As a CFO, how can I get a grip on my cloud computing costs?
At first glance, cloud computing appears cost-effective. The pitch, whether Microsoft, Amazon or Google is that it will be cheaper than running your own data centre or on-premise system because:
- You only pay for what you need
- Other people carry the cost of buying the hardware
- Other people carry the cost of operating and maintaining that same hardware
- Other people fix it when it goes wrong
The reality is cloud computing comes with pitfalls that can lead to higher than expected costs. Avoiding these and getting the full cost benefit of cloud is where FinOps comes in.
Doesn’t cloud computing mean I only pay for what I need?
Cloud computing means you pay for what you use, which is not necessarily the same as paying only for what you need.
To make sure your usage does not exceed your need, your software needs to be written to ‘do nothing’ when it’s not in use. Depending when and how your software was made, it may need changes or even replacing completely.
Software designed to run 24/7/365 that assumes it runs on dedicated hardware is likely to be extremely costly to run in the cloud.
Remember that for a computer, even if it only runs for a tenth of a second, every second, it’s 90% un-utilised, which means it could be run for 10% of the cost, if designed for the cloud.
Use Cloud native software designed to only consume resources that you need, so that you don’t pay for usage that you didn’t really use
Doesn’t cloud computing mean other people carry the cost of buying and operating the hardware?
The vendor of the cloud platform is of course the one who incurs all the real costs of operating the data centres where the cloud really lives. These include the primary costs of:
- Physical computer hardware, new and replacement
- The estates where the data centres are located
- Operations teams to keep them running
- Energy consumption costs
But it would be cloud naïve to imagine they are not passing those costs on, with margin built in, to you. Those costs are shared between, which means that whichever tenant is not optimising their consumption is subsidising other people’s businesses.
Optimise your cloud consumption so that you don’t pay to subsidise other businesses’ usage
Doesn’t cloud computing mean other people fix it when it goes wrong?
Consider that cloud computing boils down to your software running on someone else’s computers.
Your cloud vendor is responsible for making sure the underlying platform is working correctly, and to fix things quickly and quietly so that you, and especially your customers, feel no impact from both planned and unplanned outages.
But you, or your vendors, are still on the hook to keep your software working properly, and to architect your system so that it takes advantage of the failsafe features provided. Again, if software has not been specially developed to thrive in a cloud environment, if it’s not cloud native, then a team of humans is still going to be required to turn it off and on again whenever something goes wrong whether in your software itself, or in the underlying cloud infrastructure.
Automate monitoring and system recovery as much as possible so that you don’t need to pay a large team of humans to be available in case of a problem.
How can I minimise my cloud computing consumption OpEx cost?
From the CFO’s point of view, one fundamental difference between using your own hardware, wherever it lives, and using the cloud is that all of your cloud costs are OpEx. There is no asset to depreciate over the lifetime of the installation. All costs are immediate.
As a CFO therefore, you should make sure that your IT and/or engineering functions are implementing the FinOps best practice for cloud computing optimisation.
What is FinOps and how can it help me reduce my cloud costs?
FinOps is an operating model for continuous optimisation of computing consumption cost, implemented in three steps:
Step1 Audit your current costs and baseline
- Make sure the business is actually capturing and analysing data on your consumption
- Often, the data is available but not readily understandable or circulated to relevant parties
- Document and share the data with finance, IT, engineering, operations teams and most crucially of all, with the teams building and operating the software and systems running in your cloud themselves
- If the teams building the software haven’t had feedback on the operating cost then they can’t be expected to optimise it
- Don’t rely on your sysadmin or infrastructure team to do all the optimisation, they only have a few levers to pull compared to the what the development teams can do
- Look for immediate and obvious opportunities for savings
- Unused development environments, excess reserved capacity, end of life applications, unarchived old data and inefficient data transfers are all potential low hanging fruit
Step 2 Mandate optimisation to be considered for all future changes
- New additions to the system should have their cloud consumption estimated during the architecture design phase, and validated during commissioning
- Similarly, changes to existing software present an opportunity to reconsider architectural choices made previously in light of real world feedback
- Align across the organisation on whether you are optimising for performance, for cost, for reliability or what is the balance between the three
- Changes identified as being necessary to make optimisations need to go on the development backlog, after all, if it’s not in Jira* (other tools are available), it doesn’t get done
Step 3 Embed a culture of continuous optimisation
- Create a feedback loop so that all teams, internal and external, receive detailed consumption reports on at least a monthly basis
- Agree an appropriate cadence for each part of the system to more formally review the consumption depending on proportion of consumption, rate of change, business criticality and other factors
- Make development teams responsible for their own consumption cost, including vendors
What are the next steps to reducing cloud consumption costs with FinOps from Vertex Agility?
Our FinOps implementation service starts with a cloud consumption workshop to kick off your Step 1 audit. Contact us now to book your workshop. hello@vertexagility.com
We’ll then guide you through the cloud consumption analysis process, and build your transformation plan to implement steps 2 and 3 to affect permanent change and continuous optimisation of your cloud costs
Get in touch