Measuring cloud cost efficiency for FinOps

7 KPIs for Measuring FinOps Success

Public cloud can deliver significant business value across infrastructure cost savings, team productivity, service elasticity, and DevOps agility. Yet, up to 70% of organizations are regularly overshooting their cloud budgets, minimizing the gap between cloud costs and the revenue cloud investments can drive.

Cloud cost management (the practice of FinOps — often assigned to a multidisciplinary, cross-functional group, also called “FinOps,” or a “Cloud Center of Excellence”) is targeted at helping businesses maximize the return on their investments in cloud technologies and services.

Because managing cloud costs is such a relevant challenge, and is such an area of focus, it has been ascribed many names, including, “Cloud Financial Management,” “Cloud Financial Engineering,” “Cloud Cost Management,” “Cloud Cost Optimization,” and “Cloud Financial Optimization.”

Every business with cloud infrastructure will have a cloud cost management strategy, and every successful strategy will include a practice of benchmarking and measurement to ensure progress and improvement towards increasing return on cloud investments.

Cloud cost efficiency measurement

Amazon Web Services, the largest public cloud service provider, devotes one-sixth of their Well-Architected Framework to avoiding unnecessary costs. While the Cost Optimization Pillar is comprehensive, it is largely written in broad strokes and generalizations, rather than identifying specific tactics and KPIs that can deliver FinOps success.

Although valuable, the Well-Architected cost pillar focuses on operationalizing using a plethora of discreet AWS-native tools and offers little insight for businesses with modern multicloud strategies (even ignoring the existence of other public clouds).

The FinOps Foundation, a program of The Linux Foundation, segments cloud financial management into FinOps Capabilities (grouped into overarching FinOps Domains) that each consist of “Crawl,” “Walk,” and “Run” operational maturity levels. The maturity level of each capability within a business is assessed according to goals and key performance indicators (KPIs).

Simplified FinOps measurement strategies

While some FinOps models cover a tremendous amount of ground, and often, even deliver specific KPI targets, they can require months of implementation and corporate cultural change efforts before returning value and meaningful data.

This guide endeavors to simplify the measurement of FinOps efficiency into its most important metrics. This approach enables your business to assess the current impact of cloud cost management efforts at the macro level to deliver immediate insights, and can serve as a precursor to significantly more sophisticated and time-consuming FinOps strategies and measurement efforts.

As your cloud consumption increases, measuring and tracking cloud efficiency will become a critical task.

The following KPIs are critical to understanding the effectiveness of your FinOps efforts and driving incremental success:

1. Percentage of Allocatable Cloud Spend

2. Average Hourly Cost

3. Cloud Unit Costs

4. Percentage of Waste

5. Blend of Purchasing Strategies

6. Time to Address Cost Anomalies

7. Forecasting accuracy

Using FinOps to drive cloud efficiency

The 7 KPIs above are probably the most important indicators of your cloud account’s efficiency, but there are plenty more. Think about the KPIs you currently track in your organization as you review this list. Do you need additional tools or resources to track these KPIs?

Defining the KPIs that can measure cloud efficiency is crucial for many organizations. Continuous cost monitoring allows for assessing what percentage of the costs are justified, and where improvements can be made.

Cost efficiency is a shared responsibility across multiple levels of an organization. As the FinOps team or expert, it’s our responsibility to make sure we have the proper guardrails, cost monitoring, process optimization, and rate optimization in place. It is then up to the engineering teams using cloud services to make sure the solutions they architect and engineer are as cost-effective as possible.

The road to cloud efficiency has many challenges, including:

• Visibility and cost allocation for multi-cloud and Kubernetes
• An increase in complexity due to using container-based applications and serverless technologies
• Identifying and avoiding pitfalls in FinOps adoption

It is possible to overcome technology, visibility, and cost allocation challenges by using native Cloud Service Provider tools, building inhouse solutions, or purchasing FinOps tools — such as Anodot cloud cost management

Anodot is the only FinOps platform built to measure and drive success in FinOps, giving you complete visibility into your KPIs and baselines, recommendations to help you control cloud waste and spend, and reporting to make sure you improve your cloud efficiency.

Identifying and solving organizational challenges is not always easy. Here are a few things you can do from an operational perspective to take action today:

• You can make different stakeholders aware of their responsibilities by implementing a solid showback model.
• Cloud cost reporting with real-time data is crucial for the teams to understand how they are doing – make the information available directly to them.
• Communicate what efforts are being made and what savings can be expected.
• Mentor and support teams that are facing challenges in their cost efficiency instead of shaming and punishing them.
• Check out FinOps Foundation for great resources around training and buy-in.
• Book a demo with an Anodot cloud cost optimization expert to show your team what is achievable with a purpose-built FinOps solution