The Challenge of Financial Control in the Cloud
Many organisations begin their cloud journey by re-hosting some existing applications in cloud environments like AWS or Azure. Once these platforms have moved, especially production platforms, these systems are often forgotten about, just like in the old days of on-premise hosting. In other words, the business often don't update their business processes to fit in with the new realities of cloud-based consumption model.
Organisations understandably expect these systems just to work, and the underlying infrastructure to be available whenever its needed. The problem with this approach is that systems get left "on" when they're not being used - and this invariably this leads to cloud cost blow-outs due to inefficient management of cloud-based resources.
This approach can at best lead to "bill-shock" - and in some cases - be a devastating blow to the business' sustainability. There have been examples where a "fat finger" from a relatively junior technical staff member has accidentally "switched on" cloud-based resources that have cost $100,000 per day! Examples of this type of cloud-related budgetary blow-out are relatively rare - but they have happened - and all without the usual financial approval processes required for this level organisational expenditure. It therefore poses a significant risk to organisations working with cloud-based resources.
New thinking Required
In the on-prem days, management around ongoing IT costs were mainly focussed on software maintenance and support agreements for the underlying hardware. The business didn't know or particularly care about the utilisation of the hardware being used, provided there wasn't a performance problem, as most of the hardware cost had been spent "up-front". Such an approach to lead to "over-spend" on the hardware resources - as technical managers would try to "future proof" their technology resource requests, knowing that the underlying hardware would need to host existing and new applications for the next few years.
With the introduction of cloud, businesses are charged by the amount of cloud-services "provisioned" - not "utilised" - and therefore new thinking about financial management of cloud-based resources is required. The difference between "provisioned" and "utilised" is very important because if too many cloud resources are "provisioned" - or made available to the organisation to use - then the costs incurred will be much more than what is required. This has lead to a new term being defined - and its called "FinOps" - or Financial Operations - which is designed to more tightly control the resources an organisation "provisions" in the cloud environment.
Financial Operations (or FinOps) is a term used to describe the management of organisation costs relating to cloud technologies. It's a term used to describe the financial controls and processes required to ensure "value" is being derived from cloud financial expenditure, and to ensure all resources are optimised. If FinOps is implemented correctly, cloud resources which are not required are "switched off" and this may include systems like "test" and "development" systems, or in some cases "production" systems (during idle times like overnight). It allows organisations to more tightly monitor and control the cloud resources being "provisioned" and to monitor their ongoing "utilisation" levels.
What's your FinOps maturity?
Parsec Pacific has derived a FinOps Maturity Assessment score to measure the effectiveness of an organisation's business process with respect to cloud financial control. When we compare this score with "FinOps" best practices - we are able to derive recommendations which will allow your organisation to improve this score, and better manage FinOps related risk. This will allow your business to accurately measure your cloud-related financial operations business process maturity. Once your FinOps Maturity Score has been assessed, a series of recommendations will be provided on how to bridge the gap between your current state processes, and the FinOps best practice process settings.
For more details on our FinOps Maturity Assessment please contact us here.
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