Why you won't save money on your cloud

FinOps

Around 3 in 4 organizations spend upwards of $1M on their cloud infrastructure every year. And $1M is just the beginning. For 1 in 4 companies, it is $25M per year. For 1 in 40 – over $1B.

When you spend these amounts of money on one thing only, you start keeping a closer eye on the costs because even 5% more than planned becomes noticeable. Companies take the most advantage of the cloud when they get control over the costs. And in the end, saving more may lead you to spend more.

Why? Because the key here is the control itself and not absolute values.

And at exactly this point, companies start to mention FinOps. Or at least speak about it, as it is still a relatively new set of practices. It is steadily gaining ground, and more people start to wonder whether there is something for them in it.

Here are a few pieces about FinOps. If you missed them, then check the posts below:

But why am I getting back to this topic? Because it too is having a “shift-left” moment.

In future articles, I will show you what that means and how you can apply the practices step-by-step to get your cost in check.

However, every journey must begin somewhere. So, there we go.

What is FinOps?

The official definition by the FinOps Foundation says that:

“FinOps is an evolving cloud financial management discipline and cultural practice that enables organizations to get maximum business value by helping engineering, finance, technology and business teams to collaborate on data-driven spending decisions.”

Now, what does it mean? Let me put it this way: FinOps is an approach that involves multiple teams working together to make the most of the cloud resources you’re paying for.

Sounds mouthful, doesn’t it? But it is more practical than you might think. Notice that it’s not about spending less on your cloud.

It’s about spending smarter so that you don’t waste money when you don’t need to and pay only for services that bring or generate value.

Based on my conversations with clients, I can see that most organizations are still in the early stages of learning to understand their cloud spending. Even though the practice is developing, and new dedicated roles are being created, most cloud users find it hard to discover where to start with cost optimization.

While it all can seem complex and daunting, there are ways to help you get on the road to adopting FinOps practices. The journey begins with getting your existing resources under control. At Predica, we use Azure cloud and tend to focus our efforts on three main areas. And that’s where I will begin.

Understanding and forecasting costs

You can’t balance your budget if you don’t know where your money goes. That’s why the first step is to understand your cloud bill.

Start with answering the following questions:

  • What resources are you using?
  • Who is using them and why?

If all you see on your bill is “Azure,” it’s impossible to execute any budget. You may consider resource tagging to help you with that. Whenever you create a new resource group for a project, department, test, or anything else, you can use tags in Azure to specify the cost centers to which the group belongs.

What is even better is that you don’t need to do that from scratch every time. Instead, set up automation or an Azure Policy to add these tags for you.

Here’s an example of how we did it.

If you prefer a visual guide, here’s a video introducing the concept of resource management in Azure:

A way to get ahead of your cloud bill is to take advantage of reservations or reserved instances. If you know your application usage (e.g., how much data they process, or how many users they have), you can book the necessary compute resources in advance and at a lower price. That one change can save you up to 40% on your bill.

Cost management

Much as keeping your budget, managing your cloud spend is easier with the right tools. And they don’t need to be complicated, either.

The Cloud Cost Management service allows you to create budgets for your resources. You can allocate them per subscription or specific resource group for even more efficiency.

So, you could set up separate budgets for:

  • different departments,
  • development environment,
  • test environment,
  • prod environments,
  • different products,
  • or any other way that works for your organization.

Here’s an overview of the service and available functions:

Azure Price Calculator – how to analyze and estimate service costs

The great advantage is that you can monitor these budgets and set up automated alerts to trigger when you’re at risk of spending too much. Naturally, they can also be sent to your colleagues responsible for their own resources. That way, they will stay updated. The service also includes forecasts, allowing you to predict how much you’re likely to spend in the future.

Here’s a short demo of how to put budgets into practice:

How to apply budgets to subscriptions using the Azure portal

Another tool is Azure Advisor. It’s an analytics engine that looks at your cloud usage and issues personalized recommendations on making the most of your cloud. It can help you save money and find out where to use your cloud more efficiently.

Optimizing workload costs

And here comes the third aspect of managing your cloud costs. In short, it’s about automating your services so that they don’t run when they’re not needed. When cycling between development, test, and production environments, it’s unlikely that all of them are running 100% of the time.

With automatic scaling, you can switch off services when they are not needed. And if you need them running but not at full capacity, you can scale them down or pause them.

For example, you don’t need your development environment on the weekend if your team only works from Monday to Friday. In this case, the VMs can be switched off automatically at 6 PM on Friday and back on again at 6:30 AM on Monday (or any other time).

That way, you are saving costs as well as time. Once you set up the automation, you don’t need to worry about it.

Make sure you analyze each environment in this way because they all have different SLAs and requirements. If it is not possible to turn them all off, you may switch them to a lower-tier – running at less capacity when less data is being processed or fewer users are online.

Find some more tips on project organization in this article.

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Shifting cost-efficiency left

As you can see, there are many ways to optimize your spending once your services are running. But as the old saying goes, prevention is better than cure.

What does it mean in this context? That cutting down your bill starts much sooner – at the design stage. When you follow the best practices right from the outset, it’s much easier to keep the costs under control. A good starting point is your vendor’s guide to cloud architecture. I will talk about that next time. Naturally, I will put it in the context of Azure, but other vendors offer these guidelines too.

Spending done wisely

And here I am, telling you how to minimize your cloud costs while at the same time claiming that you won’t do that.

How does that work?

The point is not to just spend less. It’s about spending less on the unnecessary. That way, you can allocate more money for useful options.

Less waste means more value. And we know how to take care of that – and for free. Here’s how.

In the meantime, I will leave you with some resources to read about lowering the costs of your Azure cloud services.

If you have any questions, feel free to get in touch.

Key takeaways:

  • FinOps helps to save money and pay only for services that bring or generate value.
  • If you want to balance your budget, consider resource tagging in order to understand your cloud bill.
  • You can manage your cloud budget with the number of tools like Cloud Cost Management and Azure Advisor. They monitor your budgets and help you save money and find out where to use your cloud more efficiently.