A new research study conducted by Foundry exposes what the most successful cloud cost management programs have in common, helping IT and financial leaders pinpoint FinOps approaches generating the highest savings. Here’s the bottom line:
Partner with a provider for FinOps software and services and you’ll save 20% on average.
Apply AI to your FinOps practice and you’ll save greater than 20% on average.
Do neither of the above and you’ll save less than 10% on average.
FinOps is a methodology for optimizing cloud resources and costs, and companies are operationalizing this strategy using in-house programs and outside partners. The study surveyed 200+ IT and financial leaders who have implemented a FinOps model across many industries, and the findings focus on best practices for maximizing ROI on cloud infrastructure and applications.
Lessons learned from early adopters of FinOps
Rising cloud adoption has brought numerous benefits but also challenges related to financial management. Sprawling resources can be accompanied by a lack of visibility into utilization and costs, triggering a new need to govern rising expenditures. The FinOps Framework puts forward a process for addressing cloud waste management.
Early adopters describe the benefits of FinOps as:
1. Productivity savings
2. Cost savings
3. Reduced security risk
But while the benefits of FinOps are well recognized, how companies successfully implement and tool the model are far less established. The Foundry study pulls this critical information out of the shadows, exposing how successful programs reach the highest payouts.
FinOps ROI: 3 ways to get the highest cloud payouts
The survey zeroes in on the business leaders achieving at least a 20% savings from their FinOps program, and data points to the following factors triggering higher returns.
Key factors maximizing FinOps ROI:
1. The approach used for implementation
2. The use of AI to automate data collection and analysis
3. Comprehensive programs optimizing both IaaS and SaaS
The right approach can double your savings
Organizations can choose to build FinOps programs internally or partner with external providers for software and services. Results show that outsourcing some or all of your programs can significantly impact cost savings with companies using third-party services reporting an average savings of 20% — compared to less than 10% for in-house solutions. Data also shows partners are key in controlling runaway costs and gaining efficiencies in financial management.
The findings are congruent with other analyst firms that issue warning statements.
While do-it-yourself (DIY) tooling is on the rise, Forrester “vehemently dissuades” FinOps practitioners from a DIY approach due to the complexity and investments required. Ultimately, DIY can jeopardize the ROI of a FinOps practice. Gartner puts forward similar cautions, finding that cloud cost governance practices are largely immature. The problem? The tools they use. Gartner states, “FinOps is a particular implementation of cloud financial management. It is often oriented toward what the vendor’s tools can do, rather than high-value best practices.”
In-house FinOps programs typically rely on native tools — the built-in dashboards and analytics found inside their provider’s portals. However, native tools aren’t always good at achieving what FinOps aims to be — a multi-cloud optimization strategy that can deliver on the needs of both IT and finance teams.
More savings faster: AI breaks down barriers
Artificial intelligence (AI) plays a crucial role in optimizing cloud costs. According to the Foundry study, companies that leverage AI for their FinOps practices are 53% more likely to achieve a savings of greater than 20%. Companies that don’t use AI save only 6% to 10%. The report also says 63% of respondents believe analytics is the top use case for AI in FinOps, with 50% praising it for easing financial management burdens and 48% saying they have seen productivity gains from AI automation.
Without AI it’s nearly impossible to evaluate massive amounts of cloud usage data against all possible IaaS configuration options to quickly determine which action will yield the highest savings. AI can rapidly play out what-if scenarios using advanced analytics to generate cost optimization suggestions. Plus, it can help IT engineers automatically implement recommendations once approved. This results in faster time-to-savings.
Reducing more costs: Start with SaaS then tackle IaaS
Maximizing cloud ROI involves making better use of IaaS resources and SaaS licenses. While most survey respondents optimize both, the survey says SaaS offers more significant cost reduction opportunities. FinOps programs save 20% or more on cloud software, versus less than 10% on cloud infrastructure. This shows FinOps practitioners where to begin their journey. Start first by scrutinizing high-volume applications, and reallocating unused and underused licenses to achieve savings. Also reduce redundant applications, consolidating SaaS services to save money.
How to choose FinOps solutions and service providers
When a service provider can double your FinOps savings, choosing the right partner is critical. The Foundry study also reveals the criteria business leaders use when selecting FinOps platforms and services (see image).
Tangoe
In conclusion, as cloud adoption grows, so does the popularity of the FinOps methodology. But as IT and financial leaders design their approach, they should make careful considerations in how they implement and tool their FinOps programs. Outside partnerships, AI technologies, and SaaS optimization are best practices for achieving the highest savings payouts.
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