S.D.I. English Edition Newsletter : What is FINOPS and what it is used for

The cloud paradigm has represented a fundamental change in the way organisations access and use technology resources. This paradigm is based on the idea of using computing resources (such as computing power, storage and applications) provided through the Internet, rather than owning and maintaining physical hardware and software locally.

There are several sources of supply, the best known being Azure, provided by Microsoft, and AWS, provided by Amazon; but there are several more specialised companies on the market that provide services for particular needs. Each has its own services and peculiarities, but all have in common that they provide cloud packages that offer advantages and disadvantages over classic on-premises servers or dedicated datacenters.

What are the advantages?

1. On-Demand Self-Service: Users can acquire, use cloud resources (such as computing power or storage) and terminate them automatically, without direct intervention from the service provider.
2. Broad Network Access: Cloud services are accessible from any device with Internet access and a web browser, such as computers, tablets and smartphones.
3. Resource Pooling: Cloud service providers' computing resources are pooled to serve multiple customers using a multi-tenant model, with physical and virtual resources dynamically allocated and reallocated based on demand.
4. Rapid Elasticity: Cloud resources can be rapidly scaled up or down, with the ability to adapt to fluctuating user needs.
5. Measured Service: Cloud usage is monitored and can be measured, providing transparency for both providers and consumers of the service.

How can we use it?

There are several distribution models, classically:

• Public Cloud: Resources are owned by an organisation selling cloud services and are made available to the general public. I basically rent services from the provider with whom I sign a contract.
• Private Cloud: The cloud is used exclusively by an individual organisation. Similar to the previous one but in a reserved part of the public cloud, where confidential and private data is put; clearly at a higher cost.
• Hybrid Cloud: Combines public and private clouds, allowing data and applications to be shared between them, moving back and forth, sharing space and resources. It offers the advantage of being able to work in a proven space when needed and then make it available to public cloud users.

In addition to drastically reducing infrastructure, eliminating datacentres, removing maintenance services and the need for upgrades, the cloud offers several approaches that can increase or decrease the services indicated;

• Infrastructure as a Service (IaaS): Provides virtualised infrastructure, such as virtual servers, networking, storage and operating systems. In essence a virtual datacenter, I do not have to worry about managing, maintaining and upgrading and, an often forgotten cost; cooling, defending and sometimes shutting down a datacenter (Risk management is an often ignored practice).
• Platform as a Service (PaaS): Offers platforms and environments to develop, test and deploy applications. Compared to IAAS, the services are already packaged and have to be configured according to one's own needs. They are particularly suitable for development teams that often require high computing power, memory space and storage.
• Software as a Service (SaaS): Software applications distributed via the cloud and accessible via a web browser; all done and ready to go, just one user and everything is ready to use according to a logic by design, i.e. standard processes, standard methods, very limited customisation (Hurray!)

Challenges that a cloud environment poses to those implementing it

• Security: Concerns related to data protection and breaches, working in the cloud offers many possibilities but these expose more visibility and consequently security must be managed.
• Vendor dependency: Difficulties in changing cloud service providers. New tools are being approached to facilitate migrations; clearly the greater the complexity of the project, the greater the difficulty of migration when changing strategy and supplier.
• Latency: Delays in data transmission can affect application performance. This also can be mitigated with adequate network facilities that are not always cheap

Benefits of the cloud, in order of effectiveness

1. Scalability: Resources can be acquired or released quickly based on demand.
2. Flexibility: Access to a wide range of services and applications.
3. Work from anywhere: Access to resources from anywhere with an Internet connection.
4. Automatic updates: Cloud service providers manage maintenance and updates without the need for a dedicated IT department.
5. Cost reduction: Eliminates the need to invest in expensive hardware and software.

But, why is cost reduction only in 5th place? At first approach, it will not be so simple; costs will increase with a reductive trend in the long term; it will be necessary to equip oneself with adequate tools to calculate the actual ROI before submitting the proposal to Top Management, but above all with FinOps tools, which we will see in more detail below.

To summarise, the cloud paradigm has transformed the IT landscape, offering flexibility, efficiency and access to advanced technologies without the need for significant investment in physical infrastructure, and at the same time guaranteeing the scalability that physical systems find increasingly difficult to keep up with in the ever-shrinking timeframe for technology renewal.

FinOps: Optimising cloud spending

As we have seen, cloud computing has revolutionised the way businesses operate, offering flexibility, scalability and access to cutting-edge technology. However, with the increasing adoption of the cloud, companies have also faced challenges related to managing and optimising costs. Costs identified in the past as CAPEX but which are gradually moving towards consumption-based operating models such as OPEX (thereby changing the calculation of investments, depreciation, and taxation); in addition to this we are faced with costs that are not constant over time, such as Capex hardware purchases, but become variable, cloud Opex; putting us at the mercy of the supplier and, perhaps, having to re-discuss contracts, investments, and budgets with all that this entails.

So it becomes important to equip ourselves with tools that allow us to :

• Understand the costs associated with cloud resources.
• Forecast and plan expenditure.
• Optimise costs without compromising performance.

To help, we have FinOps tools, or Cloud Financial Management, an operational practice that aims to bring financial transparency to cloud computing, enabling businesses to get the most value from every euro spent in the cloud.

FinOps tools are designed to help companies manage and optimise their costs in the cloud These tools provide visibility into spending, cost analysis, forecasting, recommendations for optimisation, combines systems, best practices and culture to increase scalability and reduce costs, through:

1. Access and control: Distribute responsibility for cloud costs among teams or plants using resources and applications, allowing them to manage and optimise their spending through inter-company mechanisms
2. Continuous optimisation: The cloud is dynamic and costs can vary. Continuous optimisation ensures that resources are used efficiently. Switching off machines that have not been used for a long time or only for development or testing; can lead to considerable savings.
3. Transparency: Having clear visibility of costs and usage enables companies to make informed decisions.
4. Clarity: Finops brings out the points of attention without having to untangle different tools, a bit like identifying the best telephone tariff without consulting 1000 offers.

But who should monitor the FinOps application?

It must be a mixed team of IT, finance and business professionals, this team will be responsible for monitoring, analysing and optimising spending in the cloud, using monitoring tools; tools such as AWS Cost Explorer , Google Cloud Platform's Cost Management, Azure Cost Management and Billing that monitor and analyse spending. But if these are not sufficient, specific tools, Flexera, Dynatrace or similar should be adopted.

The team should follow a strategy to maximise the value of their cloud investments. A proper FinOps strategy should ensure that cloud resources are used efficiently and that costs are optimised.

Strategy that must go through goal setting, cost reduction? Optimisation of resources or the most accurate forecast of cloud spending, clearly define what we want to achieve from the FinOps analysis

If the company is organised in locations, divisions, teams we allocate cost centres to them and divide them up by intercompany; even managing them by project, this promotes accountability and encourages teams to actively manage their costs.

Continuous monitoring and optimization.

The cloud offers dynamic potential and the needs of companies change over time. Schedule regular reviews to identify optimisation opportunities, such as eliminating unused resources or adopting more advantageous pricing models. Educate teams on the importance of FinOps and provide training on best practices and tools, a culture of shared responsibility, where each team is responsible for managing and optimising their costs. Feedback from teams is always welcome, useful and necessary information to continuously improve the FinOps strategy.

Where possible, automate FinOps processes, such as stopping unused resources or adjusting resource sizes according to demand. Forgotten service access could lead to nasty surprises in the next billing cycle.

Reporting and dashboards, to monitor daily, weekly, monthly costs and utilisation and highlight anomalies. This allows timely action to be taken on the problem.

Close collaboration with suppliers, understand pricing options, promotional offers or features that can help optimise costs.

Alignment with the market, new offers, players, proposals; they are always just around the corner and are the winning weapon to improve services or reduce costs.

These are just some of the FinOps tools that can be applied. The choice of the right tool will depend on the strategies, the specific needs of the company, the complexity of its cloud environment and the available budget.

FinOps functionalities can be very similar, so it is essential to carefully evaluate the features and benefits of each to find the best solution for your organisation.

Conclusions

A successful FinOps strategy requires continuous effort and close collaboration between IT, finance and business. With the right approach, companies can make the most of the cloud's potential, while ensuring that costs are effectively managed and optimised.

FinOps is not just a practice, but a mindset. As companies continue to adopt the cloud, it is essential to have a strategy to manage and optimise spending. With FinOps, companies can ensure they get the most value from their cloud investment, while ensuring innovation and growth.