Augmented FinOps – Need of the Hour
The accelerating pace of global digital transformation has made cloud services an indispensable part of modern business. According to the latest forecast from Gartner, Inc., worldwide end-user spending on public cloud services is expected to grow by 21.7%, reaching a total of $597.3 billion in 2023.
IT Spend and Cloud Waste are a recurring problem
While the adoption of cloud services offers unprecedented advantages, it also brings challenges, particularly in cost management. A concerning 32% of an organization’s cloud expenditure is reportedly lost to cloud waste. This statistic underlines a critical need for financial oversight in cloud operations.
Despite the rising awareness around traditional FinOps, it is evident that organizations require more than just basic practices to manage their burgeoning cloud expenditure effectively. This is where Augmented FinOps emerges as the need of the hour.
In this guide, we will explore the transformative world of Augmented FinOps, distinguishing it from traditional FinOps, and unveiling its role in shaping the future of cloud cost management.
What is Augmented FinOps?
While traditional FinOps solutions provide a starting point for organizations to align financial accounting with the variable cost model of the cloud, they often falter in driving usage reduction. This shortcoming stems from engineering teams’ reluctance to spend valuable time on cost optimization.
Augmented FinOps, as defined by Gartner, bridges this gap by automating traditional DevOps concepts of agility, continuous integration, and deployment, and extending them to financial governance, budgeting, and cost optimization through AI and ML practices.
- Intelligent Observability: It enables a detailed view of cloud clusters, resulting in intelligent recommendations to optimize cloud spend.
- Autonomous Remediation: The technology takes over the task of cloud spend control, ensuring business objectives are met without budget overruns.
- Deep Insight into Anomalies: Augmented FinOps provides profound insights into cloud spend anomalies, with the capability to autonomously remedy such inconsistencies.
- Proactive Stance: It shifts an organization’s posture from reacting to monthly cloud bills to actively determining true spend and identifying areas of waste.
- True Price/Performance Ratio Calculation: This ability, hailed by Gartner as “the only metric that matters,” allows for accurate assessment of a cloud project’s value.
Difference between Traditional FinOps vs Augmented FinOps
The difference between traditional FinOps and Augmented FinOps lies primarily in the application of AI and ML to the cloud cost optimization process.
- Traditional FinOps: Focuses on fostering collaboration between engineering, finance, technology, and business teams. It provides a foundational approach to managing cloud financials but often lacks the depth needed for effective cost optimization.
- Augmented FinOps : Builds on traditional FinOps by infusing it with artificial intelligence and machine learning. These technologies enable autonomous and continuous optimization of data infrastructure, shifting from reactive cost management to proactive strategic planning.
Why do we need Augmented FinOps?
A 2022 survey of cloud FinOps practitioners paints a telling picture: 37.1% of the 572 respondents were in the “crawl” stage of their cloud FinOps efforts, indicating that they were still grappling with the basics.
In the face of increasing cloud spend and the intricate challenges of managing such expenses, Augmented FinOps is fast becoming a must-have for modern organizations. Its ability to offer intelligent, autonomous, and real-time insights and remediation elevates it from a mere improvement on traditional practices to a cutting-edge solution.
Workload Management and FinOps Automation
Workload Management & Automation encompasses strategies and technologies that ensure resources are run only when needed and adjusts them dynamically to match the ongoing demand.
This capability extends to all facets of cloud computing, including IaaS, PaaS, and SaaS. It is a core principle in the Augmented FinOps toolkit, geared to enable FinOps teams to align supply with demand efficiently and to optimize cloud usage through intelligent resource management.
A 2023 survey by the FinOps Foundation revealed that “there’s still a long way to go with automation across a lot of areas as, on average, 50% of respondents are still planning to automate”
The Rise of Public Cloud Spend – Statistics from Gartner
Public cloud spending is on a steep upward trajectory, symbolizing a shift in how businesses are adopting and utilizing technology. This increase is being driven by the demand for scalable computing capabilities, particularly for technologies such as generative AI and large language models (LLMs).
Growth Across Cloud Segments
All segments of the cloud market are anticipated to see growth in 2023. The most prominent growth is expected in the Infrastructure-as-a-service (IaaS) sector at 30.9%, followed by Platform-as-a-service (PaaS) at 24.1%, with SaaS being the largest segment and growing at 17.9% to total $197 billion in 2023.
The Influence of Generative AI
Cloud serves as the foundational platform for running large language models, which require significant computing capabilities. Cloud hyperscalers are the key players in the generative AI race, offering the needed infrastructure and services.
Digital Transformation Trend
By 2026, Gartner predicts that 75% of organizations will base their digital transformation models on cloud, signaling a massive shift in the way businesses operate.
What factors affect the cost of Cloud?
- Lack of Awareness & Oversizing: Often businesses are unaware of saving opportunities, opt for oversized solutions, and choose wrong cloud resources leading to overspending.
- Waste & Inefficiency: Factors like 24/7 services not used round the clock, redundant resources, and old versions contribute to wastage and inefficiency. There’s often a dilemma between time-to-market and efficiency, leading to higher operational costs.
- Legacy Architecture & Migration Decisions: Migrating to the cloud requires confronting legacy architecture, a complex mix of modern and old systems, and making tough decisions that can have long-term financial implications.
- Vendor Lock-In: Cloud providers often promote their cloud-native PaaS services, but this can lead to lock-in with proprietary services, hindering future flexibility.
Gartner’s Hype Cycle 2023- Positioning Augmented FinOps
The Gartner Hype Cycle provides a graphical representation of the maturity and adoption of technologies and applications. It serves as a guide to understand the expectations and practical realities related to emerging technologies.
6 Emerging Cloud Technologies
- Augmented FinOps – This technology automates traditional DevOps concepts and integrates them into financial governance, budgeting, and cost optimization efforts. It leverages AI and ML practices, providing agility and continuous integration and deployment to the financial operations.
- Cloud Development Environments – These environments support the growth of the pervasive cloud, providing platforms and tools needed for efficient development and deployment of cloud-based solutions.
- Cloud Sustainability – Cloud sustainability refers to the economic, environmental, and social benefits achieved through the use of cloud services. It emphasizes alignment with sustainability goals and responsible cloud usage.
- Cloud-Native and Cloud-Out to Edge – These concepts describe the distribution and architecture of cloud computing, emphasizing flexibility, scalability, and responsiveness to industry demands.
- Industry Cloud Platforms – These platforms build upon existing SaaS, PaaS, and IaaS services to offer specialized business and technical capabilities tailored for specific vertical industries.
- WebAssembly (Wasm)– WebAssembly provides a compact binary instruction format for safe, fast, and portable execution, enhancing the development of web-based applications
Benefits of Augmented FinOps for Businesses
Here’s an exploration of how Augmented FinOps is revolutionizing cloud cost management and its distinctive advantages over traditional methods:
Real-Time Cost Monitoring and Visibility
Augmented FinOps allows for continuous monitoring of spending patterns. The immediate insight enables prompt identification of inefficiencies and areas of waste, leading to actionable, intelligent recommendations for optimization. Another native feature update, GCP’s FinOps Hub allows you to assess your cost optimization efforts with industry benchmarks.
Cost Forecasting and Efficient Prediction
Through the integration of AI and ML, Augmented FinOps facilitates accurate cost forecasting and efficient prediction of future expenditures. The ability to forecast costs empowers organizations to maximize their return on investment (ROI) and reduce unexpected overruns.
Intelligent Recommendations and Autonomous Remediation
One of the standout features of Augmented FinOps is its capacity to provide tailored, intelligent recommendations for optimizing cloud spend. Not only does it offer insights, but it also autonomously implements remediation strategies to align with business objectives.
Visualization and Analytics
Augmented FinOps offers intuitive visualizations and comprehensive analytics to help stakeholders understand complex cost structures. These visual tools transform raw data into meaningful insights, making it easier for decision-makers to grasp the financial landscape and implement effective strategies.
Augmented FinOps Examples, Applications, and Use Cases
Since Augmented FinOps solutions are still in development, it may be difficult to provide the exact benefits and applications. However, by examining some specific use cases and scenarios, we can begin to understand the potential impact and value of Augmented FinOps.
Content Delivery Network – Procurement Team’s Cost Optimization
Problem: The procurement team aimed to reduce costs by purchasing the best commitment plans on AWS. However, they relied on past data, failing to account for a large upcoming demand due to a newly onboarded client.
Solution: Augmented FinOps enabled the collection of real-time data across different departments, estimating future cloud expenditure, and accounting for growth. The result was the procurement of a flexible, cost-efficient plan that accounted for both current and future expenditure, saving significant costs.
Healthcare Organization – Managing Scalability and Compliance
Problem: A large healthcare provider was struggling with fluctuating resource demands, compliance requirements, and budget overruns.
Solution: Augmented FinOps provided insights into optimal resource allocation, ensuring scalability, compliance, and cost efficiency. Real-time analytics facilitated informed decision-making, resulting in both regulatory compliance and substantial cost reduction.
Retail Company – Seasonal Demand Management
Problem: A global retail company faced challenges in managing its cloud infrastructure costs, especially during seasonal demand fluctuations.
Solution: By using Augmented FinOps, the company gained a precise understanding of their seasonal trends, resource needs, and associated costs. It allowed them to preemptively optimize their cloud spend, balancing cost efficiency with performance during peak periods.
Financial Services – Continuous Innovation Without Overhead
Problem: A financial services firm wanted to foster innovation without exponentially increasing their cloud costs.
Solution: Augmented FinOps offered real-time visibility and predictive analytics, enabling the firm to understand the price/performance ratio of various cloud projects. By optimizing spend, they could innovate without unnecessary overhead, aligning financial governance with continuous innovation.
Implementing Augmented FinOps in an organization’s financial management strategy goes beyond mere cost-cutting. It’s about harnessing intelligent, real-time insights to drive strategic, agile, and efficient decision-making across cloud infrastructure.
Utilizing AI and machine learning, Augmented FinOps opens up new possibilities for predictive analytics, cross-departmental collaboration, and proactive cost management that aligns with business objectives.
If you’re looking to explore the transformative potential of FinOps and Cloud Cost Optimization, these related topics might be of interest:
- How to set FinOps KPIs for Cloud Cost Optimization
- 6 FinOps Principles & Best Practices
- FinOps FOCUS: Common Billing Specs for all Cloud Services
- FinOps Domains, Capabilities, and Maturity Model Assessment
- OpenAI Pricing, Monitoring & Cost Optimization: Open AI API, Microsoft Azure
- 8 Free Open Source Cost Optimization Tools
- 12 Best AWS Cost Optimization Tools in 2023
We hope this article has illuminated the dynamic landscape of Augmented FinOps, providing not only an understanding of its theoretical applications but also real-world examples.