What is Cloud Financial Management?

Control Cloud Spend With Cloud Financial Management

There are few organizations left today without some of their business operating in the cloud. A recent IDG Cloud Computing Study found that 92% of businesses globally moved to the cloud. According to Gartner, cloud adoption spending will surge to about $482 billion by the end of 2022.

Most companies make the move to take advantage of the speed, innovation, and flexibility offered by cloud computing solutions. Operating in the cloud can also provide cost savings and improved productivity. 

But keeping cloud costs under control has become increasingly difficult and complex as cloud adoption grows. That is why cloud cost management has become a priority for CIOs to understand the true ROI for cloud operations. 

It is easy to lose sight of the budget when cloud assets are fragmented across multiple teams, vendors and containerized environments. As a result, cloud financial management is a must-have for understanding cloud cost and usage data and making more informed cloud-related decisions. 

On average, survey respondents in a 451 Research study saved 56% on cloud costs as the result of applying Cloud Financial Management (CFM) practices in their organization. 

But what exactly is CFM? Is it merely about cutting costs? What kind of tools are best for multiple cloud environments? If you have these and other questions, we have the answers. Let’s jump in. 

What is Cloud Financial Management?

Cloud Financial Management is a system that enables companies to identify, measure, monitor, and optimize finances to maximize return on their cloud computing investments. 

CFM also enhances staff productivity, workflow efficiency, and other aspects of cloud management. However, it is important to remember that while cost is a major focus, it’s not the only one. 

A subset of CFM is FinOps which is essentially a combination of Finance and DevOps. The idea behind FinOps is to foster collaboration and communication between the engineering and business teams to align the cost and budget to their technical, business and financial goals.  

Cloud Financial Management Benefits 

Better Track Cloud Spend

With Cloud Financial Management, companies can monitor and manage the operations, tasks, and resources that underlie usage bill. This insight can be used to identify projects, apps or teams that are driving your cloud costs.

Optimize Cloud Costs

With visibility into cloud resources and spend, your organization can  identify and remove unutilized resources, redundant integrations, and wasteful processes.

Financial Accountability  

Instead of reacting to unexpected cost spend and spikes, cloud financial management allows businesses to plan and predict budgets by making delivery teams financially accountable. By aligning cloud financial data to business metrics, organizations can establish common goals and outcomes. 

Cloud Financial Management Challenges

Budgeting

Migrating from on-premise to the cloud often means transitioning from a CapEx to OpEx model. On the surface, switching to a predictable OpEx based strategy seems attractive. However, the change can create more issues than it solves. 

Optimizing costs is the biggest driver for moving to OpEx. However, cloud spend is vulnerable to waste and overspend if not carefully managed. Many companies have not realized the value they expected moving to the cloud due to lack of visibility and control. Some have taken the dramatic step of ‘repatriating’ workloads while others have adopted a hybrid approach. 

Visibility Into Cloud Assets and Usage

How cloud assets are performing is another significant factor. Employees tend to struggle with tracking how various assets are performing, what resources they require, and how much storage they demand. 

Tagging is a simple yet efficient system where different cloud assets can be tagged and categorized based on departments, performance, what they are being used for, how much they cost, and more. 

Even when you look at the infrastructure, there are numerous departments in an organization, and there are different purposes for them to use the cloud. So, unless and until there is a proper tagging system for these departments, operations, and costs, it is very difficult to monitor cloud assets. 

Calculating Unit Costs

The unit cost calculation becomes a tedious job, considering the complexity of the cloud infrastructure and the sheer number of assets. In addition, calculating and comparing the investment and the revenue being generated becomes difficult when there are so many multiple interdependencies. 

Identifying Inefficiencies

Companies that lack full visibility into cloud spend find it difficult to identify where there are inefficiencies, waste or overuse of resources. The result is that decisions can’t be made regarding the efficient allocation of resources, and companies are in the dark regarding questions such as whether an increase in spend results from business growth or from sheer inefficiencies.

Building a Cloud Center of Excellence

A Cloud Center of Excellence (CCoE), or FinOps practice, is an important next step for companies using ad hoc methods for cloud cost management. A CCoE provides a roadmap to execute the organization’s cloud strategy and governs cloud adoption across the enterprise. It is meant to establish repeatable standards and processes for all organizational stakeholders to follow in a cloud-first approach.

According to Gartner, the CCoE has three core pillars:

1. Governance – The team creates policies with cross-functional business units and selects governance tools for financial and risk management.
2. Brokerage – Members of the CCoE help users select cloud providers and architect the cloud solution.
3. Community – It’s the responsibility of the CCoE to improve cloud knowledge in the organization and establish best practices through a knowledge base.

With those pillars as a foundation, CCoE’s are generally responsible for the following activities:

1. Optimizing cloud costs – Managing and optimizing cloud spend is a key task of the CCoE. They are also accountable for tying the strategic goals of the company with the cost of delivery value in the cloud.
2. Managing cloud transformation – In the initial phase of transformation, the CCoE should assess cloud readiness and be responsible for identifying cloud providers. During migration, the team should provide guidance and accurate reports on progress.
3. Enforce cloud policies – Security and regulatory requirements can change frequently in complex and changing cloud ecosystems. It’s important that CCoE members enforce security standards and provide operational support across the business.

Anodot for Cloud Financial Management 

Anodot’s Cloud Cost Management solution helps organizations get a handle on their true cloud costs by focusing on FinOps to drive better revenue and profitability.

From a single platform, Anodot provides complete, end-to-end visibility into your entire cloud infrastructure and related billing costs. By monitoring your cloud metrics together with your revenue and business metrics, Anodot enables cloud teams to understand the true cost of their cloud resources, with benefits such as: 

AI-based Analysis for Identifying Inefficiencies and Anomalies

With the help of machine learning and artificial intelligence, Anodot’s cloud cost solution analyzes data to find gaps and inefficiencies in the system. It can also catch anomalies in various parameters such as usage, cost, performance, etc., thus solving the inefficiency challenge. 

Savings Recommendations 

Continuously eliminate waste and optimize your infrastructure with personalized recommendations for unknown saving opportunities that can be implemented in a few steps.

Real-Time Cost Monitoring 

Monitoring cloud spend is quite different from other organizational costs in that it can be difficult to detect anomalies in real-time. Cloud activity that isn’t tracked in real-time opens the door to potentially preventable runaway costs. Anodot enables companies to detect cost incidents in real time and get engineers to take immediate action. 

Cost and Usage Forecasting  

Anodot’s AI-driven solution analyzes historical data in order to accurately forecast cloud spend and usage by unit of choice, anticipate changing conditions and get a better read on related costs. This helps organizations to make more informed budgeting decisions and find the right balance between CapEx and OpEx. 

Try Anodot for Cloud Costs with a 30-day free trial. Instantly get an overview of your cloud usage, costs, and expected annual savings.