Three Essential Areas to Measure Cloud FinOps Success

You can’t wait for the shock horror of an unexpected bill to find out your cloud spend isn’t optimized correctly. This is where cloud FinOps comes in. FinOps is the financial management tool for your cloud spend—a set of principles and practices that help ensure nightmare bills never arrive.

Cloud optimization is a large and long-term investment, and measuring FinOps success is crucial. To complicate matters further, there is often a disparity between IT metrics and traditional KPIs based on business outcomes. Therefore, to communicate cloud spend management success to everyone—both business and IT leaders—you need to be clever about the main metrics you choose.

We recommend following the FinOps Foundation’s three phases of FinOps as a framework to base your metrics:

1. Inform
2. Optimize
3. Operate

What is cloud FinOps?

In our recent whitepaper (Take control of cloud spend with the power of FinOps) we defined cloud FinOps as, “the strategy, management, and ongoing execution of everything that goes into ensuring your cloud is cost-effective.”

Cloud FinOps is the systematic implementation of certain principles and practices to better optimize cloud spend management. And, the FinOps Foundation is the best place to find a detailed outline of these principles.

Three cloud FinOps areas to measure

We are focusing on three areas: Inform, Optimize and Operate. And one of the best ways to measure the maturity of each metric is with a Crawl, Walk, Run system—where Crawl is low maturity and Run is optimal maturity.

Inform

For FinOps to succeed, visibility and clarity is a requirement. This means monitoring a range of key areas to ensure cloud spend management goes according to plan. And the first step is carrying out a resource hierarchy by labeling and tagging all relevant data and resources. Without this, you won’t have the required granularity to keep track of your cloud resources.

There are a couple of considerations you will need to make when doing this. First, tagging must be carried out with consistent and accurate labels in order to provide reliable data. Second, it’s important to orchestrate your tagging and labeling architecture so it aligns directly with profit and loss (P&L). The best way to do this is to include cost centers as tags.

There are three types of cloud resources to tag:

• Taggable resources for a particular P&L, e.g. where an application is used by only one business unit.
• Taggable resources that are used across the organization by many business units.
• Resources that aren’t taggable, such as support and networking.

The most important metric to measure in this area is cloud allocation percentage. This includes the three types of cloud resources above, to tell you how effective your tagging and labeling are. This way, you know you have set up cloud FinOps for success and are capturing all the relevant data that leads to cloud costs.

How to measure success

• Crawl: < 70% of cloud spend allocated to the business unit
• Walk: 70-90%
• Run: < 90%

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Optimize

Cloud FinOps is not just about reducing costs, it’s about maximizing your cloud investments. You can look at cloud spend and say, “Let’s cut these costs by x%”. But you can also decide to keep costs the same while looking to increase the business value generated by the cloud.

It’s, therefore, crucial to measure how well your organization is optimizing its cloud spend. The goal is to measure rates and usage, and then work out what is and isn’t working. That way, cost spend can be invested wisely. The best metric for this is to measure realized savings from cost optimization.

How to measure success

• Crawl: < 70% of realized savings on total cloud services optimized
• Walk: 70-90%
• Run: < 90%

This metric lets you monitor cloud inefficiencies, so you can see the true value of cost savings. As there is always room for improvement, optimization is a never-ending journey. And taking a consistent approach is vital in order to measure your cloud consumption effectively in the long run.

Here’s what you should focus on in to discover and measure potential savings:

• Pricing optimizations
• Resource optimizations of inefficient resources

Operate

In its FinOps Framework, The FinOps Foundation outlines that the Optimize phase is about continuous improvement and operations. It’s important to clarify this, so as not to confuse it with the Optimize phase — which as stated above is focused on measuring rates and usage. In the Operate phase, we favor using the number of automated recommendations implemented as the key metric, as this will measure progress by identifying tangible actions taken to optimize costs.

How to measure success

• Crawl: < 70% of automated recommendations implemented
• Walk: 70-90%
• Run: < 90%

Financial forecasting is an essential part of any cloud project, as any investment needs to be planned out in full, and in advance. It is also key to cloud spend management because you need to have accurate targets to aim for and benchmarks to measure success against.

Measuring the accuracy of your forecasting will (in turn) lead to more accurate forecasting, which can help you reduce cost inefficiencies. By identifying trends and patterns in the accuracy of forecasts, you can zoom in on why cost planning went wayward, and ensure that better, more accurate forecasts are made in the future.

How Inscape™ can help 

MessageOps provides the Inscape™ suite of tools, which are designed to help clients stay on top of their cloud spend management. With a multi-cloud approach, and a single dashboard that provides full visibility over your cloud spend, Inscape is the FinOps solution you need.

Inscape Multicloud Cost Management helps with all three phases of FinOps by giving you a 360-degree view of your cloud spend, including for multi-cloud setups. With detailed billing information and cost reporting, you no longer need to use spreadsheets to track your cloud costs. Instead, everything is presented in one downloadable invoice. The dashboard offers visibility into your monthly costs and target thresholds—including a granular view of cloud spend by account, service, resource, and more. Automated budgeting features help you manage monthly bills, with tracking and alerts.

Inscape Anomaly monitors activity across your systems, detecting and reporting any anomalies that lead to abnormal costs. Using machine learning, anomalies are flagged so you can prevent costs from spiraling out of control.

Inscape Recommendations is perfect for the Operate phase. Inscape not only allows you to track and monitor cloud spend, but provides sophisticated recommendations for how to fix issues when they occur. Additionally, recommendations for cost savings, security, and performance give you ready-made actionable steps to take. What’s more, each recommendation details the potential savings when implemented, including underutilized resources, idle resources, low utilized resources, and more.

Count on us for cloud FinOps

MessageOps provides solutions and services to optimize cloud costs so you can realize the full potential of the cloud. Our experts can help ensure your cloud is managed optimally, with FinOps at the front and center of your cloud strategy. We work closely with our clients to pinpoint how to tailor FinOps principles to their unique business requirements, and then provide the tools to carry it out.

To learn more about cloud spend management with Inscape and cloud FinOps, contact our team to get started today.