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FINOps (Cloud Financial Management) – The Future of Cloud Governance

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Cloud Computing is a powerful, scalable and flexible tool that many companies are able to use to their advantage. However, as hybrid cloud decentralizes access to cloud resources, cloud users are challenged with runaway costs and poor visibility. This makes it difficult to control the IT budget and financial flow of the company or in English Cloud Financial Management, or simply FINops.

To overcome these challenges and ensure your organization is successful in the cloud, you need to create a comprehensive strategy for cloud financial management, along with your cloud strategy (Cloud Strategy).

World Cloud State Survey

The results of this research are available on the Flexera 2021 State of the Cloud Report. The report explores what the 750 global cloud decision makers and users are thinking about the public, private and multi-cloud marketplace. He shares his current and future cloud strategies, often showing year-to-year changes to help identify trends.

“COVID-19 has accelerated the move to cloud computing,” said Jim Ryan, president and CEO of Flexera. ” Businesses are moving fast, facing challenges and trying to connect cloud computing to business results.

“The Flexera 2021 State of the Cloud Report shows that the appetite for digital transformation is high,” continued Ryan, “but the real-world challenges — how to manage security and optimize cloud spending — have yet to be addressed.”

Some of the main highlights of the Flexera 2021 state of the Cloud Report:

  • Companies are opting for multiple, multi-cloud clouds;
  • 92% of companies have a multi-cloud strategy; 80% have a hybrid cloud strategy;
  • Respondents use an average of 2.6 public and 2.7 private clouds
  • Public cloud adoption continues to accelerate;
  • 31% of enterprises spend more than US$ 12 million per year on public cloud;
  • 54% of enterprise workloads are expected to be in the public cloud in 12 months;
  • 90% of respondents who responded to a question about COVID-19 expect cloud usage to exceed plans due to the pandemic
  • Understanding cloud initiatives and metrics;
  • 61% of the global plan to optimize cloud costs by 2021, becoming a top initiative for the fifth consecutive year;
  • 59% of Power Users Name Cloud Migration a Key Initiative;
  • 76% for cost efficiency and savings to measure cloud progress;
  • Organizations taking a centralized approach to the cloud;
  • 75% of enterprises have a central cloud team or center of excellence, CCoE;
  • 54% of the cloud teams are responsible for governing IaaS/PaaS usage and costs;
  • 63% of companies report using managed cloud service providers for public cloud use;
  • AWS leads, Azure continues to close the gap in second place;
  • All seven cloud providers tracked in the State of the Cloud Report experienced growth.
    • AWS adoption has grown to 77% (from 76% last year);
    • Azure has grown to 73% (from 63% last year);
    • Google Cloud has grown to 47% (from 35% last year);
    • VMware Cloud on AWS has grown to 24% (from 17% last year);
    • Oracle Infrastructure Cloud has grown to 29% (from 17% last year);
    • IBM Public Cloud has grown to 24% (from 13% last year);
    • and Alibaba Cloud grew to 12% (from 7% last year).

The report drew on a panel of 750 technical professionals from around the world and a wide cross-section of industries, providing insights into their adoption of cloud infrastructure. The independent panel is composed of vetoed respondents with detailed profiles and is strictly maintained. The survey was conducted in the fourth quarter of 2020.

What is Cloud Financial Management or Cloud Financial Management FINops?

Cloud Financial Management (CFM) is also known in the market as FinOps or Cloud Cost Management. It can be classified as an area that helps to align and develop financial goals, drive a cost-conscious culture, establish guardrails to meet financial goals, and achieve greater business efficiencies.

The ever-changing nature of cloud services, as well as your dynamic and evolving business objectives, will require your Cloud Financial Management FINops to be extremely adaptable.

The right CFM FINOps can help you optimize and better manage your cloud costs, but only if it's treated as an ongoing process and embedded in the culture and collaboration across areas, teams and projects across your organization. This model will have positive impacts on the governance of your financial costs in clouds like AWS, Azure, Google Cloud and Vmware.

Building a Cloud Financial Management CFM FinOps Success can be achieved by companies of different sizes as it involves the establishment in modules of the following four main pillars: visibility, optimization, automation and governance with business integration.

In order to help ensure that CFM Cloud Financial Management starts with a solid foundation and remains successful long after its implementation, a comprehensive, multidisciplinary and collaborative working group needs to be at the forefront of this “project”. Today companies with greater Cloud maturity are creating a Cloud Center of Excellence (CCoE) sometimes known as a Cloud Strategy Office or Cloud Program office with a focus on FinOps.

The main pillars of FINops:

Ensuring that technology, business and finance professionals are brought together with a new set of processes can lead to good FINops practice. Generally speaking, the journey of the FinOps it has three phases or pillars: inform, optimize and operate.

Inform

This is the first phase of the journey of the FinOps. It is the phase responsible for giving visibility. I often say that the foundation in Cloud Computing is knowing what is being spent with what, where is it being spent and who is spending it.

It is, in fact, essential for empowering organizations and teams on issues such as visibility, allocation, benchmarking, budgeting and forecasting. Since the nature of the cloud is quite elastic in terms of usage and pricing, teams need accurate visibility to make assertive decisions.

optimize

Once organizations and teams are empowered, they need to optimize their cloud presence over and over again in a PDCA model. Thus, teams can optimize the environment by scaling the platform and disabling unnecessary features.

Based on the information generated by the first phase, it is possible to optimize the cost in several ways. Cleaning the environment, resizing, changing the type of instances, booking instances and even changes in the architecture of a solution.

Operate

THE migration to cloud it will only be successful if the company manages to build a culture of FinOps very wide. Therefore, this culture must involve a cloud cost center or Cloud Center of Execellence, including commercial, financial and operational teams that also define the appropriate governance.

FinOps: Inform, optimize and operate

The adoption of the FinOps methodology, performed consistently, using the best practices and with the appropriate tools, allows the creation of a virtuous cycle that, in the end, brings Organizations the benefits of control and saving of resources and the possibility of adopting new services. cloud that are actually useful to the business.

This process is based on 3 fundamentals, which are:

  • Visibility of resource use, with constantly updated data and consumption history. View of resource allocation, business areas, systems, etc.
  • Taking the necessary actions that make good business sense. Modification of hiring plans, alteration of consumption regions, “rightsizing” decisions or even deactivation of services.
  • Search for continuous improvement based on the adoption of recognized practices, benchmarking, speed of delivery and cultural change.

In this sense, among the common practices we have: 

  • Elimination of underused or unused resources.
  • Changing Snapshot Retention
  • Storage tier change.
  • Purchase of reserved resources.
  • Right-size” & “Right-family” actions. 
  • Use of “spot” instances.

What is the structure proposed by the FINOps foundation to operate a Cloud Excellence Center?

FinOps Best Practices from CIO.com 

Regardless of whether companies adhere to guidelines or best practices in their own cloud governance projects, Cio.com says there are four main strategies for managing cloud spending:

1. Determine who is spending what. 

To do this, you need to “tag” your features or find out which features an app accesses. This is particularly important in companies where thousands of people access hundreds of apps.

2. Do not use a lawn mower when a shrub trimmer will do.

Do you have the right EC2 instance for the compute workload you need, or are you over-provisioning? Use and pay for only what you need.

3. Rationalize spending. 

Consider using Reserved Instances, a reserve of resources and capacity for a specific Availability Zone within a region. This lets you buy the computing power you know you'll need, at a lower cost than purchasing on demand.

4. Create apps suitable for the cloud. 

If you're a high-volume transaction business, that means designing your applications to scale out, allowing you to add or subtract resources as needed.

What is a Cloud Center of Excellence?

The Cloud Center of Excellence (CCoE) is a cross-functional working group that governs an organization's use of the cloud, driving best practices across functions.

The CCoE has three main responsibilities:

  • execute the cloud strategy;
  • Drive collaboration and using best practices such as Tagging Management, for example;
  • Evaluate and use cloud technologies to support business initiatives.

Because CCoE is made up of areas across the organization — primarily finance, operations, and security — the projects and initiatives they create have context and buy in from numerous areas outside of IT, ensuring that everyone is working for what's best for the organization.

The CCoE is tasked with creating a culture of financial awareness (FinOps) and accountability, both of which are crucial to operating a successful CFM FINops function. Some of the indirect benefits include increasing gross profit margins, decreasing cloud spend, improving DevOps speed, and becoming more proactive when it comes to managing hybrid clouds.  

If you'd like to learn more about how to build your own Cloud Financial Management strategy, we've made this original article available from the site. VMware. Also check a SCHEDULE with one of our experts.

Did you know that the 4Matt Technology Are your consultants PIONEERS in Brazil in Software Governance, FINops and Cloud Center of Excellence?

Do you want results and good management of your cloud? Contact us

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