs where organizations are given access to granular details of expenditure on a department, project, or application basis. Real-time reporting provides full visibility into which areas of the business costs are being accrued and allows teams to make appropriate changes.

Cost Optimisation

FinOps works by first prioritizing waste, rightsizing resources, and optimizing cloud spend through continuous monitoring. Teams monitor their cloud usage and adjust either the resources or cost-saving practices to get the most value out of that investment.

Accountability and Collaboration

FinOps is based on a shared responsibility model wherein teams not only from finance but also from IT and engineering contribute together. In short, each group can take ownership of its respective spending and collaborate toward the budget goals set.

FinOps Lifecycle: Ongoing and Iterative

The FinOps framework generally moves through a lifecycle that consists of a group of steps:

1. Inform

The Inform phase focuses on creating visibility, such as usage tracking, cost attribution, and real-time reporting. Key elements in this phase include:

Budgeting and Forecasting: Predict future costs based on historical usage.

Cost Allocation and Tagging: Use tagging of resources to attach costs to projects or teams.

With real-time reporting, you are able to track spending and usage trends to keep teams informed about budgetary impacts.

2. Optimise

The Optimise phase is where organisations take active steps toward unnecessary spending reduction. Strategies will include the following:

Rightsizing Resources: Rightsizing of resource configuration to fit the workload; for example, resizing EC2 instances.

Auto-scaling: Enable auto-scaling to dynamically adjust resources to meet demand.

Utilise Reserved and Spot Instances: Commit to Reserved Instances for predictable workloads and make use of Spot Instances to save cash on variable tasks.

Remove Idle Resources: Identify and remove unused resources, such as unattached EBS volumes or unused RDS instances.

3. Operate

During the Operate phase, organizations look to make this a sustainable process, embedding FinOps into the core operations. This will include:

Continuous Monitoring and Alerting: Creating alerts for unexpected spikes in costs.

Stakeholder Reviews and Optimisation Recommendations: Regular stakeholder meetings to assess use and cost efficiency.

Automation: Leverage AWS services like AWS Lambda to automate most of the cost optimisation tasks.

AWS FinOps Tools and Services

AWS offers a suite of tools and services that support FinOps practices, from the most basic cost management to deep analytics.

1. AWS Cost Explorer

AWS Cost Explorer is utilized to understand your spending trends over time. With this service, you can:

• Create customised reports and visualise costs with usage telemetry in easy-to-understand graphs.
• Identify usage trends and Exact locations where usage is more than expected.
• Do forecasting of future costs based on historic usage.

2. AWS Budgets

AWS Budgets provide a way to help track and stay within budgetary limits. The salient features of AWS Budgets include:

• Setting up budgets for cost or usage at every level-from account level down to resources, tag-based, amongst others.
• Setting up notifications when overspending crosses budgets set up.
• Create usage budgets to track resource consumption.

3. AWS Cost and Usage Report (CUR)

AWS Cost and Usage Report: This report provides a detailed cost and usage report down to the last resource. It is ideal for deep analytics, and it has good integration with analytics tools to provide custom reporting.

4. AWS Trusted Advisor

AWS Trusted Advisor provides best practices in real-time, including cost optimization checks. These checks find unused or underutilized resources and provide actionable insights to reduce waste.

5. Amazon EC2 Auto Scaling

Auto Scaling ensures that your resources are appropriately scaled to meet demand, automatically adjusting capacity for performance at the lowest cost.

6. AWS Compute Optimizer

AWS Compute Optimizer provides recommendations on optimal instance types for your workload, thus enabling you to rightsize instances for improved cost efficiency.

7. Spot Instance Advisor

Spot Instance Advisor is a source of insight about spot instances and their historical trends, therefore enabling organizations to make an informed choice for costs on non-critical workloads.

8. AWS Organizations

AWS Organizations enable multiple AWS accounts with consolidated billing, budget tracking, and account-level cost management. For bigger organizations with teams or projects, it's relevant.

9. Amazon QuickSight

QuickSight enables the FinOps teams to build customized dashboards and advanced data visualizations of cloud spend data.

10. AWS CloudFormation

AWS CloudFormation will be able to automate and manage resource deployments at scale, helping to enforce cost-efficient architectures across your organization.

Best Practices for FinOps on AWS

Create a Tagging Strategy

Resource tagging is essential to perform cost allocation. With tags, costs can be associated with the proper teams, projects, or departments to ensure precise tracking and reporting.

Adopt Automation

Automate resource clean-up and scheduling, use AWS Lambda; automate cost allocation, use AWS Organizations; and set alerts, use AWS Budgets, to stay within your budgetary limits.

Optimise Storage Costs

Apply Amazon S3 Storage Classes to reduce storage costs associated with infrequent access data. Make use of S3 Lifecycle policies and automate the moving of objects to more cost-effective classes of storage.

Implement and Enforce Resource Lifecycle Policies

Establish policies around resource lifecycles that include resources such as test or development environments, which can automatically terminate after a certain amount of time. Regular auditing will also help identify and clean up unused resources.

Perform Regular FinOps Reviews

Run monthly or quarterly FinOps reviews with stakeholders to ensure that financial and operational goals are aligned. Also talk about usage patterns, review high-spending areas, and identify opportunities for optimisation.

Use Reserved Instances and Savings Plans

Reserved Instances and Savings Plans can result in significant discounts for steady-state workloads. Analyze the pattern of usage to determine when these options may result in cost savings.

Integrate FinOps into CI/CD Pipelines

Include cost checks in your CI/CD. For example, run resource cost analysis before deployment to avoid surprises.

Key FinOps Metrics to Track on AWS

Following key metrics helps to gauge the success of the FinOps being practiced:

Cost per Customer: This metric is product-specific, meaning if a company offers multiple products, this metric should be worked out for each separately. Total costs are divided by the number of active customers.

Reserved Instance Coverage: This is the usage covered by Reserved Instances or Savings Plans.

Unattached Resource Costs: Accountability for costs of resources that are unattached, for instance, unused EBS volumes.

Efficiency Metrics: For example, the CPU utilisation rate of the EC2 instance can indicate an opportunity for rightsizing.

Conclusion

FinOps on AWS entails not just cost monitoring but a cultural approach toward costs: awareness, accountability, and iterative efficiency. Using AWS's extensive portfolio of FinOps tools can give organizations visibility into their cloud usage, optimize their spending, and inject FinOps practices into their operations.

In fact, by adopting the right approach to FinOps, AWS users will achieve a fine balance between cloud agility and cost efficiency that maximizes the investment in the cloud for business success. Embrace FinOps as a journey of continuous improvement, with strategy shifts appropriate to changing business goals and the set of new AWS services and features optimised for financial operations.