Financial operations (FinOps) is important on the cloud because it allows organizations to effectively manage and optimize their cloud expenses. Without proper FinOps practices, organizations may overspend on cloud resources or miss opportunities to reduce costs. The key steps for managing financial operations on the cloud include:
- Enforcing cost center tagging: Establish mandatory tagging of cloud workloads with cost center tags to track and allocate costs (chargeback) to specific departments, projects, or business units within your organization. Assigning costs to specific cost centers, can help to more accurately forecast and budget for future cloud expenses.
- Setting up cost management and monitoring: Tools such as Azure Cost Management or CloudHealth can help to track and optimize your cloud expenses.
- Establishing a budget and cost alerts: Set a budget for your cloud expenses and create alerts to notify you when costs exceed a certain threshold. Budgets can help control your current cloud consumption.
- Identifying and removing underutilized resources: Regularly review your cloud resources and eliminate any that are underutilized or orphaned to reduce costs.
- Right-sizing resources: Use tools like the Azure Advisor to identify resources that can be scaled down to reduce costs.
- Optimizing usage of reserved instances: Opt for reserved instances for specific compute resources in the case of predictable or steady state usage of the resourced. Reserved instance offer significant cost-savings compared to on-demand pricing, in exchange for committing to a longer team use of specific resources.
- Monitoring and controlling access to resources: Use identity and access management (IAM) to control access to cloud resources and monitor for any unauthorized access.
- Implementing automation to optimize costs: Automating tasks such as starting and stopping resources can help you optimize costs, particularly during early stages of development.
- Educate users: Help your users understand how they can calculate costs of their resources or infrastructure. Guide them on how to select the right SKU for their resource based on their business need. Enable the users with the right FinOps tools so that they can take ownership, be responsible for managing their cloud spends and take informed data-backed decisions.