It’s been a few years since you moved your assets to the cloud. Now, you’ve observed, prices are beginning to spiral. It’s time to undertake a comprehensive cost optimization exercise… but what does that mean exactly?

While cloud cost management is the traditional approach to cost savings on cloud infrastructure, there’s a new kid on the block – FinOps. Businesses of all sizes are increasingly adopting this approach, aiming to get the most out of their cloud. Among several big names using FinOps is Airbnb.

So how did Airbnb move from reactive management to FinOps finesse?

The hospitality giant initially relied on a Cloud Cost Management approach. They reacted to surges in costs, utilized cloud provider tools to identify areas of high spend and implemented cost-saving tactics to address them.

This approach yielded results, but could not keep pace with Airbnb’s demand spikes and troughs. The lack of nuance and siloed approach resulted in an inability to forecast requirements and proactively optimize infrastructure utilization. Communication gaps between the finance and engineering teams also resulted in improper prioritization.

Airbnb realized that something had to change. They needed a more holistic approach. Enter FinOps – a methodology that goes beyond cost-cutting; it’s a cultural shift that fosters collaboration between finance, engineering, and operations teams.

Let’s explore the nuances of FinOps and Cloud Cost Management, and discover which approach works best and why… or if you should opt for a combination of both!

Cloud Cost Management: Foundation for Optimization

In Cloud Cost Management, a team aims to reduce overall cloud expenditure of a business. The team identifies which resources are unused or under-used, and then optimizes their utilization. This process also involves generating reports to help stakeholders understand resource usage status.

Cloud Cost Management helps organizations save cloud expenses; however, it has its limits. It majorly focuses on terminating unused resources to reduce costs. This makes it a reactive approach, meaning that the team takes action to reduce costs only after the issue has occurred. This means that with this approach, you would be able to reduce cloud costs; however, you won’t be able to visualize possible occurring costs in the future. With CCM, you lose out on the proactive approach.

Cloud Cost Management is also a siloed approach which means it doesn’t foster a collaborative environment. This would force departments to work separately rather than collaboratively, negatively impacting the business in the long run.

FinOps: A Holistic Approach to Cloud Financial Management

FinOps, is a portmanteau of ‘Finance’ and ‘DevOps’. FinOps, short for Financial Operations, is a cross-functional financial management practice tailored to the unique needs and dynamics of cloud spending. At its core, FinOps is about bringing financial accountability to the Variable and distributed spend model of the cloud, enabling organizations to harness the cloud’s power without succumbing to its potential cost pitfalls. FinOps not only focuses on cost-cutting within cloud computing, but also optimizes the resources and the overall performance in an organization.

This means that by adopting FinOps, you would be able to use your resources more effectively and make the most out of your expenditure. By opting for FinOps, you would be presented with opportunities for improvement and a common understanding across the organization.

Let’s see how FinOps does the magic:

  • The model keeps all teams talking the same language, based on their roles and responsibilities. This way, no team has to deal with jargon terms they don’t understand, and they all can maintain their guardrails.
  • It enables businesses to identify regularly review expenses and so on leading it to achieve its vision and mission.
  • FinOps model enables businesses to identify possible financial risks such as budget overruns and make course corrections before the crisis occurs.
  • It regularly reviews expenses on cloud resources, identifies room for improvement, and implements the changes.
  • FinOps helps businesses set boundaries, define and meet fixed cloud budgets, and use optimal cloud resources at discounted prices.

Synergy: How FinOps Leverages Cloud Cost Management Tools

To deliver the best of both worlds to businesses like Airbnb, FinOps model can help in the below:

Cost Visibility:Providing an in-depth view into cloud expenses. These details on usage and resource allocation across departments within an organization allow practitioners to understand the patterns and find areas for cloud cost optimization.

Reporting and Analysis:Generating detailed reports on cloud expenditures. The team can use these reports to monitor costs and track budget allocations, leading to more informed future decisions. At the same time, this helps stakeholders understand these processes.

Optimization Recommendations:Implementing cost savings and efficiency improvements.

Budgeting and Forecasting: Planning budget and resource allocation that makes sure it aligns with organizational goals. Such budgeting also helps with forecasting cloud costs, letting the team be proactive in cost optimization.

Policy Enforcement: Teams can enforce cost-saving policies and implement compliance measures across the cloud systems.

While traditional cloud cost management offers basic savings, it lacks the strategic depth and collaborative approach of FinOps. Thanks to FinOps, Airbnb gained better accountability, transparency, visibility, collaboration, agility and – most importantly – informed decision-making. It could work for you as well. Reach out to our team of experts to learn how to foster a culture of cost awareness and continuous optimization and truly optimize your cloud spend.