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5 ways to maximize your ROI on cloud computing (Using FinOps)

Cloud computing costs can add up. Use these techniques to get the highest return on your investment, make data-driven decisions, and manage tradeoffs.

Apr 16, 2024 • 4 Minute Read

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  • Cloud
  • Engineering Leadership
  • Business

These days, organizations are being asked to do more with less. Because of this, many expenditures come under scrutiny, and any costs need to be evaluated to make sure you're making a return on investment (ROI). When it comes to cloud computing spend, FinOps is a framework you can use to make sure you're getting the most for your money (and be able to prove it).

What is FinOps? 

FinOps is a portmanteau of "Finance" and "DevOps". According to the FinOps foundation, it’s an operational framework and cultural practice that enables organizations to optimize the return on their cloud investment, drive data-driven decision making around cloud architecture and usage, and foster cooperation  and collaboration between technical, finance and business teams.

Why was FinOps invented?

These days, cloud is tables stakes, with nine out of ten organizations using it for their technology initiatives. However, only 27% of leaders say their cloud initiatives are driving more customer value --- there is a massive gap between technology adoption and that all-important ROI. 

Part of the problem is consumption of cloud services is variable and changes every day. Coupled with the variable cost model for cloud services --- and lack of visibility into what is being consumed and by whom --- it’s no surprise that many organizations struggle to achieve the most optimal return on their cloud investment.

This is what FinOps aims to solve. Now that we've covered the "What" and "Why" of FinOps, let's delve a bit more into the "How."

FinOps Explained: The 3 Phases of FinOps 

There are three phases to FinOps: Inform, Optimize, and Operate. You can think of these as a circle, with each step leading into the next, starting with Inform --- naturally, you need to know what's going on before you can take definitive action.

1. Inform

The Inform phase is all about gathering data about your cloud cost and usage, understanding who is using what, and why. 

2. Optimize

The Optimize phase is where the cloud cost Optimization activities happen, and here’s where you can reap the rewards of collecting and analyzing your cost and usage data. 

3. Operate

The Operate Phase allows you to continuously improve on your FinOps capabilities, increasing maturity in your processes, establishing metrics to measure success, adding automation and iterating back through the first two phases to grow your FinOps muscle. 

5 actionable steps you can take with FinOps

"All of this is interesting, but what are the actionable steps I can do today, to begin adopting FinOps and mazimise our cloud investment?" To answer that, here are the top five things that will have the greatest impact. 

1. Tag your cloud resources

A solid tagging or labeling strategy is essential  to enable cloud spend to be fully understood. By tagging your resources properly, costs can be allocated to the appropriate team, project, or business unit.

2. Delve into the data

Understanding who is utilizing cloud resources is the key to making informed decisions. This will take effort from a cross-functional team, with representatives from technology, finance and business to help contextualize the data.

3. Empower your teams 

FinOps is a team sport, and teams should feel involved and empowered to contribute to decisions around cloud optimization. Your technologists in particular are often gifted problem-solvers, and uniquely equipped to come up with creative solutions to help optimize your cloud environment.

Hold regular meetings to review the data, track progress, plan optimization strategies and collaborate. This will help foster transparency, trust and accountability. 

4. Pick the low hanging fruit 

Here are some easy places you can start optimizing your cloud spend:

  • Tackle wasted resources by using monitoring data to identify under-utilized systems so they can be right-sized. 
  • Terminate resources that are no longer needed, for instance virtual machines that were created for a Proof of Concept and are no longer required.
  • Consider stopping non-production instances outside working hours when they are not in use. 
  • Implement auto-scaling, to take advantage of the elastic nature of cloud, and reduce capacity when demand is low. 

5. Take advantage of the variable cost model 

Each of the three main cloud providers (AWS, Azure, GCP) offer discounts for capacity reservations or committed use. By committing to use an agreed amount of cloud resources, customers can save significantly compared to on-demand prices. These discounts can attract savings of up to around 70%. 

It’s also worth exploring if you have any workloads that could be run on spot instances, which let you take advantage of unused capacity that cloud providers offer at up to a 90% discount. Spot instances are excellent for workloads that are fault tolerant, and can cope with being unceremoniously stopped when a spot instance is taken away if the cloud provider needs the capacity. For example batch jobs, or any workload that is designed to easily resume after a failure.

Learning more about FinOps and cloud cost optimization

There are of course many more activities involved when it comes to implementing FinOps. If you’d like to learn more, check out the following courses available on Pluralsight: