Introduction
Saying that migrating into the cloud is one of the major business trends of the past decade is close to an understatement. The transformation of moving large parts of the IT infrastructure into the cloud is one of the key elements of nearly all medium to large companies’ long-term strategies. The promise of reducing the on-premises footprint and thereby increasing the speed of innovation & flexibility, but also reducing operational costs is a convincing argument for IT management across all industries.
In this blog post, we want to show you that cost reduction through the adoption of the cloud is real, but far from given, and how cost control and innovation can actually complement each other if done right. We will also present to you our self-developed MobiLab Financial Operations Dashboard that will give you the power to have full control over your cloud costs and, thereby, really unlock its full potential.
Cost reduction with the cloud: Reality, but not a self-fulfilling prophecy
Cost reduction is the source of much anticipation, but also disappointment for many CIOs and CFOs, equally. Usually, the decision to move into the cloud is based on a business case analysis that provides an estimate of the reduction of IT costs within a given timeframe. When starting to move workloads into the cloud, the anticipated cost efficiency is often not reflected in reality.
So are cost savings in the cloud a myth? Not at all! But it depends on a multiplicity of factors to really ripe the benefits of the cloud from a financial standpoint.
Starting off the right way – A proper Cloud Assessment
First of all, the quality of the initial Cloud Assessment is of huge importance. Many companies offering cloud business cases are oversimplifying their analyses and do not include sufficient technical and financial factors in their TCO (Total Cost of Ownership) calculation. MobiLab is offering a thorough business case analysis that is scanning and analyzing the full IT infrastructure in scope. The customer gets an in-depth analysis of its IT environment, listing and structuring the number of servers along their OS (Operating System), status, and machine type. A migration strategy is created based on the technical readiness to move into the cloud.
The cloud assessment is the first step, where it is recommended to consider the extensive opportunities the cloud is offering regarding higher cost efficiency. Technical specifications and consumption patterns on-premises can already indicate the utilization of cost reduction measures, such as Reserved Instances (RI) and right-sizing. Also, going from PaaS to IaaS solutions in the cloud can lead to significant cost reduction in the medium- to long-term future. The MobiLab Cloud Assessment takes all these measures into account and, therefore, is able to assess future costs more accurately and gives a clear cloud migration strategy.
Also, read our blog post on why a proper Cloud Assessment is needed here.
“Welcome to the Cloud” – So, what now?
But also a very thorough cloud assessment and business case analysis can only be the first step to a successful cloud adoption. As much as the cloud is an opportunity for companies, it is also a huge innovation that poses a challenge to multiple stakeholders within the organization. IT operations, development processes, and even purchasing and procurement processes are different on the cloud compared to the past on-premise environment.
Operating a cloud efficiently and securely, making sure that development teams can utilize the benefits and speed of the cloud extensively, but also responsibly and at the same time having full cost control and a proper basis for purchasing decisions is a tough nut to crack.
In order to bring more clarity into the jungle of cloud offerings and to provide clear guardrails on how to operate within the cloud, a well-defined and state-of-the-art cloud governance is of essential help.
Show me the way – How a well-defined cost management governance can benefit all
Governance is of utmost importance in the cloud as it defines the guardrails on how to utilize and operate within and around the realms of the cloud. It serves as the rulebook for all relevant stakeholders. The concept of governance is built on formulating risks that occur in the cloud and precisely defining how to mitigate them via policies. Thereby, it is not only a set of rules or guidelines people can read and relate to but these policies can also be implemented across the cloud platform on a technical basis. This enables monitoring of accordance to the governance and can even be enforced through automation. To give an example: A potential risk in the cloud is the spinning up of resources without an identifier to a specific cost center, hence, a proper chargeback cannot be executed. This risk needs to be documented and a mitigation policy needs to be defined. In this case, the policy would be to apply a tag on the resource level that clearly identifies the cost center to the costs of the resource that should be charged. A step further would be to implement a deny policy on the platform that prohibits the creation of a resource without such a tag. This way the policy is enforced and adherence to the governance is guaranteed.
Cost management governance is of special importance, as cost management is a discipline in which a multiplicity of stakeholders from very different backgrounds come together. For example, in the past, IT Controlling and developers had little to no contact ever. Large numbers of servers were bought in amortization cycles of 5 to 7 years, hoping that they would meet the IT infrastructure requirements for the upcoming years. Nowadays, developers can spin up resources independently and flexibly, purchasing power is democratized. Controlling responsibility shifts to long-term purchasing decisions in the cloud, such as contracted discounts on resources or MACCs (Microsoft Azure Consumption Commitment). But also for these decisions, a continuous exchange between developers and purchasing departments is needed to ensure decision-making with the necessary knowledge basis. A good cost management governance facilitates the communication, interaction, and collaboration of all these stakeholders and finds a common ground for all to integrate and create a common understanding of the cloud costs.
Read here on the elements of cloud governance and how it can help your organization.
You only believe what you see – making costs visible
To make cloud expenditure and utilization understandable a dashboard that precisely visualizes the costs and where they are coming is the next step in better achieving higher cost control. This way, all relevant stakeholders see and understand the costs and can make purchasing decisions on an informed and real-time basis as well as execute optimization measures. MobiLab’s FinOps Dashboard aims at making costs visible and providing a basis for real-time cost decision-making in the cloud for all relevant stakeholders. The stakeholders we want to properly support in their day-to-day business are:
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C-level IT Management: C-level Management wants to have a general overview of the cloud costs on a monthly to yearly basis. Their main interest is to see if the negotiated Enterprise Agreement is executed upon. An Enterprise Agreement is a long-term contract between Microsoft and its customers that contains agreements on e.g. committed cloud consumption from the customer, but also specific discounts provided by Microsoft. The dashboard needs to provide a basis for strategic, long-term decisions in the cloud.
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IT Operations/FinOps Practitioner: IT Operations want to know exactly what is happening in the Cloud. What are the costs on a daily to monthly basis? What are the most consumed resources? Which subscriptions and/or workloads are the highest consumers? The dashboard needs to provide all relevant information for the IT operator to make short-term cost decisions and align usage optimization measures with the respective workload owners.
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IT Controlling: Their main interest is the proper identification and allocation of costs to the respective cost centers in order to be able to properly charge back the costs that are occurring. The dashboard needs to provide the necessary data for accounting systems to process and to the automatic chargeback on a regular basis.
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Workload Owner / Developer: Workload owners’ and developers’ highest concern is the proper and stable functionality of their applications. In order to achieve this, they usually require a high degree of freedom to operate their workloads, like spinning up necessary resources or utilizing specific services to improve performance. The goal is to sensitize them to the costs their actions implicate and convince them that proper cost management does not hinder, but rather supports the efficient operation and development of applications. The dashboard needs to provide specific details about the costs & utilization of the respective workloads in order to enable an optimization of the usage patterns of resources & services on the cloud, such as e.g. auto turn-off/turn-on, rightsizing, etc.
To provide the needed information to all of these stakeholders the dashboard allows the analysis of the cloud costs from a generic point of view all the way to drilling down on costs for specific resources or services. You can get a quick overview of the overall costs within your cloud tenant and how they develop over a chosen timeframe as much as isolating the costs for virtual machines for a specific subscription.
The goal of the dashboard is to enable cost optimization from two different perspectives:
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Rate optimization: Reducing the average price of the resources you are utilizing. This can be achieved by the optimal usage of e.g. Reserved Instances or applying on-prem licenses to resources in the cloud (Azure Hybrid Benefit or, in short, AHB). Normally these optimization measures are managed centrally, either, by IT Operations or a dedicated FinOps team within an organization.
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Usage optimization: Reducing or optimizing the utilization of resources and services. You only want to use what you really need. Therefore, you need extensive information about e.g. utilization patterns, the resources you are utilizing, and how you are using them. This enables an informed and efficient usage of cloud resources.
For both approaches, the Cloud FinOps Dashboard provides features to work towards these optimization goals. It offers detailed insights into which RIs are currently purchased and how they are being utilized. Additionally, it gives clear recommendations of which additional RIs to purchase, based on the current consumption pattern. The same features are also available for Azure Hybrid Benefit.
Furthermore, it is possible to isolate and segregate the costs in the cloud into each layer that is required for you to obtain the needed insights from your data. Do you need to know the costs in a given timeframe from one application in particular? Do you need to know which resources this application is using and if the utilization is making sense based on its purpose? All of this information you can easily obtain by filtering the dashboard along the metadata that is implemented across your Azure tenant.
To facilitate the internal cross-charging of cloud costs in your organization all of this data can be extracted in the required format from the dashboard and pumped into your internal accounting tool in an automated way.
A look into the future – What is next?
Our long-term vision for the dashboard is a cloud-agnostic tool that is giving meaningful insights to all relevant stakeholders within the Cloud FinOps realm.
Currently, the dashboard is still a tool mainly for the IT Operations team that is centrally managing and controlling the costs of the overall cloud. They can use it to understand consumption patterns on Azure in high detail and counteract, where necessary, via purchasing decisions or in collaboration with developer or workload teams. Looking forward, we want to enable each persona to access the dashboard and get exactly the information it needs. Simply by logging in with your credentials the dashboard is able to visualize the information connected to the person’s roles and permissions. This will allow also other stakeholders to involve in-depth in FinOps practices on a regular basis and create a collaborative approach to achieving the highest cost-efficiency in the cloud possible.
Furthermore, we want to combine the MobiLab Cloud Assessment Dashboard and FinOps Dashboard to enable our customers to see the prospected cost reductions turn into reality. They are, then, able to track the development of costs during the migration into the cloud at a deeper level and can steer the outcome of this transformation in a more controlled manner.
If this topic caught your attention and you also want to find out more about how our FinOps Dashboard can help you understand your costs better and unlock more efficiency in your cloud, feel free to reach out to us!
