Businesses today operate in a highly dynamic and competitive environment, necessitating the need for effective financial operations (FinOps). FinOps is the financial management and optimization of a company's cloud resources, that includes costs, utilization, and performance. Organizations that have adopted FinOps have reduced cloud costs by 20 to 30%. To maintain successful financial and cloud operations, critical indicators and KPIs must be measured to identify areas for improvement and maximum cost reductions. This blog will go over the various FinOps metrics that can be used to monitor success and identify areas for improvement.
Deep Dive into the 7 FinOps Metrics
Accountability and Enablement Metric
The Accountability and Enablement pillar is critical to establishing a culture of cost and value awareness, as it lays the groundwork for both process and cultural change journeys in cloud FinOps. By optimizing IT financial processes and enabling frictionless cloud governance, the primary goal is to promote financial accountability and drive business value realization. Enablement provides training to IT, finance, and business teams to help them better comprehend cloud resources and strategies for their effective deployment and management. Leveraging accountability and enablement begins with charter and core governance standards that assist in process transformations that connect finance, IT, and business owners.
The cloud enablement is an essential metric as many organizations struggle to use Cloud FinOps due to a lack of knowledge and training. It will assist business executives in capturing the true value of the Cloud and how it can be further used to create long-term business goals. Moreover, it is easy to deploy this metric as you just need to set a goal based on the number of identified business leaders in your organization. Having said that, it is critical to apply the Pareto principle of the 80/20 rule and select the top business executives who are heavily consuming cloud services.
Measurement and Realization Metric
To assess the efficacy of the Measurement & Realization pillar of cloud FinOps, we suggest using Cloud Allocation% as the lead metric. The metric is calculated based on the percentage of overall cloud costs (taggable resources consumed by individual business units, taggable resources shared across multiple business units, and non-taggable resources).
It is usually employed in Showback (cloud costs incurred in central IT P&L but are reported to business units) and Chargeback models (cloud costs charged to business unit P&Ls) that reflect the underlying effectiveness and accuracy of resource tagging and cost attribution to business units. There are two techniques to accomplish Cloud Allocation%. The core implementation would include costs allotted by the P&L parameter (consumption or traditional P&L allocation such as revenue or personnel). The more advanced implementation of this metric would only qualify resources (both specific and shared) that track consumption and attribute costs corresponding to business units via tagging or API calls.
Cost Optimization Metric
One thing you should know: Cloud cost optimization strategy is not about minimizing costs. It is about knowing where to spend your money to maximize your business value. It is an iterative and continuous approach to managing cloud utilization cost-effectively.
Generally, cost savings can support the implementation of:
- Optimizations in prices such as Committed Use Discounts (resource-based and spend-based), BigQuery reservations, and so on.
- Resource optimization of resources that offer no business value (such as old snapshots, idle instances, and over-sized databases)
This metric is important for any business as it helps them keep track of their inefficiencies and allows them to reduce costs while deriving the full value of hosting their workloads in the cloud.
Planning and Forecasting Metric
The team in charge of cloud operations is usually in charge of planning and forecasting cloud computing costs and expenditures. Consumption workload plans, historical trajectory, seasonality, and leading indicators are used to construct operational forecasts. Transformational projects pose significant risks to forecast accuracy.
Accurate financial forecasting in cloud spend requires reimagining existing approaches over asset depreciation run-outs, trend-based maintenance and licensing cost forecasting. Workload-specific forecasting models that combine trend-based models for steady-state workloads, driver-based models for scaling applications, and monthly variance analysis can significantly enhance the accuracy of dynamic cloud demands.
Assessing forecast accuracy allows businesses to determine whether or not they are following through on their plans. Evaluating and discussing deviations in forecast accuracy allows for improved control over cloud spend allocations.
Tools and Accelerators Metric
Using the right tools and accelerators is critical for reaping the full benefits of FinOps services. Earlier, companies had limited capacity to report and analyze their cloud spend. As the FinOps practices evolved with the times, labeling and tagging resources proved useful in identifying costs for individual projects/teams and building unit cost metrics. As a result, the proposed Tools & Accelerators metric is used to assess the percentage of the total list of generated automated recommendations that contribute to cost savings.
What makes this metric important? As the organization migrates newer workloads to the Cloud, a lack of comprehensive actionable advice and monitoring can lead to increased cloud waste. This has prevented major organizations from capturing the full value of their cloud investments.
Mean Repair Time (MTTR)
Mean time to repair (MTTR) is a key performance indicator that evaluates how long it takes to remedy cloud infrastructure faults. A reduced MTTR suggests that an organization can resolve difficulties rapidly, minimizing the impact on task performance and reducing resource waste.
Performance metrics are used to assess the performance of a company's cloud resources, which include computing, storage, and networking. These metrics are as follows:
- Response Time: This metric measures the time it takes to complete a request. It can be used to find areas for improvement in performance.
- Latency: It tracks the time taken to issue and receive a request.
- Error rate. Counts the number of requests that result in an error.
Stay Miles Ahead of your FinOps Journey with Cloud4C
As technology and business goals evolve over time, it is critical to establish a process of continuous reviewing of the Cloud FinOps metrics. You need the right governance and support to enable financial accountability, efficient cost optimization, greater cost visibility, and resiliency across the organization. Cloud4C FinOps as a Service relieves organizations of the burden of building and implementing complex cost management roadmaps, training teams, or hiring in-house cloud cost experts. To know more, get in touch with us today!