As cloud costs spiral upward, enterprises turn to a thing called

In the first few years of cloud computing, cost savings were the driving force behind cloud adoption. Nowadays, however, businesses are facing spiraling cloud costs. There’s even a term for the emerging process to tackle this: “FinOps.”

Organizations continue to waste significant cloud spending, according to Flexera’s recently released 2022 State of the Cloud report, based on survey responses from 753 global cloud decision makers and users. Sixty-six percent of executives said cloud usage is “higher than planned at the beginning of this year,” estimating that their organizations waste 32% of cloud spend, up from 30% in last year’s survey.

In addition, “spending is likely to be less efficient and also likely to be higher than average, as many organizations underestimate the amount of waste they consume,” report the authors of the survey. In addition, respondents reported that their public cloud spending was an average of 13% higher than last year’s budget. They expect their cloud spend to increase by a further 29% over the next twelve months.

Among small to medium businesses, 53% are now spending $1.2 million annually on cloud computing, up from 38 percent in 2021. Although the survey authors do not provide a similar overall spending figure for large enterprises, they report that many spend $12 million or more annually on selected public cloud services – 18% of enterprises spend it on AWS, 15% spend it on Microsoft Azure and seven percent on Google Cloud Platform.

That’s why a lot of money is being poured into cloud services. It’s likely that a lot of monthly subscription bills are going to a bunch of unused or under-utilized services that no one really accounts for. Someone in a department signed up to a cloud instance three years ago to run some tests, dropped it, and the company is still paying for its use.

Enter FinOps. According to the FinOps Foundation, the exercise aims to help organizations derive maximum business value from the cloud “by helping engineering, finance, technology and business teams to collaborate on data-driven spending decisions.”

(Yes, now there’s even an entire foundation dedicated to the practice.) In many cases, they’re practicing the art of FinOps, even without calling it one. Respondents are actively involved in ongoing usage and cost management for both SaaS (69%) and public cloud IaaS and PaaS (66%). “More and more users are swimming in the FinOps side of the pool, even if they don’t know it – or call it FinOps yet,” say the authors of the Flexera survey.

Furthermore, for the sixth year in a row, “optimizing existing use of the cloud is the top initiative for all respondents, underscoring the need for FinOps teams or similar ways of improving cost-saving initiatives,” they also note. We do.

Although the survey does not explicitly ask about FinOps adoption, the authors also note that some organizations have organized FinOps teams to assist with evaluating cloud computing metrics and value. (A specific percentage has not been provided.) They also note that “for the sixth year in a row, optimizing existing use of the cloud is the top initiative among 59%, followed by migrating more workloads (57%) to the cloud.” .

The survey authors appear very optimistic about what the cloud can do to boost the technology’s value to enterprises: “As organizations move more workloads to the cloud, they are less likely to maintain and operate traditional data centers.” can retire the technical debt associated with doing so,” he says. (We’ll have to check back on that, right?)

What are organizations doing to better understand cloud costs and keep them down? Close to two-thirds, 64%, focus on maximizing resource use, while 50% engage in removing or eliminating unused or inactive resources. This means that half the respondents are not actively reviewing cloud services for which they pay a monthly fee. Another 41% look at reserve instances like provider discounts.

The other 39% are following a pure FinOps approach: employing the entity economics model, which is considered a key component of the FinOps disciple. (Unit economics, as explained by Apptio’s Andrew Midgley, is “the average revenue or cost, or margin, directly tied to a specific unit delivered by an organization.”)

The survey shows that automation is an important tool for optimizing cloud costs. More than 40% of respondents are using automated policies to shut down workloads after hours and authorize underused instances. Another 33% are using automated policies to apply the required tags, while 43% still do this labor-intensive process manually.

While at least half of IT executives believe the value cloud is bringing to business, the key measure of success is still cost savings. This is probably the easiest and most displayable pitch for C-level and board. Speed ​​to market is also a highly tangible benefit, and thus a success metric.

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