Research overwhelmingly points to cloud cost governance as the greatest stumbling block to digital innovation. Most businesses have plans to increase their investments in cloud software and infrastructure, but 80% see cloud cost savings as a primary challenge – an obstacle to their ongoing use of cloud resources.
Much of the problem stems from cloud cost management, as 70% of companies struggle to account for cloud spending and usage. Excess cloud waste and overspending also create swirling winds that can eventually spin out of control, at which point the value of cloud agility and scalability is overshadowed by the complexities of financial management. Without defined governance for cloud assets and their expenses, the pursuit of digital innovation can be a non-starter.
Enter the FinOps framework.
FinOps blazed onto the scene in recent years as a methodology for cost optimization programs addressing software as a service (SaaS), infrastructure as a service (IaaS), and unified communications as a service (UCaaS). The framework empowers IT and financial leaders to achieve cloud ROI, cutting through the complexity to make cloud investments more financially sustainable and deliver more business value.
Enterprises are adopting the FinOps strategy in droves, but how are they implementing and tooling their programs? Practitioners face a widening variety of cloud cost management tools in this blossoming sector, from homegrown solutions to fully managed FinOps software and services, and they all promise the same: cost savings, more efficient use of resources, and predictable cloud expenditures.
This guide explains how a purpose-built FinOps tool from a third-party expert better facilitates a corporate FinOps program, helping to jumpstart success. We’ll explore four competitive advantages of using a technology platform to active the FinOps framework.
Which implementation approaches can fast track FinOps success and maximize ROI? The FinOps Foundation has observed an increase in homegrown tooling, but this does not imply that a DIY approach effectively operationalizes FinOps. Here are three data-backed reasons why DIYers can compromise the ROI on their FinOps programs:
DIY FinOps is outright discouraged by industry analysts for its resource intensity. Forrester Senior Analyst, Tracy Woo, penned an article stating: “At Forrester, we vehemently dissuade FinOps teams from taking a DIY route because of the level of complexity and the number of person-hours required to maintain it.”
Woo acknowledges that some DIY efforts do work but only for large enterprises with 15-45 engineers and at least $1M to invest in building a cloud cost management technology platform from the ground up. Forrester also estimates that three full-time employees are needed to operate a FinOps program.
Homegrown solutions must:
The complexity of these criteria can be a detour from reaching the cost savings goal at hand, making it a risk not worth considering.
Digital leaders move four times faster and with twice the power as their peers. For leading FinOps practitioners, this means recognizing cost optimization opportunities quickly and implementing changes fast to turn potential savings into real dollars back in the budget. Time-to-savings is a problem for 75% of companies that report they will have to wait at least 2-3 years to see real results from their in-house FinOps platforms.
Over 60% of companies recently polled by the FinOps Foundation are in the earliest “crawl” phase of FinOps maturity. This means most companies are FinOps beginners, understanding requirements with little reporting and tooling capabilities and only basic KPIs set for the measurement of FinOps success. A 2023 study from McKinsey reports similar findings. Only 15% of companies polled by the firm say they have sufficient understanding of cloud unit economics, and only 46% are adept at analytics despite citing the need for better budgeting and forecasting.
The right FinOps tool should be able step you through the phases of maturity faster, thus generating higher returns. In fact, Foundry’s research found that enterprises activating a FinOps model using third-party, AI-powered FinOps software realized an average cost savings of more than 20% plus additional productivity gains. This is in stark contrast to a DIY approach without AI, which averages less than a 10% savings. When compared to programs and solutions sourced in-house, AI-enabled FinOps solutions from outside partners correlate with greater savings and stronger results in cost control and productivity gains.
Highly integrated FinOps platforms offer companies a clearer view into the cloud and also faster insights into their consumption habits, delivering summaries and cost saving recommendations in just 24-48 hours. Integration also facilitates high levels of interoperability, as one system offers a single pane view for optimization across IaaS, SaaS and UCaaS services. The value of centralization and interoperability sharpen as you look at how FinOps tools can connect the dots, synthesizing intelligence across service charges, usage habits, and IT budgets.
Here’s how those benefits culminate into real results and outcomes.
One platform works across multiple cloud service providers, bringing everything together using API integrations that automatically retrieve service details, invoices, and utilization data.
A single source of truth makes for easier apples-to-apples cost comparisons, as normalized data across multiple services shows you who has the lowest rate per unit cost. Plus, you’ll see where you’re spending the most, where the spending growth is, and how and where to get a better deal.
Centralized management also helps with custom recommendations that go beyond surface-level savings. Direct access to all the raw data enables advanced FinOps platforms to serve up more than just out-of-the-box cost savings recommendations. For example, you can apply filters to hone in on cloud resources not used over the past X days/months/years and set rules to automatically alert to important recommendations or ignore those that may not be relevant to the business.
FinOps tools that tap into a company’s vast ecosystem of SaaS applications can deliver high-level overviews while also letting users dive deep into their SaaS spending and application usage trends, including:
Only with these granular insights is a path to cost SaaS optimization possible. For instance, you can’t downgrade a Microsoft 365 software license to a lower tier without impacting employee productivity if you don’t know specifically how that employee uses the application and how often they use it.
FinOps platforms that seamlessly plug into existing financial management systems provide even more value:
Studies show FinOps programs aren’t fully automated yet, but AI automation is changing that. AI is enabling IT and finance leaders to automatically monitor and govern cloud costs, which is why it’s considered the driving force behind streamlined cloud expense management. Solutions infused with AI technologies accelerate FinOps programs in many ways. Here are some compelling examples:
Crunch Massive Data Sets for Smarter Cost Analysis
AI analytics are uniquely designed for large-scale data processing. Consider that there are 480,000 unique SKUs for a single hour or partial hour of EC2 Amazon Web services and more than 1 million ways to configure a single server. Finding the most cost-efficient configuration isn’t possible without AI. FinOps software uses machine learning, behavioral analytics, and predictive algorithms to continuously assess data to inform on usage and spend optimizations with the clearest insight.
Automatically Act on Cost-Saving Tactics
AI-powered FinOps tools allow you to instantly act on identified cost savings recommendations thanks to automated implementation features that make changes for you. Modifying cloud network infrastructure configurations and right-sizing resources to reallocate unused resources are as simple as clicking “APPROVE.” This is how you capitalize on FinOps insights and speed time-to-savings, turning potential savings into real dollars saved. You can also automate cost allocation and chargebacks – two major pain points cited by companies using a DIY approach to FinOps.
As mentioned, most organizations are in the initial “crawl” phase of maturity. Early stages might be sufficient for addressing “low hanging fruit,” but what happens when you’ve hit all your first savings recommendations? Will your team have the endurance to continue? Because cloud services and spending are constantly changing, cost management must be a regular exercise with ongoing, expert support. Managed services can level up your FinOps maturity. Full-service solutions keep FinOps on track, enabling IT and finance teams to stay focused on their top business priorities.
Service packages are particularly helpful when you need help to:
Cost governance shouldn’t stop with the cloud. In fact, broader technology expense management solutions can apply FinOps principles to mobile devices and telecom services to expand savings across the entire IT environment and improve efficiency across the board. You’ll better understand the total cost of ownership of your telecom, mobile, and cloud services with AI insights that help reduce waste, realign services, and gain productivity.
By financially managing more technologies you can:
When it comes to cloud expense management for FinOps, Tangoe One Cloud is in a league of its own. We make it easier to effectively operationalize FinOps and reduce cloud costs by as much as 40%.
Tangoe’s direct integrations with four top IaaS providers ensure multi-cloud data ingestion, and we have the most direct SaaS integrations in the industry (550+ apps, plus support for 225K other apps). We also have the widest Shadow IT visibility with a five-pronged approach for multi-source data gathering. No one does user analytics for Microsoft 365 like we do. You’ll immediately start getting the insights you need to scale or right-size your cloud investments across IaaS, SaaS, and UCaaS while uncovering all the apps being used within your organization.
With patented AI capabilities for cloud optimization, Tangoe’s advanced analytics make quick sense of even the most complex cloud environments. Tangoe One Cloud works 24×7 to crack down on unused and redundant cloud resources, provide strategic tagging and pausing guidance, and identify cost-effective configurations and discounts. AI can automatically act on its own recommendations, which will only get better with time as it continually ingests data. Best yet, automation is applied to all areas of cloud financial management (invoicing, contract management, cost allocation, bill pay, and more) to instill efficiency into every FinOps practice.
Tangoe provides end-to-end FinOps support, helping Tangoe clients save millions of dollars each year. Tap into our extensive managed services and professional consultants to uplevel your FinOps approach. From comprehensive auditing and optimization services to a dedicated team of Program Managers who can act as your FinOps team, we’ll help you execute strategic initiatives and handle all aspects of digital innovation projects that require any IT expense optimization. Tangoe has a full-service cost management consultancy that can help with everything from cost savings assessments and RFPs to contract negotiations and staffing your cloud migration.