Embracing FinOps to Maximize Cloud Value and Control Costs with the Deloitte FinOps Framework

By Hemant Ahire, WW Migrations/Modernization, Principal Solutions Architect – AWS
By Nik Jethi, FinOps Leader – Deloitte Consulting LLP

Deloitte

In the rapidly-evolving landscape of cloud computing, organizations face numerous challenges in managing their IT financials while keeping up with the increasing cloud footprint. Embracing cloud FinOps presents a solution to drive the right governance model and align business and engineering teams to accelerate business value.

Cloud FinOps can drive effective control of ballooning cloud spend and help organizations manage the cost of cloud deployments. This post explores the concept of FinOps, its significance, and implementation details to maximize business value and optimize cloud usage.

Deloitte is a FinOps Certified Service Provider and its services help customers examine and plan for cloud consumption while monitoring costs to minimize cloud-spend waste. Deloitte’s FinOps framework helps organizations align their FinOps maturity journey with business strategy and goals

An AWS Premier Tier Services Partner with AWS Competencies in DevOps, Migration, and many other areas, Deloitte is also a member of the AWS Managed Service Provider (MSP) Partner Program.

Why Cloud FinOps?

Cloud computing has become critical for many businesses, offering a fundamentally different consumption model than traditional IT financial management.

However, the pay-as-you-go subscription-based model creates complexities in projecting and tracking actual cloud usage, leading to a lack of clarity in cloud adoption. The shift from capital expenditure to operating expenditure (CapEx to OpEx) also requires a change in financial management practices.

Furthermore, the ease of provisioning infrastructure at the click of a button has led to engineering teams operating in silos, including finance and procurement. This flexibility can lead to overcomplicated pricing structures, discounting mechanisms, and an inevitable multi-cloud architecture that can result in cloud sprawl and inefficiency.

FinOps brings a culture transformation that unites DevOps, finance, and business teams. It can empower engineering and IT teams while ensuring financial discipline is aligned with business strategy. This could maximize business value and introduces financial accountability to the variable spend model.

Market Trends and Challenges

Research indicates that approximately 33% of total cloud spending is wasted across industries, making cloud spend optimization a top initiative for many organizations. Despite this, companies still expect their cloud costs to grow and anticipate exceeding their cloud budgets.

In FinOps implementation, three primary challenges stand out: empowering engineers to take action, understanding unit economics, and achieving organizational adoption of FinOps.

Deloitte’s FinOps Framework

To effectively manage FinOps, a simple framework comprising six key domains has been developed. Deloitte’s FinOps framework aligns with the FinOps foundation framework and helps organizations navigate the complexities of Cloud FinOps.

• Understanding usage and costs: Gathering and normalizing cloud usage and cost information to make it available for review in other domains.
• Performance tracking and benchmarking: Setting and mapping usage and cost to budgets, forecasting based on historical data, and establishing key performance indicators (KPIs), including benchmarking.
• Real-time decision making: Curating data for stakeholders, improving decision velocity, and aligning organizational processes with cloud operations realities.
• Cloud rate optimization: Defining pricing model goals, making adjustments based on historical data, and managing pricing aspects of cloud services.
• Cloud usage optimization: Taking actions to match cloud resources with actual demand, including predictive right-sizing, workload management, and resource optimization.
• Organizational alignment: Integrating FinOps capabilities with existing organizational processes, units, and technology.

Designing an Effective Cost Allocation Model​ on AWS

Cost allocation is an all-encompassing term to define the assigning or distribution of incurred costs to the beneficiaries of those costs. It does not occur haphazardly during end-of-month or end-of-year cycles, and is defined through revenue or headcount and then costs are allocated to business units or organizational units.

Designing a cost allocation model has to begin with the customers and built for the entire organization. There are four primary stakeholders that include:

• Technology teams: They are consuming or creating the innerworkings of the cost allocation model that eventually becomes the foundation going forward. This team defines how customers and end users leverage it for visibility and control mechanisms.
• Finance and accounting teams: They must operate in lockstep with technology teams and ensure the functional capabilities are validated and tested properly.
• Procurement teams: It’s critical that procurement teams are kept informed on cost allocation process and the model itself. This allows matching of the invoice perfectly based on the design of cost allocation model.
• Business teams: They are the frontlines of any company bringing in the revenues and need proactive visibility with upcoming monthly expenses. The goal of designing an effective cost allocation model must include input from business teams to ensure customers’ business requirements are met.

Following are the important building blocks that are helpful when designing showback or chargeback strategy and cost allocation model:

• Transparent: The cost allocation process must be transparent to end customers. It must be clear on its purposes in terms of how rates or chargeback process is developed.
• Accessible: The data supporting allocation model must be accessible and underpinned by a single source of truth with a proper system of record.
• Simple: Complexity doesn’t equal accuracy, and the same applies with the cost allocation models. Simplification of model helps improve adoption by end users.
• Maintainable: Cost allocation models must be developed based on principles of automation and ease of maintenance.

Leveraging AWS Cost Management Tools

AWS provides a comprehensive set of cloud FinOps tools that engineers, DevOps teams, and finance teams can use to drive measurement and accountability. Over the last decade, AWS has developed a portfolio of cloud FinOps tools to help customers from a cost visualization and cost optimization perspective.

Following is not an exhaustive list of tools but includes key cloud FinOps tools offered by AWS:

• AWS Cost Explorer: Free, out-of-the-box tool that provides insights on AWS cost and usage metrics and is available at entire payer account level.
• AWS Budgets: Allows users to set budgets based on parameters including set of accounts, tags, services, and cost categories. This allows customers to automate cost reporting.
• Cost Intelligence Dashboard (CID): Amazon QuickSight dashboard provides different visibility views into lines of cost. It’s been developed working backwards from customers to supplement reports provided by cost explorer.
• AWS Cost Anomaly Detection: Provides specific target metrics for alerts and leverages machine learning to analyze customer usage and attempts to find anomalous spend.
• AWS Cost Categories: This is a method to group customer spend and allows users to create cost categories with the ability to import services, account, and tags.
• AWS Cost and Usage Report: This tool’s data feeds into other cost optimization tools and provides a scalable model with detailed lines of billing capabilities.

Figure 1 – AWS tools for measurement and accountability.

Deloitte and AWS Impact on FinOps Practice for Customers

Deloitte boasts a well-established FinOps practice, having assisted numerous clients across multiple industries. As a certified FinOps service provider and premier member of the FinOps foundation, Deloitte is actively redefining FinOps standards and strategic direction. Additionally, Deloitte collaborates with the FinOps community to understand and address real-world challenges.

Deloitte’s extensive relationships with AWS, key cloud service providers, and tooling vendors in FinOps ensures comprehensive and effective solutions for clients. Deloitte’s innovative cloud-native artificial intelligence-based FinOps solution, Cloud Billing 360, enables enterprises to visualize, optimize, and control their full cloud footprint at scale.

Depending upon where customers are in their FinOps journey, Deloitte and AWS have jointly developed ways to help customers turn real-world ideas into impactful solutions. Examples include cloud cost maturity assessments, spend diagnostics, and implementations for all cost optimization opportunities. Additionally, long-term FinOps capabilities include the build out of the FinOps foundation, roadmaps, trainings, and FinOps as a service.

Conclusion

Embracing cloud FinOps offers organizations a strategic approach to manage cloud financials, maximize business value, and control costs effectively. By implementing the Deloitte FinOps framework, organizations gain a holistic understanding of their cloud usage and costs to help them make data-driven decisions.

From an operational perspective, organizations are able to optimize rates and usage, and align their cloud operations with overall business strategies. Deloitte’s FinOps experience, comprehensive tools, and support helps ensure customers have the ability to navigate their FinOps journey successfully and achieve cloud financial goals. Additionally, AWS cloud financial management solutions help transform businesses with cost transparency, control, forecasting, and optimization capabilities.

AWS offers a unique set of solutions to help customers with cost management and optimization. This includes services, tools, and resources to simplify cost estimates, set up guardrails, and operationalize cost control. AWS FinOps tools assist customers in organizing and tracking cost and usage data, and enhancing control through consolidated billing.

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