FinOps Tools 101: Optimizing Cloud Expenses

Cloud infrastructure costs are often the highest and most difficult to manage of all business expenses.

Most infrastructure as a service (IaaS) providers offer a pay-as-you-use model that, though mostly fair, brings with it increased volatility and the peril of costs spiraling out of control if left unchecked.

To avoid sticker shock at the end of your billing cycle, you need to work with your team.  When it comes to saving money, we can help each other by sharing ideas and working as a team.

But without visibility, you won't get far.

And cloud costs are difficult to visualize. You need the right tool that will gather, organize, and suggest pricing optimization - a FinOps tool.

What are FinOps tools?

FinOps is the work frame of optimizing and managing cloud financial operations to control costs and maximize efficiency - a way to achieve company-wide data-driven business decisions. A FinOps tool is a tool that enables you to do just that.

FinOps maturity model

The FinOps maturity model helps organizations understand how good they are at managing and understanding their cloud finances. It has three levels: crawl, walk, and run. 

Imagine you're learning to ride a bike. In the crawl stage, you're just starting and don't know much. In the walk stage, you understand how to ride better and can handle most situations. Finally, in the run stage, you're an expert and can handle even the trickiest situations.

But here's the catch – you don't need to be an expert in everything. It's important to focus on what brings the most value. For example, if you're good at detecting minor financial problems, you might want to improve other areas that can help you immediately. Each area of finance can be at a different level, and that's okay.

To determine your level, you look at how much you can allocate resources (money) accurately, how well your forecasts match reality, and how much automation you use. The higher the level, the better you are at managing your finances.

Remember, the goal is to improve and bring value to the business. So instead of being a finance expert in every area, prioritize the ones that matter most to your organization. 

By following this model, you can gradually grow and better manage your finances over time.

FinOps domains

FinOps tools are divided into different categories called domains. Think of them as different sections in a toolbox, each serving a specific purpose. They cover everything from understanding how you're using the cloud, and how much it costs to measure unit costs, manage anomalies, forecast, and more.

But here's the fun part – just like you can build your LEGO creation in different ways, organizations can choose which domains to focus on based on their level of expertise. You can start small, like when learning to build basic LEGO structures. As you get better, you can explore more domains and improve your skills.

The FinOps maturity model helps you understand where you are in your journey. It's like a roadmap that shows you how to go from crawling to walking to running. You don't have to run in every domain right away. Instead, you can focus on the ones that bring the most value to your cloud operations.

Use your FinOps tools the right way

Just like cyclists need the right tools for a smooth ride, engineering, business, and finance teams need FinOps tools to control cloud costs. 

These tools act as helpful companions, doing the hard work while you focus on what's important. They analyze data and provide insights on cutting cloud spend without hurting app performance. Think of them as smart guides, suggesting the best routes to avoid unnecessary detours and obstacles.

With these tools, you can sit back, strategize, and make informed decisions about your cloud expenses. 

What does a FinOps tool bring to the table?

As it turns out, a lot. Here are a few benefits of using a FinOps tool:

• Cost visibility: FinOps tools provide an overview of your cloud spend by breaking down costs by service, resource, and usage. This visibility helps identify areas where you spend more money than necessary and take appropriate actions to optimize those costs. 
  A good tool would do that across your entire cloud environment, not only providers such as AWS or Azure, but also include data warehouses, Kubernetes, CDNs, and more.
• Anomaly detection: An ounce of prevention is worth a pound of cure. Whatever metric systems you're using, detecting unexpected spikes in cloud spend is crucial in keeping cloud costs in check. 
  You would also be able to detect anomalies on teams and environments, not only cloud services. By identifying unusual patterns, you can investigate and address any issues causing increased costs or inefficiencies.

• Cost allocation: FinOps tools allow you to allocate cloud costs accurately and efficiently across teams, departments, or projects. 
  Some tools can even add a dollar sign to your cloud costs services and understand your spend by feature or customer. It gives you the profit number and annual recurring revenue (ARR). This helps you understand who is responsible for specific expenses and enables better cost accountability and optimization.
• Budgeting and forecasting: These tools help set budgets for your cloud spend and track actual costs against those budgets. Some FinOps tools also provide forecasts and predictions based on historical data, enabling you to plan and allocate resources in the most cost-effective manner.  

• Optimization: A complete FinOps solution would do all that while automatically detecting cloud waste, giving your dev teams insight they can use, and actively optimizing services such as AWS EC2–usually within the same pricing model without adding fees.

Choosing the right FinOps tool for your business

There are dozens, if not hundreds, of FinOps tools available on the market. 

Make sure you choose the right one for your business by hosting regular discussions with your team. Talk about the features you'll likely need the most, and look for key capabilities such as:

• Comprehensive cost reporting: Look for a FinOps tool that offers detailed and comprehensive cost reporting. It should give you a clear breakdown of your software expenses, allowing you to understand the costs associated with different aspects of your operations, such as resource usage and service charges.

• Easy tagging: Make sure the tool provides easy tagging capabilities. This feature lets you categorize and label your cloud resources, applications, and services with relevant tags. It helps you track costs, allocate expenses, and identify areas for optimization by providing a structured way to organize your spending.

• Cost allocation and chargeback: Choose a FinOps tool that supports cost allocation and chargeback mechanisms. This functionality enables you to distribute costs to different teams, departments, or projects based on their resource consumption. It promotes transparency and accountability within your organization by ensuring that expenses are appropriately attributed.
• Customizable dashboards: When choosing a FinOps tool, prioritize options that enable different teams, such as finance and engineering, to create their own reports with the specific data they need to see. This flexibility allows each team to customize their dashboards according to their unique requirements, ensuring they have the relevant cost insights at their fingertips.
• Support for multiple cloud platforms: Ensure the FinOps tool integrates seamlessly with your chosen cloud service providers. It should be able to automatically retrieve cost and usage data from platforms like AWS, Azure, or Google Cloud. This integration provides you with an accurate and up-to-date view of your financials across multiple cloud platforms.
• Cost optimization: Make sure your tool helps you actively reduce spend, make better commitments, reduce waste, and increase efficiency
• Unit economics: Make sure a solution you use can go beyond the cost per service, such as namespace or EC2. Understand how much you spend per customer and how to improve it. This is the basis for a profitable business.

Best practices for implementing a FinOps tool

Once you've chosen the right FinOps tool for your organization, it's essential to implement it effectively to get the most out of it. 

Train your team

Provide comprehensive training to your team members, especially those involved in DevOps and finance. Ensure they understand how to navigate the tool's interface, generate relevant reports, interpret cost data, and make informed decisions based on the insights provided.

Integrate the tool with your existing cloud infrastructure

Ensure seamless integration of the FinOps tool with your existing cloud infrastructure. This integration allows for accurate data collection and provides a holistic view of your cloud costs. It may require configuring API access, establishing connectivity with your cloud service providers, and ensuring data synchronization between the tool and your cloud environment.

Establish governance policies and guidelines

Develop governance policies and guidelines that outline best practices for using the FinOps tool. This includes defining budget thresholds, approval processes for resource provisioning, and guidelines for cost optimization. By establishing governance policies, you ensure consistency and accountability in managing your cloud costs.

Set up monitoring and alerting mechanisms

Configure your FinOps tool to provide real-time monitoring and alerting mechanisms. Set up alerts for cost thresholds, unusual spending patterns, or sudden spikes in usage. This allows you to proactively address cost-related issues and take immediate corrective actions.

Track your cloud costs regularly

Use the reporting and analytics capabilities of your FinOps tool to track your cloud costs on an ongoing basis. Monitor trends, identify areas of overspending, and analyze cost allocation across different teams or projects. By staying proactive, you can make timely adjustments and ensure your costs remain under control.

Continuously optimize your cloud costs

Optimizing your cloud costs is an ongoing process that requires continuous effort and analysis. By regularly reviewing and optimizing your spending, you can ensure that you're making the most of your cloud resources and maximizing cost efficiency.

Managing cloud costs is critical for modern businesses

Managing cloud costs can be tricky in a globalized world that favors convenience and speed. But there's nothing to worry about. We can learn from each other (and from tools) in our quest for anything, including better cloud cost management. 

Let's summarize everything we've learned so far.

Effectively managing and optimizing cloud costs is a critical aspect of modern business operations. By leveraging a FinOps tool, you can gain visibility into your cloud spending, identify areas for improvement, and take proactive steps to control costs. 

Remember to choose a tool that aligns with your organization's needs and offers features such as cost reporting, tagging, cost allocation, customizable dashboards, and support for multiple cloud platforms. Choose carefully in a saturated market.

Once you have implemented a FinOps tool, train your team to utilize its capabilities effectively and integrate it seamlessly with your existing cloud infrastructure. Establish governance policies and guidelines to ensure consistent cost management practices.

Then, regularly monitor and track your cloud costs, analyze spending patterns, and identify anomalies. This will help you continuously optimize both your cloud costs and app performance.

Searching for other ways to manage your cloud costs? Learn more about data deduplication and how it can help remove redundant data to reduce data storage costs.