Beyond the Nastygram: Cloud FinOps for the Enterprise with Ness Digital Engineering
By Subir Grewal, Global Head, AWS Practice – Ness Digital Engineering
By Maysara Hamdan, Partner Solutions Architect – AWS
|Ness Digital Engineering|
Imagine the following scenario: a business unit could save the enterprise $15 million a year in proprietary database licensing costs by migrating to open-source databases. The cost of migration is estimated at under $10 million, providing positive return on investment (ROI) within eight months.
Nevertheless, the business unit will not fund this migration. Why not? The licenses are paid for from an enterprise-wide pool, whereas the cost of migration would have to be funded by the business unit out of its own IT budget. This is a prime example of organizational misalignment.
Here’s another scenario: an application modernization effort for a batch-driven analysis application would cost $1 million to execute and result in a containerized implementation reducing idle compute and scratch storage. The proposal for migration originates with a team that lacks strong executive sponsors. In the absence of an experienced arbiter with the organizational weight to fund the effort, the proposal goes nowhere.
Or consider a third situation: a legacy software-as-a-service (SaaS) application is migrated to the cloud as a lift and shift operation. The product’s technology team resists change, perhaps because the workload is brittle.
Any pressure to modernize and employ cloud-native, responsive architecture is stymied by engineers who are opposed to any modernization. Over time, the product atrophies as features are delayed and competitors that have invested in modernization develop lower cost offerings.
These stories are but a taste of what can happen when an organization accustomed to managing technology via one-time purchasing decisions encounters the variable and dynamic cloud environment. Deep-seated, expensive misalignments cannot be addressed with budgets, alerting, and quarterly notifications. They require something more.
In this post, we outline an approach for enterprises seeking a mechanism to align cloud costs with their business value. We’ll discuss various change management challenges that such efforts may encounter and share ways to address them.
Ness Digital Engineering is an AWS Premier Tier Services Partner with Competencies in Financial Services, DevOps, and Migration. Ness works with organizations to ensure Amazon Web Services (AWS) infrastructure will support current business projects, as well as future strategic initiatives.
FinOps Can Only Rescue Those Willing to Grasp the Lifeline
A robust FinOps function can solve chronic issues that plague cloud cost management at large enterprises, such as:
- Failure to allocate costs at the right granularity and in real-time.
- Inaccurate forecasts and inconsistent estimation across business units.
- Inability to accurately and consistently measure the net benefit of application modernization.
- Finance, technology, and business/product owners working at cross-purposes.
The hardest of these to solve is the last one. Structural impediments and competing priorities often doom well-meaning but toothless efforts to improve cloud cost management.
Figure 1 – Addressing cloud financial management challenges.
Cloud cost reduction efforts driven solely by finance functions cause friction and are resisted by technology teams who decry mandates as arbitrary. This is especially true when cost management is limited to a monthly or quarterly nastygram intended to prompt lower spend at any cost.
Meaningful cloud cost optimization efforts require an investment in modernization and automation. When led by engineering teams, these efforts can flounder in the face of competing priorities. Without the active support of enterprise finance functions, ambitious modernization programs that deliver long-term benefits rarely take off.
These dynamics leave product owners arbitrating technical claims they are ill-equipped to adjudicate, and business heads wonder why the cost savings and agility promised by a move to the cloud haven’t materialized.
These misalignments result in organizational friction and inconsequential efforts. An effective FinOps function must be aware of these challenges and prepared to confront them. It must blend the discipline of finance with the adaptability of DevOps to create an engineering-aware financial cost management function that’s effective at identifying and championing the most impactful efforts.
The Older Your Organization, the Harder it Can Be to Change
Much of the FinOps literature is driven by the experience of digital-native enterprises. Yet many of Ness Digital Engineering’s clients are enterprise and older than cloud computing, or even computing itself. Their organizational culture needs to be addressed to deliver effective cloud cost management.
Most enterprises, even large ones, that have historically relied on procurement teams to control costs have not re-imagined their function. Legacy procurement functions are ill-equipped to manage the variable cost and dynamic architecture world that cloud computing offers.
Many organizations with such a history can struggle to produce or manage the large amounts of data that an effective cloud cost management effort requires. When pressed, they will deploy one or more shrink-wrapped products that purport to offer insightful analysis of cloud costs.
Without few exceptions, these products end up supporting a process that results in a monthly or quarterly notification sent to technology owners. This may result in reducing some wasteful spend, but only months after it has begun to accrue costs.
Such an approach ignores the root cause of wasteful spend, trimming inefficiencies in running workloads months after they first manifest. Worse yet, it pits finance and technology organizations against each other, exacerbating organizational friction.
For example, a fundamental cost management process for most organizations has been the solicitation of competitive bids. This has no direct analogue in the cloud computing world. Migrating workloads between cloud vendors to take advantage of marginal differences in the cost of services is not worth the effort.
Rather, what needs to happen is a retreat to first principles. A competitive bid approach establishes a process and a discipline by which value and cost can be evaluated prior to decision making. The analogue in the cloud computing world is not a competitive bid between cloud vendors, but instead a cost comparison between different architectures or managed vs. self-managed services.
How an Effective FinOps Function Can Deliver
The true value of a cloud platform to any large enterprise is that it democratizes the ability to experiment and create. It removes scarcity from the vast array of impediments confronting a team seeking to innovate.
Figure 2 – Data-driven decision making is a key part of your FinOps practice.
The role of cloud FinOps is to enable responsible decision making at the grassroots level in support of operational and product innovation.
Cloud FinOps teams must do the following:
#1 – Support data driven-decision making
- Use a standard taxonomy and dataset to support cloud cost management.
- Analytics tooling to report on cloud costs.
- Accurate cost allocation across profit centers.
#2 – Support cost-efficient platform engineering:
- Consistent total cost of ownership (TCO) analysis of workloads.
- Architecture standards designed for cost-effectiveness and sustainability.
- Systematic pruning of waste in cloud utilization.
- Consistent ROI analysis for modernization efforts, and cloud spend aligned with revenue.
- Report on cloud value to sustain support for initiatives.
#3 – Drive organizational incentives to align cloud costs with value to the enterprise:
- Nudge the organization to align cloud spend to enterprise value.
Bootstrapping a FinOps Function
Cross-organization initiatives have a reputation for meandering around and failing in large organizations. To reduce that risk, the mission, roles, and responsibilities must be clearly communicated to all.
Here are the critical areas to be addressed:
#1 – Organizational mapping
- Understand business drivers.
- Secure support of key sponsors.
- Identify impacted groups.
- Identify areas of friction.
#2 – Socialization
- Form a FinOps startup team with engineers and analysts.
- Achieve quick wins to gain acceptance and support.
- Collaborate with and get support from technology, finance, and executives.
- Converge on a first-year roadmap.
#3 – Operate and iterate
- FinOps teams should adopt an agile culture of learning and improvement. If successful, they are enabling innovation, adaptation, and change for the enterprise. Quite naturally, FinOps teams will have to adapt alongside those they serve.
Enterprises that have relied on a procurement and contracting approach to technology cost management will find that these approaches do not translate well to the more dynamic nature of cloud resources and costs. Heavy-handed approaches driven exclusively by finance or technology functions create organizational friction and generate misincentives.
Therefore, developing a FinOps function is not merely a matter of picking the right tooling or cost containment process; it requires organizational commitment and an alliance between technology, business, and finance.
To learn more about how Ness Digital Engineering’s collaboration with AWS can help you build or mature your FinOps function and optimize cloud spend, check out Ness Digital Engineering’s Cloud FinOps: Maximizing Efficiency and Business Value offering in AWS Marketplace.
Ness Digital Engineering – AWS Partner Spotlight
Ness Digital Engineering is an AWS Premier Tier Services Partner that works with organizations to ensure AWS infrastructure will support current business projects, as well as future strategic initiatives.