Is your Business in Control of its Spend?
Cost reduction and elasticity are major attractions when organizations are looking to move to the Public Cloud. Businesses realize the benefits of immediately scaling up capacity when needed, only paying for what is used, then rapidly scaling down when there is no longer a business requirement. This significantly reduces the cost over the IT landscape’s life while better meeting capacity demand. But it does not stop there.
Controlling costs requires continuous management
80% of enterprises consider managing Cloud spend a challenge(1), and the Public Cloud’s agility and capacity can also be a double-edged sword for any unwary customer. Soft-limits set by the hyperscaler certainly try to create a financial ‘blast radius’ around spend, but often it isn’t the mammoth spend increases that destroy a business case; it’s the build-up of many small increases over time that can significantly impact costs. Some examples of this include:
- Not deleting old backups
- Running systems when they were meant to be shut down
- Not buying Reserved Instances which were planned to be purchased
- Not including additional costs for services, including monitoring
The good news is that all of these are addressable, and, once resolved, the public Cloud should provide a more cost-effective way to run Enterprise IT. However, it requires a new way of thinking.
Accelerate the benefits, not the costs, with FinOps
The newest approach to effective Cloud management in Enterprise IT is Financial Operations or FinOps. FinOps brings financial accountability to the variable spend model of Cloud. One of the many benefits of FinOps is that it can manage the variable spend in a way that does not obstruct agility within the business. It achieves this by providing more modern cost management approaches before and after any changes have been made, which are more focused and real-time than classic cost control processes. A proper understanding of the level and variability of a business’s future demand can also help an organization calculate spending commitment, maintain continuous improvement and optimize cost savings.
Cost Impact Analysis as part of DevSecOps = DevSecFinOps
When modeling a change in the Cloud as part of CI/CD pipelines, FinOps allows you to instantly predict the cost change associated with that technical change. This way, the approval of a change for release also approves the Cloud spend budget change. Automation of this calculation is a crucial FinOps enabler as the manual calculation can delay the change to the point where agility is lost.
Detecting and Closing Cost Drift
Should any changes be made outside of the CI/CD pipeline, FinOps surfaces real-time reporting of Actual vs. Budgeted spend, and any drift can be easily identified and investigated. The cost drift typically comes from unauthorized spending or inaccurate modeling of spend and managing this can significantly improve FinOps controls in the future.
Ongoing Cost Optimization
Public Cloud pricing is geared to make life much easier for customers to consume. However, it extends across a vast area of services, use-cases, and commitment models. Like every other part of the Cloud, pricing is subject to ongoing innovation. It can present a new set of challenges to the business when understanding the overall pricing and opportunities to optimize innovation. For example, when AWS released gp3 storage, it offered organizations service improvements and cost reductions. However, the pricing for gp3 now has an additional dimension, meaning in some edge cases, the pricing improvement would not be as noticeable. So, as part of FinOps, it’s highly recommended that a Cloud-pricing technical expert should always scan for known improvements on the landscape and research with the hyperscaler for new enhancements to adopt.
How to get to FinOps?
There are several paths for an organization to get to a more FinOps-based approach, and the easiest first step is to gain instant visibility and control of any cost drift. Some Cloud providers in the market offer automation for SAP on AWS using a mobile app, which gives IT leaders a personal at-a-glance view of the cost drift of the Cloud spend. The app can immediately provide visibility of any unexpected spend and allows enough time for the business to make any adjustments in advance of receiving monthly Cloud invoices. It also ensures that anyone in the company who makes a change in the Cloud is confident that senior leaders can see any change’s cost impact. They will then contact the technical expert directly if the change causes any unexpected cost drift.
This transparent process gets to the heart of FinOps, which uses technology to support the cultural change ensuring the technical teams understand they are now responsible for the spend. The IT person will no longer be just ‘provisioning’ capacity; they will directly ‘procure’ capacity on behalf of the business.
A more complex step in FinOps is the introduction of a Financial Impact Assessment into the CI/CD pipeline. Primarily, this complexity arises from the need to:
- Accurately model the change
- Understand the impact of different contract models on the price
- Deal with cost branches
Although the process may initially seem daunting to a business, it allows a company to be continually aligned to a budget when successfully implemented. And, by doing this, the cost risk is immediately reduced.
A financial assessment is the first step for optimizing cost savings in the Cloud
One of the best ways for any business to understand their current IT landscape is to engage a specialist to execute a SAP on AWS Landscape Assessment. As a framework, this type of assessment should aim to cover the following topics and closely examine what has been set up versus best practice and provide a company with the following observations and recommendations:
- System Uptime Scheduling vs. Requirements
- HA/ DR Setup vs. Recoverability Requirements
- Right-sizing of Compute Instances
- Adoption of Reserved Instances and Savings Plans
- Data Retention Actuals vs. Requirements
- Usage of Storage Types
- Native Services vs. Installed Software
Enterprises can immediately benefit from lower OPEX costs
Understandably, a customer doesn’t want to admit to having lost control of their company spend, so it’s not a surprise that enterprises never want to go public with these types of case studies. However, it is beneficial at this point to share some real-life examples of how enterprise customers have immediately benefited from some impressive cost savings just by simply conducting a Cloud assessment of their IT infrastructure.
Case Scenario 1
An EMEA-based customer was about to go live with SAP on Hyperscaler and asked Lemongrass to conduct a pre-go-live check of their architecture. In less than one day, the assessment identified $500,000 of savings that could be achieved and how the business could deliver a better service outcome. Lemongrass implemented these changes, and the customer was able to cover the costs of the evaluation and remediation from a small portion of the savings achieved. The financial benefits included no new CAPEX for the customer and an immediate reduction in their ongoing OPEX costs.
Case Scenario 2
A USA-based customer ran SAP on Hyperscaler for approximately seven months before asking Lemongrass to conduct a Cloud Landscape Assessment. Within four days, Lemongrass identified savings of $150,000 per month. Again, the customer incurred no new CAPEX and benefited from a dramatic decrease in OPEX, which funded ongoing innovation and improvements in their IT landscape.
- 1. 2020 Flexara State of the Cloud Report, April 2020.
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