How Can FinOps Save Your Cloud Programme From Extinction (Europe 2021)

Cloud cost management has always been a key pillar when it comes to architecting a successful cloud environment well. However, with cloud spend in 2021 showing no sign of stopping, paired with the directly implied shift from CapEx to OpEx, doing a quarterly review of your cloud consumption is no longer enough. Combining aspects of Financial Management, Cloud Operations, Demand Management and the core disciplines of Procurement; FinOps aids organisations in driving modern Cloud Finance Operating models, by aligning one’s Cloud Adoption Journey and Cloud Spend to Engineering Efforts and Business Initiatives. The benefits an organisation can expect as a result of moving towards a FinOps Model are: Setup for the Future: A pathway to a Financial Operating model that is better aligned to the dynamics of Cloud computing Improved Decision Making: The ability to make financial decisions driven by data as the key source; resulting in a more optimised consumption of IT services Traceability of Decisions: Providing organizations with a financial trace, one that aligns business decisions to the cloud spend incurred Empowered Product Teams: Providing them with the autonomy, visibility and responsibility to make their own financial decisions, whilst operating within the guardrails established Optimised Cloud Spend: ensuring every penny spent on Cloud services is done using the optimal service offerings available and making use of the appropriate financial incentives and consumption models the Cloud Service Providers have to offer This talk will cover: - How to Bring Your Finance Functions into your Cloud Adoption - What is FinOps? How does it help? - Understanding the Core building blocks for successful FinOps function - Establish a Financial Trace between your Cloud Spend, Engineering Efforts, and Business Initiatives - What is the FinOps Foundation (finops.org) and the benefits that it offers Deepak is the Director of Strategy & Transformation (EMEA) at Contino, who specialises in working with large regulated enterprises to pave their journey for Digital Enablement & cloud adoption. Experienced across various cloud providers Deepak is known for; helping organisations adopt modern operational and engineering practices like SRE - FinOps - GitOps, developing Cloud Native Products and Services for their customers and building sustainable in-house digital capabilities for long term adoption.

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Deepak Ramchandani Vensi

Director of Strategy & Transformation, Contino

TRANSCRIPT

00:00:13

Hi, I'm Deepak fencing and the darks are strategy and transformation for casinos. And today I'm here to talk to you about all things finops and why a practice like this could be just the thing that you need in order to help salvage your cloud and digital transformation program. If you'd like to get in touch with me on screen, you can see my LinkedIn handle, and I'll be more than happy to continue the conversation there as well as in the slack channels, um, for developments post summit. For those of you who might not be aware Contino at the leading digital transformation consultancy, that helps some of the world's largest, most regulated enterprises to become fast, agile, nimble, and competitive and onscreen. You can see the customers that we've worked with in the kind of methodologies and skillsets that we apply in order to help our customer achieve their digital transformation goals.

00:01:00

And part of the reason why I'm here to talk to you today is because the one thing that we love is making sure people out there in the industry, in the community do not repeat the same mistakes that we've been able to help overcome other organizations in the past. So do stick along and I'm sure you'll be able to there the thing with you today. So why are we here to talk about fin ops today and actually, what is the criticality for a program like this within a digital transformation journey? Well, one of the things that we've heard time and time again, over the last couple of years is that organizations are starting to see as their cloud adoption has scaled that their cloud costs happened to me much, much higher than initially anticipated. They aren't actually seeing some of the cost benefits and the business benefits from the digital strategy than what they initially set out to do.

00:01:49

And turns out from a finance perspective. Well, they're actually far exceeding the initial budgets and forecasts that they had in place. Um, and with cloud consumption, not stopping, it's all, this is a big challenge that organizations really need to need to uncover. So in today's talk, we'll actually cover a practice called fin ops that actually has helped solve some of these challenges out there within the industry. We'll introduce the concept of what we call the financial trace and actually why that could be fairly critical. And you being able to marry your costs for the actual business benefits. We'll talk you through how you can actually get started. What does good look like? And last but not the least, we'll talk you through actually a community that you can look to join, where you can actually exchange a lot of these ideas as to other practitioners are in the industry who perhaps might have overcome some of the challenges that you're currently looking to go through.

00:02:41

So what has been ups and how did this entire concept this entire approach come about in the first instance? Well, if we look at public cloud and the spend beyond public cloud and digital transformation, and the news that you see out there on what organizations are looking to embark, we all know the public cloud spend is predicted to far surpassed more than three hit $330 billion by 2022 that's that's less than a year away. Um, and if we look at the approaches that have been employed to date, when it comes to cloud consumption, cloud adoption and digital transformation programs, a lot of these programs are very much engineering led. Um, you know, a CIO CTO is backed fellow engineers. When the organization, they asked the finance teams to just work with them. But a lot of the approaches were being led by the engineering functions, by the product functions and the finance teams, or maybe that from an approval point of view.

00:03:37

Um, and this was okay whilst cloud costs were relatively low. CapEx are still the king when it comes to it spend. Um, and actually a lot of organizations still managed to go about just fine when it comes to separating project and build, spend on one hand and run based cost allocation on the other. There were okay by doing monthly or quarterly reviews of their spend. And by and large, no, the finance teams actually got involved in looking at, for example, a billing console of their cloud programs. Well, in reality, this isn't something that can actually look to scale. And if we look at the cloud costs that are currently being projected within the industry, frankly, the finance function and the, the role of finance has to fundamentally change. Because if we go back to some of the challenges that we articulated, if we need to overcome those finance apps to figure out what the new role looks like, finance has to be part of the actual architecture cloud costs are currently on track to overshadow on-prem costs.

00:04:39

And if you were to look at the current growth rate for AWS, Azure and GCP as a top three, they've the fall starting to outstrip and exceed in that off your own premise provider. So there's, it's not real rocket science knowing their cloud spend is only going to grow with the lost in, in the coming years. And OPEX is soon going to become the actual way of it. Spin. The won't be CapEx based spend anymore. And therefore you as an organization need to move to an alignment and methodology where you can start to align product based spend based on the capital that you actually look in, spend out there. You need to have a framework where real-time decision-making is a possibility given the fact that you do have the technology underpinnings to do it. And last but not the least, you need to programmatically start introducing all of these financial guardrails as code because as your cloud environments are all built by code, as the approach by these cloud environments is being controlled by the engineering teams.

00:05:41

Finance really need to start to figuring out the role that they actually like to play. But guess what? This isn't a challenge that we haven't seen in the past, because if we go back to 10, 15 years ago, when we were all having this discussion around the ball of confusion between dev and ops completely on the different side, turns out this is very much a similar scenario right now. What we're talking about is actually, how do we bring the business, the finance functions together with the it teams. And just like before we were talking about biz ops and dev ops and sec ops, et cetera, et cetera. Now, what we're talking about is actually being in finances yet another function that comes closer together, we did development and operation and engineering teams in order to collectively make these decisions together. And finance is now yet another lens that we need to look to consider as part of it.

00:06:38

So what finops actually is, is an approach to managing and operating one's cloud spend by breaking down these silos between engineering, finance, procurement, to bring everyone together that they collectively make this decision together. Very similar to what dev ops nursery did when it comes to the actual engineering landscape that would be encountering these challenges in the past. So what it is is as a methodology of collaboration between the various functions to be able to make the right decisions. And trade-offs when it comes to looking at cloud spend and not just looking at it from a finance perspective, but actually what is the consumer experience that we're collectively trying to build, define a set of metrics in order to have a common framework for decision-making using the notion of a financial trace that we'll go to in a second, I no longer have finance and procurement the gatekeepers of spend anymore because back in the day where it spend was primarily controlled by the finance and procurement teams, guess what engineering teams can just very easily go out there right now and off the back of a credit card go and consume cloud.

00:07:45

So finance and procurement need to reinvent the roles. And actually, how are they collectively going to take the domain knowledge and bring that to bear within this world of cloud consumption and last but not the least, having the ability to increase that visibility across all teams that that'd be finance, let that be engineering, let that be operations in order to make that collective decision-making process and drive the behavioral change within the organization where everyone has an understanding of what the implications of their cloud usage actually looks like. So how do we bring all these teams together? What's our approach to actually making finops valuable for everyone within the organization? Well, the methodology that I really like and actually has been tried and tested now with, with a lot of, uh, with a lot of organizations out there is that, uh, for establishing a financial trace now, what is a financial choice?

00:08:37

And what is it that why do we actually need it? Well, if we were to look at it on one hand, we've got things like cost drivers, we've got business metrics, we've got forecasted spend, we've got potential architectural changes that we're making. We've got business cases, we've got benefits, realization program, et cetera, et cetera, but in no way, do we have the ability to trace these metrics? These data points to be actual ads that are being consumed or that are being incurred when it comes to one's cloud spend. So financial trace is a means to bring everything that you can currently see on the, on the left, when it comes to your core metrics and eco cost drivers with some of the, with some of the data points that we're currently getting from the cloud providers, and actually being able to help answer questions such as why have a cloud costs suddenly gone up and down?

00:09:29

What does our forecast look like? Do we know why we're spending on what we're spending so much money on? What value has the digital strategy added to us, or how much control do we actually have on our last bit? So later on in this session, we'll actually talk you through, how do you go on building a financial trace where if we were to look at it holistically, what a financial trace helps us do is it brings together on one hand, three domains, cloud engineering, product, finance, and operations as a collective partnership. And it helps you build this framework where you can look at, at what point are you about to potentially launch a product and what's your cost that's going on there. You can then start to visualize that to the based on potentially new features that you're looking to release how your cloud spend is going up.

00:10:18

And actually you, as a product team, know why your cost is going up. The finance team knows why that's happening and the engineering team's able to provide that data. And then also as you start to make collective decisions such as purchasing reserved instances, such as making some architectural changes in the environment, you can actually see what decisions were made that has done, had add an impact in your cloud costs, which was a critical factor that organizations today have been missing. Because if today you go and ask someone, why did we suddenly see a fluctuation in our costs? In reality, not a lot of organizations have the ability to give the answer or at least being able to give it quickly. And they certainly don't have the ability to do that in real time. So what we'll talk you through today throughout the rest of the, the rest of the session is actually, what are some of the steps that you can live to take where you can start to bring these teams together?

00:11:15

We can start to answer some of these questions in real time, but then also what does good look like? What is the feedback loop that you can look to put in place between your engineering functions, your financial operations teams and your product teams to collectively make sound financial decisions. So how do you actually get started? Well, just like with every brilliant, uh, DevOps or fin ops or dev sec ops methodology, there is a maturity model. So, uh, the finops foundation has this phenomenal framework called the finance maturity model. Uh, we've done for the tweak that based on certain feedback that we've working with our customers and they actually gives you a very simple methodology. On one hand, you've got the crawl walk, run model based on your, based on how, uh, how quickly you actually want to go to your high level of maturity. And then you've got six different domains on the steps that you can look to take in order to increase your maturity.

00:12:15

For me, I've highlighted some of the key ones that one wants to look to focus on in bold, you know, being able to make sure you've got the right visibility into your it spend is frankly critical. And we'll talk about some of the tooling that you can look to do. Look you can use let's use in order to achieve that understanding what are the cost drivers with loosely coupled goals. As we talked about, you know, when you're establishing the financial trace, being able to pinpoint what business decision and goals that we were looking to achieve, the athlete drove that cost up is a fairly key being able to understand if your resources are under, over provisions. Now we're looking at the more technical capacity management side of things and removing those under utilized instances is also quite a key thing. And then also being able to define those guard rails, as we talked about this control framework.

00:13:03

So cloud usage, and as your maturity increases, you can start to look to do more fancy things such as maybe perhaps internal team men's barking and tubs game gamified. Find the process a bit where you can look at which team has a much better for an ops coefficient compared to another, another element that we've seen work quite well actually is looking to tie ones, carbon neutral goals against your fin ops, uh, pin-ups maturity, because a lot of the CSPs nowadays actually publish what their own carbon neutral consumption looks like based on the cloud platforms that you provide in you. Well, guess what you can actually piggyback on top of that data and look at how carbon neutral and carbon efficient you are being when it comes to releasing new products into the actual marketplace. So when it comes to your fin ops maturity, there's lots that you can let see, but I've highlighted some of the key ones that as an organization, you should certainly look to start off with my personal favorite is actually taking the entire finance maturity framework and building out an internal policy on screen.

00:14:06

I've given you an example of what a potentially a potential policy could look like, which looks to capture elements of information, access of how you actually organize your cloud environments. How do you understand the data coming in from there? What are some of the controls that you're baking in to your platform and actually then how you're looking to further optimize that as time goes, uh, personally, what I also really liked today is then taking that and having real-time coverage and visibility on how every single product team is doing with regards to that Philips policy. Again, you can start to gain me far this process, and certainly within your teams to look at how efficient your teams are being once you've got that policy in place. And you've got an understanding of how well that policy is adhered to within the business, where you can then start to do the establish a lot of your core cost drivers.

00:14:57

So, as we were saying, when it comes to establishing that, that financial trace, it's really key to be able to tie your business metrics all the way down to the actual potential cost implication and the way in which you can start to do that. As you start establishing the business objectives of the product or the change that you potentially about to embark upon pops, you might look to grow your user base. You then allocate a business metric against the objective. So if you want to grow your user base, you could say, we want to grow our user base by X percent, or we want to track X amount of monthly active users. You then take it down yet another level. And you start to look at the technical implication of that business objective that you want to look to achieve to say, if you want to grow, if you want to look to grow your user base by X percent, that means you now need to start scaling the number of instances by 5% in order to handle the request or that volume of consumption that you're about to see which by default is going to have an implication on your compute belt.

00:15:59

So now you can students on seeing that people within the business can start to see the implications on their actual core financial bills based on the business decision they made. So no longer is this just an engineering problem on why is my car costs gone high, but actually the business can start to see the implications to the financial side of things based on the decision that they've actually had to make. Um, the other element for me, which is quite critical, actually, collectively as a, as a team across the engineering, finance and product teams is building a cloud benefits framework. This is something that you can then again, look to tie against your business decisions that you're looking to make. So some of those decisions could be tied to it, improving your customer experience. Some of this could be tied to business agility, or this could be tied to actually improving just a role performance and improving the, the operational side of things of your platforms.

00:16:56

Some of those could be just financial optimizations, or it could just be the, actually from a risk and compliance point of view. You want to actually improve the security posture of your, of your environment. Once you've actually put these benefits together, you now have yet another dimensions that you can look to work towards. And then the last bit is making sure you have visibility for every single team out there, regardless of that, being a business function, a finance function, or a product and engineering function, and the way in which you could do this as initially, if you had the lower levels of your ops maturity, you can use the native tools provided by the CSPs themselves. This for example happens to be a screen on Azure, but both Google and AWS have an equally mature one. You can then start integrating the data that you have coming in from these tools, with your financial processes.

00:17:48

And if you happen to be an organization, for example, who is also multi-cloud, if you're not, you've got tools out there that can give you multicloud visibility. So now that you've got a policy in place, you've got the ability to track business drivers and you've got business benefits with the visibility. How does things starts coming together? Well, this is what the holistic framework for something, for something of a financial traits would look like you as an organization, for instance, want to become more resilient, or you want to look to increase your customer base phenomenon. You can track that with an assistant. And again, you've got automated cost management systems to be able to do these, or you could just try and do this manually. He can then start to allocate business metrics of what you'd expect to see as an outcome from these, from these business writers and decisions, you then tie your architectural changes by architectural decision records on what is it that you're about to do.

00:18:47

You then can start tracking the impact of those architectural changes. And soon you can start to see the cost drivers being impacted based on the business drivers that you collectively all agreed upon in the first place. And these cost drivers could be consumption of new services. It could be that you've had to scale the existing services, or you've had to change the size of your financial purchasing model, or you've actually had to reevaluate reevaluate the suitability of your cloud architecture and it's in society. So soon you can now start allocating business drivers suit to cost drivers no longer. You've got executive asking a question such as why'd my cloud costs gone up so high, because guess what? It was the collective executive decision that was made in the first place that you can now trace all the way from the, through the end to end life cycle and look at the actual cost implications of making some of these decisions.

00:19:41

So a lot of what we've talked about for now sounds quite theoretical. How do you actually go about implementing some of this? Because on paper, this all sounds phenomenal. So what does good actually look like? Well, for me, the two elements to it, one element of this is how do you make this look good for your hearts, your decision makers and people who aren't necessarily involved in the day-to-day, but then also, how do you provide that feedback loop to your engineering and your product functions whilst also making sure your decision makers have the ability to make the right decisions? So to keep things simple for us, what's critical is always establishing a continuous feedback loop. If you're, if you're a leader, we strongly recommend taking all this data and putting that behind a BI tool and actually amalgamating all this data all the way from the actual cloud cost, which you can see here on the left three to the forecasted costs.

00:20:39

Again, this is data that you can actually get from the financial tools of your car providers. You can then start adding against every single one of these, the actual benefits that you've currently been tracking throughout your actual cloud consumption. And this is something you can do on an application by application basis or on a product by product basis. It's up to you. They can also start to see some of the cost drivers that potentially you can look to play with in order to further optimize your costs. So the business leader, you now have the ability to look at your entire diesel transformation, spend on a page and say, brilliant. Here are some of the leavers that we can look to play, and let's look at how that actually has an impact in our actual consumption. On the other hand, if you're an engineering and a product function, you want real time feedback loops, you want the ability to make decisions and changes quickly.

00:21:30

So on the right hand side is an example of, for example, a slack bot that we created with, with the team that had an AWS landing zone in place. And this case, what we wanted to know is how can we make sure we're optimizing the environments that AWS workspaces that we were running and the moment that we had idle workspaces, either remove those completely or give us the ability to have a manual removal process. So what we had was a slack reminder that on a daily basis, every morning as the engineering team came in, would give us a popup of our fan upstate to saying, you've got X amount of idle workspaces running in this case. Here's the potential impact when it comes to the commercials, which in this case you can see was encouraging us a $2,000 cost per month. That was completely useless.

00:22:18

And therefore has an engineering team. You can then go and look at getting those workspaces out of the way and further enhancing the cost optimization of your environment. So this is how this is one way of how you can establish a feedback loop. I'm sure there are others out there within the community, and I'd love to learn more. But for us, the key thing always is having a north star and the north star me always was, how can you have a perfect partnership between your finance product and engineering teams? That was certainly one, but then on the other hand, how can we make sure that your maturity becomes so good that over time as your maturity increases, the unit cost of your cloud consumption goes down and that unit cost can be on a per environment basis can be on a per product basis, can be on a percentage basis.

00:23:09

That's totally up to you, but making sure that those costs can go down such that you've optimized that to the perfect level whilst also having that partnership that we in finance product and engineering such that you can collectively make those decisions is key because to date finance has been completely removed from those discussions. And guess, what is your cloud consumption is going to scale? You need to bring them as part of the inner circle and make those decisions together. So to summarize what is the valley of peanuts a, it helps you make sure you've got an end to end trace of your decisions. As we talked about the financial trace B, you have the right data to make that decision. And this isn't just us going on a, on a whim and seeing if we can do something, but rather having the right data and the visibility to meet the associations.

00:23:59

The third bit is having a cloud-first approach to financial management, as opposed to the traditional approach to ITN management that we talked about the other bit is having product teams empowered with the right feedback loops to be able to make those financial decisions. So no longer are they detached from the financial implications of the work that they're doing, but actually every single engineer, every single product owner, every product lead can now start to see what the implications are against the company's bottom line is based on the decisions they're collectively making that could be on the architecture, or that could be on the features that they're looking to choose. You're now starting to collaborate with non-technical functions, just like we said, dev ops and dev cycles. Start to do that with other parts of the business. If you're not satay looks to bring in yet another domain to have everyone in the agile and modern ways of working and last but not the least a by-product of all of this actually happens to be cloud spend.

00:24:57

So whilst everyone might be thinking that fin ops is all about optimizing cloud span. If you did everything above, that actually happens to be the perfect byproduct that everyone's looking to get out there for. So if I haven't convinced you already have the power of finops and if you haven't already got a good enough insight of some of the techniques and methodology, so you can look to use, you've got a plethora of content out there hosted by the fin ops foundation, who've done some phenomenal work. You can actually go check them out on their website, as well as join their slack channel, where you've got a lot of community members collaborating and sharing their techniques and their experience within this industry. And I'm sure you'll be able to contribute to that as well. And if you did enjoy this talk, we've got a lot more on our website as well. So if you wanted to go check them out all the way in the form of blog posts or webinars, go check us out on www dot, conceal the IO, and you'll be able to get even more finops content out there that perhaps might be of interest to you. Thank you for listening. I will be on the slack channel for any further questions that you might have, but if I don't get to speak to you, enjoy the rest of the conference. Bye-bye.