Nicola Sfondrini – Partner Digital and Cloud Strategy at PWC.
As cloud utilization steadily increases, FinOps has emerged as an essential practice to help organizations keep their cloud spending under control. This trend is rising even faster, though. As cloud infrastructures grow in complexity, and hyperscalers find themselves managing workloads spread across private and hybrid clouds, the monolithic FinOps model is effectively dead. FinOps must be extended to private and hybrid clouds, and integrated into the incumbent ITIL processes, to help organizations improve their financial governance, resource reuse and service delivery.
The Complexity Of Hybrid And Private Cloud Environments
Private and hybrid cloud models can offer firms more control over sensitive data and parts of businesses that are most core and critical to the firm while leveraging the scalability and flexibility of public cloud services. A hybrid cloud can incorporate on-premise infrastructure and public cloud services, balancing cost, flexibility and security.
However, this flexibility brings significant difficulty in cost tracking and management between the different environments. Private cloud costs are capital expenditures (cap ex), while public cloud costs are operational expenditures (op ex). Hybrid cloud environments involve a mixture of these models. It’s important to track these costs in a unified way to drive efficiency and cost optimization. Otherwise, enterprises will end up overpaying, underutilizing resources and struggling to balance their budgets across different cloud platforms in a coherent way.
Key FinOps Principles For Private And Hybrid Clouds
To successfully move FinOps practices to these complex environments, companies should adhere to the following best practices:
• Set up an environment for cloud services that are sustainable, and are based on “showback” and “chargeback” mechanisms.
• Provide services and functions for costs and performance as part of an operating model for private and hybrid clouds.
Unified Cost Tracking and Reporting: FinOps should enable one view into the costs of the cloud, offering financial governance and visibility across public and private clouds. That allows unified reporting across all platforms, which enables visibility to the department and up to a CFO, with a single pane of glass into where dollars are spent and how resources are being consumed.
Cost Allocation and Showback/Chargeback Models: Cost allocation models assign the cost to departments or operational units so that no department can avoid holding itself accountable. Cost allocation underpins the creation of showback and chargeback models, where teams are given insight into how their usage drives the total cost of the cloud, and also encourages good stewardship.
Operational Optimization: Operational optimizations can be harder to achieve in private and hybrid clouds, with different provisioning environments. Ensuring cost optimizations can require regularly checking for idle resources, rightsizing instances and decommissioning idle services. FinOps can automate optimizations, identify wastage and enable overcoming it.
Automation and Cost Control: Besides helping manage hybrid environments, automation is also critical in enforcing cost controls. This could be, for instance, to turn off non-production environments out of hours, or to scale up and down based on demand. Automation can help avoid the organization overpaying for resources that aren’t needed and ensure resources are allocated only when they are required.
Governance and Compliance: Private and hybrid cloud environments are often bound by strict governance and regulatory compliance policies. Governance is a major consideration because private and hybrid clouds will generally be subject to rules such a separation of production and pre-production environments, and stringent governance and regulatory compliance policies. FinOps can guarantee these environments are managed in such a way as to avoid compliance risk while still providing the necessary financial accountabilities. For instance, it could track how data is moved between environments, as well as identify and cost out all of the compliance activities. This could potentially avoid cost-inflating budget overruns.
Integrating FinOps With ITIL Processes
ITIL is a collection of best practices for aligning IT services with business needs and provides a set of processes, functions and tasks for effective service management, delivery and improvement. Its concepts, principles and practices can be applied to cloud as well as non-cloud areas. Through the adoption of FinOps best practices, organizations can balance the cost-efficiency of cloud consumption and meet service-efficiency requirements through ITIL processes.
Service Strategy: FinOps provides financial insight into ITIL’s service strategy phase, helping to inform cloud service design decisions. The focus is on creating appropriate structures and standards that help ensure desired business outcomes while keeping costs low.
Service Operation: Real-time cost tracking and reporting via FinOps helps teams monitor cloud usage and take action in response to operational requirements, such as allocating cloud resources in a manner that limits unnecessary expenses.
Continual Service Improvement (CSI): FinOps contributes to the CSI phase to provide an ongoing financial view that informs cloud cost-optimization and enables improved service delivery over time. FinOps continuously analyzes cloud usage and costs to tune cloud strategies and improve cloud service delivery.
The Future Of FinOps In Hybrid Cloud
Moving forward, for those adopting a hybrid and multicloud strategy, FinOps will become an important consideration. It can help increase cost efficiency, improve resource utilization and maintain financial accountability for the organization while enabling advanced analytics, automation and machine learning.
With this in mind, extending FinOps outside public cloud silos, and tightly coupling it with ITIL processes, will enable enterprises to deliver integrated and holistic governance based on financial and operational decisions to optimize cloud spend, ensure regulatory compliance, drive overall efficiency across hybrid and private clouds, and navigate the next generation of cloud complexity.
Forbes Technology Council is an invitation-only community for world-class CIOs, CTOs and technology executives. Do I qualify?
Read the full article here
