April 29, 2024

Common Cloud FinOps Mistakes that Might Prove Costly

By Aman Aggarwal

Common Cloud FinOps Mistakes

Remember when FinOps was just a trendy term? Fast forward to today, and it’s a booming $5.5 billion market, with a projected compound annual growth rate (CAGR) of 34.8% between 2023 and 2025.

The trend towards adopting a cloud FinOps, a strategic blend of financial management and operational efficiency in cloud computing has been driven by the increasing challenges in the cloud, including unclear cloud cost visibility, unplanned waste, inefficient resource allocation, rising cloud operations costs, ineffective internal team collaboration, and challenging governance.

A recent survey by Everest Group states, 63% of global organizations allocate more than 7% of their total cloud spend to FinOps. While the adoption of Cloud FinOps is growing rapidly, many organizations are still struggling with common mistakes that hinder their success.

In this blog, we’ll explore common mistakes to avoid in Cloud FinOps.

Lack of Cloud Cost visibility at a granular level

If you can’t see it, you can’t measure it.  It’s crucial to understand the nitty-gritty of your cloud expenses and trends for your business. You need to have a clear, detailed picture of where your money is going in the cloud and how it’s changing over time. Without a clear cloud cost visibility mechanism, it will be like navigating in the dark.

This sets a foundation for further activities in cloud FinOps like resource allocation, budgeting, and forecasting. Analyzing past spending patterns is necessary to create realistic budgets, allowing for better financial planning and resource allocation. Thus, if the cloud cost monitoring step is not done correctly, the further activities of Cloud FinOps couldn’t be performed efficiently.

Lack of cloud cost visibility is also a root cause for many other challenges like overprovisioning of resources and mismanaging reserved instances.

It is always advised to opt for a cloud cost visibility platform like CloudKeeper that offers a granular view of your cloud spending patterns and cost usage.

Neglecting Cost Allocation and Tagging Strategy

A successful Cloud FinOps strategy is not just limited to cloud cost visibility, it goes to the next level to leverage the data and establish clear strategies for cost allocation and ensures each team pays its fair share, which fosters transparency and accountability. An inefficient cost allocation can lead to confusion and dispute among the team. Additionally, having a solid cloud tagging strategy ensures that resources are properly categorized, making it easier to track and manage expenses.

The lack of collaboration between cross-functional teams

Effective collaboration between cross-functional teams including finance, technology, product, and business teams is the essence of cloud FinOps and essential for optimizing cloud operations. Let’s understand it by an example.

Consider a scenario where a company is migrating its infrastructure to the cloud to support a new product launch. If the teams work in silos, Finance would set the budget without any input from the tech team. The technology team might migrate without considering cost implications. The product team might launch without fully understanding the capabilities and limitations of the cloud infrastructure, leading to performance issues and unexpected costs. This would create a chaotic environment.

Now consider a different scenario where the cross-functional teams collaborate closely throughout the cloud migration process. The finance team works with the technology, product, and business teams to develop a comprehensive understanding of budgetary constraints, technical requirements, product goals, and strategic objectives.

Together, they conduct a thorough analysis and plan to optimize cloud spending while ensuring that the infrastructure meets performance, scalability, and reliability requirements. The product team launches the new product on a cloud infrastructure that is tailored to meet its specific requirements, with full support and alignment from the other teams. As a result, the business team can accurately assess the ROI of the product launch, with clear visibility into cloud spending and its impact on revenue.

Not appointing a Cloud FinOps Leader for accountability

When implementing a Cloud FinOps program, it’s important to have a designated Cloud FinOps leader. A cloud FinOps leader will make sure everyone stays on track and knows what to focus on, especially when there are lots of things happening at once. Without a dedicated cloud FinOps leader, your organization may struggle to align cloud spending with business objectives, which further leads to inefficiencies and missed opportunities for cloud cost optimization.

The role of a cloud FinOps leader is not only limited to ensuring that work is being done but also oversees change management and facilitates collaborations between cross-functional teams as explained in the above point.

Missing out on cost optimization opportunities

When you’re using cloud services, there are ways to save money that many organizations tend to overlook. This could be due to many different reasons like limited awareness, complexity of features, and lack of proactive monitoring.

Exploring options like spot instances, reserved instances, and savings plans to save money without sacrificing performance. By using these options, you can lower your cloud bills while still getting the computing power you need.

Focusing on instant saving rather than sustainable cloud savings

Often companies consider saving money by right-sizing and managing rates better as a big win in cloud FinOps. They think these quick savings will keep improving their margins but unfortunately, these savings usually don’t last long and disappear as soon as you focus on other activities. However, Cloud FinOps does not emphasize one-time fix activities.

The real win with Cloud FinOps is making sure your cloud cost savings are sustainable. Sustainable savings require ongoing adjustments to how an organization evaluates, allocates budgets, and plans cloud investments. This ensures the continued realization of the financial and operational benefits of Cloud FinOps practices.

Not setting the right Cloud FinOps KPIs

This is one of the most common mistakes made by organizations. Cloud FinOps KPIs are essential metrics that help organizations essential metrics that help organizations track their progress toward specific goals and objectives. Without defining and implementing relevant KPIs, it becomes challenging to measure the effectiveness of Cloud FinOps initiatives accurately.

Sometimes, organizations may focus solely on cost-related KPIs, overlooking other crucial aspects of cloud management such as visibility, or governance. Hence Cloud FinOps KPIs should focus on all areas including Rate, Usage, and Process Optimization.

Lack of Governance

Like any other discipline, Cloud FinOps must have a set of rules, guidelines, and policies for cost management, cost usage, and security. Without these governance frameworks, things can go haywire. People might spend money on things they don’t need, or they might forget to turn off resources when they’re done with them. This can lead to a lot of wasted money and can even put your business at risk of overspending.

Establishing a governance framework enforces financial discipline across the organization by defining spending policies, preventing unauthorized provisioning of resources, and reducing financial and security threats to the organization.

The pressure and rush to implement cloud FinOps can cause companies to overlook critical factors that drive success. This potentially leads to hindered progress and recurring mistakes as the company grows.

It is therefore more important to have skilled cloud FinOps professionals or train your team to be ready to efficiently adopt this practice and cope with its challenges.

A potential and wise alternative could be partnering with a Cloud FinOps partner that has specific expertise and skill sets in the domain and can take off the whole responsibility of successfully establishing Cloud FinOps culture leaving you with more time, money, and resources to dedicate to other critical areas.

By partnering with a Cloud FinOps partner like CloudKeeper, companies can ensure that their cloud operations are efficient, cost-effective, and aligned with their business goals.

By Aman Aggarwal

Aman Aggarwal

Business Head – CloudKeeper

Aman heads CloudKeeper, a holistic Cloud Cost Optimization and FinOps solution that helps customers get guaranteed savings of up to 25% on their entire bill. He has 15+ years of experience in the Cloud & DevOps domain and holds strong technology and financial business acumen. An AWS Certified Professional Architect and a Certified Scrum Master, Aman has been working along with the AWS team to help 300+ customers in their cloud adoption and cost optimization journey. He drives the strategy, P&L, and roadmap for CloudKeeper while managing a highly talented product engineering team along with AWS Certified DevOps professionals, architects, and Cloud Economics experts.
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