Save Cloud Costs with FinOps

Cloud has become indispensable for business operations today. While it lends flexibility and agility, it can also present a major cost management challenge. Unlike regular IT costs that don't change much, cloud costs can go up and down based on usage and other factors.

This is where FinOps becomes relevant.

A portmanteau of Finance and Operations, FinOps offers a way to manage cloud costs without sacrificing speed or innovation. It isn't just about saving money; it's about making smart choices that add value to your business. It's a collaborative effort where IT, finance, and business teams make data-based decisions.

According to studies, 28% of cloud spending is of a wasteful nature. This can be addressed through FinOps, which can provide visibility into expenses and guide better resource allocation decisions.

FinOps is implemented in three phases that are carried out iteratively: Inform, Optimize, and Operate.

FinOps is implemented in three phases that are carried out iteratively: Inform, Optimize, and Operate.

Inform

The Inform phase is the starting point for smarter cloud financial management. It involves collecting and examining data to make informed choices.

So, what data should you gather? Cloud usage reports to see how much resources are being used, cost reports to track what you're spending, and performance metrics to check if you're getting your money's worth. It is also important to keep an eye on billing alerts to catch any unexpected charges.

To get started, pick tools that align with your cloud strategy and provide clear insights. You can compare your current spending against previous months' spending to spot areas where you can cut costs or invest more.

These are some of the FinOps tools that will help to fetch cloud cost usage data:

• Amazon Cloudwatch: With CloudWatch, you can track expenses, identify trends, and optimize resource allocation to manage your AWS budget effectively.

• AWS Compute Optimizer: An AWS service that recommends optimal AWS Compute resources for workloads to reduce costs and improve performance.

• Azure Monitor: It helps you collect, analyze, and act on telemetry data from your Azure and on-premises environments.

• Azure Advisor: It analyzes your configurations and usage data and provides recommendations to help you optimize your Azure resources for reliability, security, operational excellence, performance, and cost.

• Google Cloud Operations Suite: It helps you keep track of your GCP resources and applications by providing visibility into the performance, uptime, and overall health of cloud-powered applications.

• Google Cloud Recommender: It analyzes your Google Cloud resource usage and suggests ways to optimize costs, improve performance, and manage security.

• AWS Budget: It helps monitor your spending against your budget and sends a warning if you're likely to exceed a preset threshold. This helps you quickly spot and address potential overspending. 

• Third-Party FinOps Tools: Finala (open source), Hystax (free), Infracost (open source), Skypilot (free and open source), etc.

Let’s take the case of Finala. Once integrated, it can analyze your AWS cloud environment, identify underutilized or unused resources, and quantify the loss. In one scenario, we were able to identify a daily wastage of $18.96, amounting to approximately $568.84 monthly.

By consolidating reports from various FinOps tools and collecting input from various teams, including the application development team, you can create a comprehensive high-level summary and identify areas for cost optimization (see sample report below).

Optimize

The Optimize phase is all about leveraging insights to identify opportunities for efficiency and cost reduction. (Note that while FinOps tools can pinpoint potential savings, not all recommendations can be implemented immediately. For instance, a tool might flag a database as underutilized, but if it's critical to ongoing operations, downsizing or termination isn't feasible. A thorough impact assessment is essential before making any changes.)

Here are some common cost drivers that often lead to unnecessary expenses:

• Unused resources: Active cloud services or instances that are not being utilized but still incur charges.
• Over-provisioning: Allocating more computing power or storage than actually needed for a given workload.
• Expensive storage: Using high-performance storage tiers for data that doesn't require fast access.
• Forgotten resources: Cloud assets that remain active and billable after their intended use has ended.
• Inefficient pricing: Not taking advantage of cost-saving options like Reserved Instances or Spot Pricing.

Let’s explore specific best practices for compute, storage, and network optimization that can help tackle these challenges.

Compute Optimization

• Choose the instance type that best matches workload requirements. Understand the nature of your workload. Is it compute-intensive? Does it require high memory? Choose the right instance type based on these requirements. For example, compute-optimized instances are ideal for compute-intensive workloads, while memory-optimized instances are better for applications that process large datasets in memory. 
• Use Reserved Instances for predictable, consistent workloads. If you have workloads with stable and predictable resource demands, Reserved Instances can be a cost-effective choice. You commit to using a specific instance type for a set period, and in return, you get a significant discount.
• Utilize Spot Instances for stateless, fault-tolerant workloads. Spot instances offer spare computing capacity at steep discounts, but they can be interrupted with little notice. They’re ideal for workloads that can withstand interruptions, like batch processing jobs or development and test environments.
• Implement auto-scaling features to dynamically adjust services based on demand. Implement auto-scaling policies to adjust compute resources based on workload changes. This optimizes performance during peak demand while reducing costs during off-peak periods by eliminating idle instances.

Storage Optimization

• Select the volume type that aligns with your performance requirements.. 
• Utilize auto-scaling to minimize storage when not required.
• Eliminate unused volumes to prevent unnecessary expenses.
• Properly tag and label resources for cost tracking and potential savings identification.
• Increase the use of storage classes and use the Lifecycle policy for storage cost savings.
• Set up retention policies for log storage and artifacts repositories to manage resources and reduce costs.

Network Optimization

• Plan networking and routing segments strategically to reduce latency, hops, and data transfer costs.
• Regularly monitor the network to identify cost-saving opportunities.
• Maintain data within the same availability zone and region wherever feasible to reduce data transfer expenses.

Cost Forecasting

Cloud infrastructure changes and events can significantly impact resource utilization. To predict corresponding cloud costs, leverage forecasting tools like AWS Pricing Calculator, Azure Pricing Calculator, and Google Cloud Platform Pricing Calculator.

After optimizing the infrastructure, the improved state must be maintained by regularly monitoring usage and costs while making infrastructure expenses a key team focus.

Operate

The Operate phase is all about making cost management a continuous process and creating a system where everyone is aware of and responsible for cloud spending. It is driven by these fundamental practices:

Consistent use of FinOps tools: The tools employed in the Inform phase are not just for one-time use. Continuous monitoring of cloud expenses and usage is crucial.

Proactive cost management: If prices go up, be ready to change how you use the cloud and look for ways to save money. If you see unusual spikes in your bills, it could mean something's not right. Setting up alerts can help you catch these surprises early. For instance, a warning alert can be set for the Operations team if the costs reach 75% of the budget and a critical alert if it hits 90%.

Enforcement of financial policy: Create financial rules with IT and business teams. Set spending limits and enforce approvals. Creating clear rules and policies for financial management ensures everyone follows the same practices and makes decisions consistently.

Knowledge sharing:  It’s important to keep the team informed about FinOps practices and how they apply to your cloud environment. Regular knowledge-sharing sessions can facilitate the exchange of best practices for optimizing infrastructure costs.

Building FinOps culture: Promote open communication about costs to make better resource decisions collectively. This will inspire creative solutions to financial issues and help everyone feel more accountable.

Monitoring and feedback: Consistently track financial metrics and offer constructive and actionable feedback to team members.

Implementation of best practices: Share best practices across teams to drive continuous improvement. Recognize and reward outstanding cost-saving efforts.

Remember, FinOps is not a one-time effort but a continuous process of learning and adapting. So keep exploring and optimizing, and let FinOps guide your path to efficient cloud management.

Dealing with crippling cloud bills? Our cloud team can help you identify wastage and fine-tune your cloud infrastructure to optimize costs. Write to us!