In the past few years, cloud migration has become a buzzword for businesses looking to modernize and streamline their IT infrastructure. Cloud providers promise cost savings, agility, and scalability, making the transition to the cloud too good to pass up. However, this rush to enable the cloud without proper spending guardrails in place has resulted in many companies facing unexpected costs, inadequate visibility, and operational difficulties. In this article, we will explore how the rise of cloud migration has highlighted the challenges and importance of Financial Operations (FinOps) and how to navigate through them.
The Rush to Cloud without Spending Guardrails
Despite cost being a primary concern for many CIOs, it seems that in the rush to enable cloud, many companies neglected to put spending guardrails in place. While it’s true that cloud providers offer cost-effective solutions, costs can rapidly add up without proper monitoring and governance. CIOs overcame security concerns and sold cloud to their boards as an efficiency upgrade over on-premises infrastructure. However, the rush to the cloud seems to have created a chasm between enterprise demand and enterprise spend.
Shadow IT as a Result of Gaps in Oversight
Another major concern that has emerged with cloud migration is shadow IT. When IT departments lack the necessary oversight and policies to manage cloud usage, it can lead to vulnerabilities, data breaches, and skyrocketing costs. Shadow IT emerges in the gaps between oversight, as users and departments find ways around controls. This doesn’t just result in inefficient spending, but it also creates operational risk by bypassing services or security protocols.
Complexities in Billing Structures with Multiple Providers
Complicated billing structures are compounded as companies contract with multiple providers for the sake of hybrid cloud deployments. These providers often have different pricing models, making it difficult for companies to have a clear picture of their overall cloud costs. As a result, tracking usage and costs across different cloud providers has become increasingly challenging.
Centralized Cloud Governance Structures on the Rise
To address these challenges, companies are adopting a central cloud governance structure. According to Flexera’s recent State of Cloud report, nearly three-quarters of companies had a central cloud governance structure in 2022. Central governance helps to align goals between different departments, provides clear lines of reporting, and ensures compliance with procurement guidelines.
Core tenets of FinOps for cloud visibility and optimization
To manage cloud costs effectively, companies must adopt FinOps. FinOps is a framework that helps businesses organize their cloud spending around three main pillars: people, processes, and tools. Visibility into cloud usage, clear lines of reporting, and optimization are core tenets of FinOps. Measuring consumption and cost for transparency can be boiled down to individuals and teams understanding their use of cloud services and subsequently, the cost implications of that use.
Communicating data in business terms and linking cost to value
While understanding cloud costs is an essential part of FinOps, it is not enough on its own. The next step is to communicate that data in business terms and then construct a plan that ties cost to value. The linking of costs to tangible business value is where cloud governance and FinOps intersect. Communicating spending within a wider business context empowers teams to make informed decisions that align with company priorities.
Importance of Relevant Data for Crafting a Sensible Business Plan
Relevant data is at the heart of crafting a sensible business plan. Without it, it’s difficult to ensure the business plan makes sense. Comprehensive cloud management necessitates tracking and measuring cloud usage, which helps predict and manage costs upfront. By monitoring cloud usage and analyzing cloud bills, businesses can decide where to allocate resources, negotiate better rates, and make more informed decisions.
The rise of FinOps has highlighted the need for businesses to balance agility and cost control as they manage cloud migration. With the increase in distributed cloud deployments, managing costs and reducing complexity is no longer optional. Adapting to the rapid pace of change in cloud technology requires a comprehensive approach that operationalizes cloud cost management via FinOps. Financial operations’ alignment with a broader service management framework is key to realizing the full benefits of cloud technology. It helps rationalize the utilization of human skills and technology systems for efficient spend management, resulting in a better customer experience.