Cloud FinOps

Markus Iten

Senior Manager Technology & Data, PwC Switzerland

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Gabriele Rampolla

Senior Consultant Technology & Data, PwC Switzerland

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Mapping cloud costs to business value is key. FinOps teams know what decisions to make.

Embracing cloud technology offers significant advantages for organisations, including enhanced efficiency, rapid business synergies, as well as providing scalability and speed to drive innovation and new revenue streams. It improves global collaboration between developers, working practices become more flexible, and innovative technologies can be integrated more easily to improve operations and customer service. Nevertheless, it also brings new risks and challenges. Despite widespread migration to the cloud, many organisations still struggle to realise its full potential and face cost issues.

The cloud: enormous potential, inherent challenges

Cloud adopters must address several key challenges: On the one hand, inefficient integration and communication across different company functions and roles often lead to unnecessary cloud expenditure. On the other hand, the complexity of cloud services and pricing models can result in poor decision-making and affect the accuracy of forecasts. A lack of understanding of overall cloud spend combined with additional tax costs can erode potential operational savings. And while the dynamic scaling capabilities of the cloud are advantageous, without continuous monitoring there is a risk of spiralling costs. Many organisations still operate with an “on-premises” mindset, which is not optimised for cloud-based models. Additionally, professionals with experience in managing cloud finances are scarce, which further complicates effective cloud adoption and management.

Keys to success Get in touch with us

32%

of cloud spend is wasted due to inefficiencies, which is 2% more than last year*

81%

of companies say that managing cloud spend is a top challenge*

54%

of companies say that public cloud has increased their IT spend in the past three years**

70%

of organisations that perform lift-and-shift to cloud IaaS without optimisation overspend by 70% in the first 18 months***

^{* Flexera, Title: Flexera 2022 State of the Cloud Report Date Published: 2022

** Gartner, Digital Business Requires a New Normal in IT 2021

*** Gartner, Solution Criteria for Cloud Provider Native Cost Optimization Tools 2020}

Reality does not meet expectations

High expectations accompany the move to the cloud, with many clients emphasising swift migration and the rapid decommissioning of their legacy infrastructure, often employing lift-and-shift strategies. However, this urgency can overshadow the primary goal of realising the full value of cloud adoption. Migration timelines frequently extend beyond initial estimates, and the quick migration approach may fall short in delivering the expected cost savings. Complicating matters further, cloud costs tend to rise continuously, primarily due to an application landscape that isn't optimised for cloud usage, as the primary focus is on expeditious migration. Consequently, delays in cloud migration hinder the planned decommissioning of existing infrastructure, adding to the complexity of the transition.

Expectation

Reality

The key to success

A different approach to IT finance is required to address the challenges associated with cloud spend, as the traditional ways of managing infrastructure are not effective anymore, creating situations where increasing cloud costs can threaten the business. Examples of such cloud-induced transitions include:

Centralised purchasing turning into self-service by cloud users
Large fixed Capex moving to elastic pay-as-you-use Opex
Limited capacity becoming unlimited capacity
Managing the extremely detailed billing data with thousands of line items and grouping it into meaningful data points

A dedicated FinOps team is critical for managing cloud costs as IT functions change shape when organisations migrate to the cloud. FinOps is based on the collaboration between business, finance, and engineering teams, driving a culture of transparency and accountability to optimise cloud expenditure and bolster business innovation.

Tech-power is leading the way

An effective FinOps framework is rooted in tech. Machine learning (ML) is increasingly vital for enhancing cloud visibility and optimising costs. With 54% of companies citing lack of cloud use insight as a key reason for cloud waste¹, ML is being used to analyse vast data sets, tracking resource usage, identifying inefficiencies, recommending optimisation and automation actions, as well as detecting unusual behaviour and potential threats². ML algorithms help predict future use, aiding in accurate cost forecasting and avoiding resource over-provisioning. This leads to cost savings by suggesting optimal scaling of resources.

^{1: www.anodot.com

2: www.splunk.com}

How to manage cloud costs

Mapping cloud costs to business value is crucial. At times, a business may choose to tighten its belt while at others, it may opt to invest more. With FinOps, teams know why they are making those decisions. In an iterative approach, PwC’s FinOps experts focus on three key areas based on the FinOps Framework by FinOps foundation³:

Transparency: They provide departments with visibility of cloud expenses, aligning them with business data and establishing benchmarks.
Optimisation: In optimising cloud spend, a FinOps approach enables real-time decision-making, advocates for efficient resource usage, and seeks opportunities for cost savings through commitments and reservations.
Mature operations: In terms of mature cloud spend operations, they evaluate business objectives and track metrics against these goals. Ensuring organisational success involves establishing a centre of excellence for cloud cost management, which centralises expertise and best practices.

^{3: www.finops.org}

How we can support you

Our FinOps services are based on a holistic blueprint that includes transparency, process, people, governance, tools, and DevOps architecture. This approach ensures sustainable efficiency and cost reduction.

We have deep expertise in both finance and cloud, with more than 10,000 cloud professionals across PwC’s global network and 800 cloud engagements with more than 550 clients last year.

With our proven accelerators and frameworks, our FinOps experts can support you through the entire cloud journey, from architecture assessment and design to post-migration cost optimisation. In addition, our strategic alliances with major cloud hyperscalers enhance and complement our service offering.

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