Maximise the value of the Cloud with FinOps: a guide to optimising Cloud costs

Financial institutions are faced with several challenges: strong economic pressure, regulatory changes, evolving customer expectations, punctuated by strong competition from fintechs and insurtechs; which rely natively on emerging technologies to offer best-in-class services.

To meet these challenges and stand out from fintechs and insurtechs, financial services (FS) companies have invested massively in move-to-Cloud strategies, rapidly transferring their on-premises infrastructures to public and private Clouds. This has allowed companies in the industry to benefit from Cloud agility and enable:

• The development of new services by reducing time-to-market
• The adoption of a wide range of new technologies (including but not limited to e.g., AI/ML, IoT, RPA, etc.) by providing the infrastructure and services that are scalable, efficient, and secure
• The modernisation and simplification of the information system with Cloud-native application development, and the use of containers and microservice architecture
• The reduction of security risks with cloud hardening

As well as bringing innovation to the market, Cloud vendors also promised to reduce infrastructure costs while improving service quality; but this rapid development is not without its challenges:

• Traditional governance models, designed for on-premise infrastructures, are ill-suited to the Cloud and make infrastructure management more complex
• Though Cloud services are advertised for their flexibility and customisation, few Cloud service providers rule the market and customer fear for vendor lock-in
• The pay-as-you-go model is more complex to manage than expected, with ever-increasing expenses and rising overheads
• As Cloud service providers extend their service offerings with components and addons growing by the minute, governance and decision making has become tedious

For several years now, Cloud spending has consistently exceeded corporate budgets, and this year the trend continues. Even market leaders who have been investing in the Cloud for several years now are no exception. This can be explained in particular by:

Within a few years, managing Cloud expenditures has become the top priority for companies, ahead of security. Facing this urgency, companies opted to tackle the issue head on by improving their cost management, though traditional methods for managing Cloud costs are no longer relevant in the face of growing Cloud complexity.

This calls for an innovative cost management practice. Inspired by DevOps and Agile best practices as well as relying on Operational Excellence principles, FinOps has emerged to guide and structure Cloud customers navigating the various cost centres and what money can buy.

FinOps: a holistic approach to managing Cloud costs

Financial Operations, or FinOps, is an approach that aims to control and optimise Cloud spending. It enables the right balance to be struck between Cloud expenditure and IT performance, while aligning with the company’s strategic objectives. This approach also facilitates collaboration between all stakeholders and enables technological and financial aspects to be viewed through the same prism.

The Cloud is evolving year on year, and Cloud providers are constantly adding new services to increase business flexibility. However, this scalability also impacts the way expenses are managed, and traditional cost management methods are no longer effective enough for this. The FinOps approach, on the other hand, enables Cloud expenses to be managed holistically, making it easier and more accurate to track.

Traditional Cloud cost management differs in many ways from the FinOps approach:

• Scope – technical dimension vs. comprehensive approach: Traditional Cloud cost management focusses mainly on the technical aspects of Cloud spending (resource tagging, right-sizing resources, unused resources, etc.). In contrast, FinOps takes a more comprehensive approach to Cloud cost management, integrating not only the technical aspects but also the business and operational aspects.
• Goals – cost savings vs. cost optimisation: Cloud cost management centres on reducing Cloud spend, whereas FinOps is geared towards optimising Cloud spend to align with business goals.
• Metrics – financial investment vs. holistic overview: Cloud cost management traditionally centres on financial metrics, such as total Cloud spend. Conversely, FinOps adopts a more holistic perspective, incorporating non-financial metrics such as user satisfaction and business agility.
• Culture – silos vs. collaboration: Cloud cost management traditionally centres responsibility for cost management on the finance teams. In contrast, FinOps is based on a collaborative approach that engages the various stakeholders within the company, from finance to technical teams.
• Approach – Reactive vs. Proactive: Traditional cost management responds to cost issues post-occurrence. FinOps, proactively avert potential cost challenges by implementing preemptive measures.

Generally speaking, the aim of FinOps is to go further than simply reducing costs by focusing on maximising the value of the Cloud. The FinOps approach will ultimately make it easier to understand the Cloud and the associated expenditures, so as to better identify where optimisation is needed. Gathering key stakeholders around this issue, one is tempted to associate FinOps team as part of the Office of the CIO.

FinOps is therefore a logical step, and a solid ally for any company wishing to maintain its investment in the Cloud in order to support its growth and cope with future Cloud requirements as they will inevitably expand.

FinOps, a key ally in maintaining business growth in the Cloud

Companies in the financial sector will have to deal with a number of changes in the future, covering a range of aspects: technological (emerging technologies and use-cases, cybersecurity concerns, Zero-Trust architectures, etc.), regulatory (DORA, CSRD, etc.) and commercial (new products and services, evolving behaviours and customer expectations).

The Cloud remains as essential as ever, and continues to evolve as a technological foundation helping businesses face these changes and the associated challenges:

• Increased use of multi-Cloud and hybrid Clouds to improve security and avoid vendor lock-in
• Avoid consuming unused resources and ensure high availability of resources using a Serverless computing architecture
• Simplify the processing of large volume of data and reduce processing latency using Edge Computing
• Encourage the development of new high value-added business capabilities using the composability of industrial Cloud platforms
• Prevent threats to Cloud services with SASE (Security Access Service Edge)
• Take advantage of the computing power of the Cloud and data storage space to promote the development of AI
• Facilitate data exchange using an integrated cloud platform

With an increasingly complex technological ecosystem and the Cloud as a catalyst for these technologies, Cloud consumption will increase dramatically for companies in the financial sector, as will the difficulty of managing their usage and expenditure.

The FinOps approach is more essential than ever for businesses, given the future developments taking place around the Cloud. It is vital for businesses to prepare the ground now, so that they can take full control of the challenges ahead. FinOps provides essential visibility of usage and costs and simplifies the overall understanding of the infrastructure.

The future of the Cloud is taking shape year on year, and it will be hard to imagine it without FinOps. It is becoming imperative for industry players to factor FinOps into their Cloud roadmap and regain control of their infrastructures in order to take advantage of what the Cloud has to offer.

Without FinOps, current and future Cloud management is likely to be laborious (lack of understanding of invoices and their component, lack of visibility of resources on the Cloud infrastructure, automatic scaling of resources without spending controls, etc.), preventing companies from achieving their objectives and even causing investment budgets to burst.

In order to succeed in the next stage of their cloud journey, FS organisations need to address key challenges, such as cultural shift and resistance, complexity of cloud pricing models, cross-departmental collaboration, data overload and visibility issues. FS organisations can overcome the challenges of implementing FinOps practices by:

• Fostering a FinOps culture with a shared understand of cloud costs across departments,
• Simplifying complex cloud pricing models to make it easier for teams to understand, predict, and manage cloud expenses,
• Establishing a Cloud centre of excellence (CCoE) to lead the FinOps initiative and provide expertise and guidance to the entire organisation
• Using a cloud management platform to get better visibility into cloud usage and costs, and help manage and optimise resources