When dealing with some of the large enterprise migrations to the public cloud a few years ago, it was immediately clear that a huge process gap in the finance operations of these companies was not only making the finance controller miserable but also challenging the cloud teams as to their autonomy and in general, ability to deliver quickly on the flexibility and speed that the cloud promised.
A new process incorporating the peculiar nature of the cloud and the company’s set of rules and operations was badly needed, so FinOps (or as it’s called today) was born.
What is Azure FinOps?
The term “FinOps” is a relatively recent concept, such as the field of cloud computing to which it refers, and its exact origin can be challenging to pinpoint. It gained popularity around 2016 when the FinOps Foundation was founded.
The foundation aims to promote best practices, education, and standards around managing the financial aspects of cloud services. The term reflects the intersection of financial and operational considerations in the context of cloud spending.
FinOps is sometimes perceived as short for Financial Operations, but it also includes the concept of DevOps, as it’s a collaborative approach that bridges finance, operations, and engineering teams to help them optimize and gain control over variable and flexible cloud spending.
In the dynamic landscape of cloud computing, where costs fluctuate based on usage, FinOps provides a framework for managing expenses effectively. This collaborative effort empowers the teams to make informed decisions, optimize resource allocation, and ultimately achieve financial visibility and control over their cloud spend.
Read more: 6 Azure FinOps Principles to ensure financial accountability
In essence, FinOps combines the financial discipline of an OPEX model with the company’s operational excellence, combining the DevOps discipline to achieve a perfect blend of modern cloud-native technologies.
Key components of Azure FinOps
Conducting a cost assessment is a foundational step in the FinOps framework, providing a comprehensive understanding of cloud expenditure. The process involves identifying cost drivers and scrutinizing the elements contributing significantly to overall expenses.
Resource optimization
This meticulous examination allows organizations to pinpoint areas where adjustments can be made for greater efficiency. Simultaneously, the assessment entails identifying potential savings, uncovering opportunities to optimize resource usage and enhance cost-effectiveness.
Setting cost optimization goals follows, wherein organizations establish clear objectives to align their cloud spending with strategic business priorities. This proactive approach ensures that cloud resources are utilized effectively and contribute directly to overarching financial and operational objectives.
Governance and compliance
Establishing cost governance is a critical facet of effective financial management in the cloud. This involves defining budget limits and thresholds and providing a clear financial framework within which cloud operations operate. By setting these parameters, organizations create a structured environment that ensures spending aligns with predefined financial goals.
Additionally, implementing cost control measures is an integral part of this governance strategy, offering a proactive means to manage and regulate expenses. These measures serve as checks and balances, allowing businesses to maintain financial discipline while harnessing the flexibility and scalability offered by cloud services.
In essence, establishing cost governance is about fostering a culture of accountability and control, where financial decisions harmonize with overall business objectives. Leveraging Azure cost management tools is instrumental in maintaining financial transparency and optimizing cloud expenditures.
Azure Cost management
Utilizing Azure Cost Management and Billing provides a comprehensive view of resource consumption and associated costs, allowing organizations to track and analyze expenses effectively. This tool serves as a financial compass, guiding users through the complexities of cloud billing. Exploring Azure Advisor recommendations further enhances financial efficiency by offering tailored insights and best practices.
By leveraging these Azure FinOps tools, businesses gain the insights needed to make informed decisions, enhance cost-effectiveness, and align their cloud spending with strategic goals, ensuring a well-managed and financially optimized Azure environment.
What do companies gain by adopting Azure FinOps?
Leveraging the Azure FinOps best practices that have been thought up and tested to suit most customers is the easiest and quickest way of kickstarting your FinOps process. Still, every company is different, and so is their use of cloud, which has to be intersected with the FinOps framework.
The benefits of this approach are immediate: companies not only gain full control of their cloud spending but every technical (and so financial) decision will be taken in the interest of business goals and overall better usage of the innovation platform.
In many cases, companies will be able to fund part of their innovation directly through the savings out of the cost optimization phase, closing the loop on technical debt and the architectural tradeoffs that all contributed to the choice of a public cloud platform.
Implementing Azure FinOps using Native Tool
Azure Cloud is a comprehensive and scalable platform to build, deploy, and manage applications. A few key components play a vital role in optimizing and controlling cloud spending:
Enabling cost analysis and budgeting
The Cost Management blade in the portal is the most important aspect of Azure FinOps, and it involves tracking, analyzing, and forecasting expenses to ensure efficient resource allocation. Many companies approach a FinOps discipline by starting with cost management, realizing soon that one cost-saving initiative was not enough to ongoing control of cloud spend.
Configuring alerts and notifications
This ensures timely insights into budget deviations and spikes, and in some cases, even bug fixing of an application that has gone haywire.
Optimizing resource usage
Resource optimization focuses on maximizing the value of cloud resources, identifying underutilized assets, and implementing strategies to enhance performance while minimizing costs. Its mantra is “use only what you need,” making laser-cut choices to run your applications smoothly. Azure Advisor can also be customized to display your choice of usage % of a VM.
Utilizing Azure Reserved Instances
Leveraging Azure Reserved Instances and Savings plans, once your virtual data center is streamlined, provides significant cost savings compared to pay-as-you-go models.
Read more: Azure Savings Plan vs Reserved Instances
Establishing governance and compliance
The next natural step is establishing governance and compliance safeguards: implementing Azure policies helps enforce standards, such as restricting certain resource types or tiers. Enforcing tagging and naming conventions ensures consistent organization and tracking and makes it easier to find your baseline for spending and optimization.
Challenges in ‘Azure Cost Management and Billing’ for Azure FinOps
Complexities in tracking and allocating costs across departments can make it very hard to provide accurate budgeting or predict usage patterns and costs.
Striking a balance between governance and flexibility can also be a delicate task: stringent policies may slow down innovation and paralyze DevOps, while loose policies may end up with unexpected bills.
Navigating these challenges requires strategic planning, ongoing optimization efforts, technical and architectural tradeoffs, and a keen understanding of internal dynamics and applications.
Conclusion
In summary, for an effective Azure FinOps discipline, financial, technical, and operational excellence must come together. Picture it as a roadmap, helping you steer your cloud spending in the right direction, making cost-saving choices that enable innovation on new projects.
The road is obviously full of obstacles. Tracking and allocating costs can be challenging to master, and striking the right balance between control and flexibility is often a tightrope between innovation and governance. But with the proper knowledge and strategies, companies can confidently navigate these challenges, ensuring their Azure FinOps journey is cost-effective and operationally efficient.
