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How can businesses improve their operating margin by controlling cloud costs

How can businesses improve their operating margin by controlling cloud costs

With financial discipline, cloud is an incredible solution that allows businesses to accomplish their goals and innovate at unparalleled speed

Today, in the Asia Pacific, most startups and SMEs are leveraging technology-enabled business models, with a keen focus on regaining growth and gaining an edge over competitors. And in line with this urgent push toward digitalisation and innovation, the cloud has emerged as a core foundation of this renewed focus.

According to a report titled “The Future of Cloud in Asia Pacific” by Cisco and Boston Consulting Group (BCG), the overall cloud spending in the region is expected to reach US$200 billion by 2024, with investments in cloud growing at a CAGR of over 20 per cent since 2018.

Getting clarity and some control over cloud expenses

Cloud has many benefits for businesses in a digital-first world, but it can be expensive.  Based on my observations, having worked with more than 300 digital native companies over the last six years, cloud costs contribute somewhere between 10-20 per cent of the overall operational spending (which can be even higher for SaaS companies).

Plus, there is an additional challenge – cloud cost wastage. Numerous surveys and reports conducted across APAC and beyond have shown that executives believe that over 30 per cent of their cloud spending goes to waste.

Furthermore, cloud costs might increase exponentially after IT upgrades or scaling an important workload. The cost increase might be a concern initially, but the workload enhancements could lead to more transactions and customers. To manage costs, establishing and adhering to metrics is vital.

As such, for small businesses and startups with low budgets, getting clarity on cloud expenses and figuring out how to optimise them is becoming increasingly critical. Startups are generally focused on creating product value and are thus often forced to choose between spending time implementing new functionalities and prioritising low-effort-high-impact architectural modifications to maintain momentum.

Also Read: 8 Keys To Market Delivery Of Innovative Technologies

This is where modern technology consulting firms are stepping up to empower startups and SMEs to future-proof their businesses but just providing these solutions is not enough. Offering these solutions while helping startups and SMEs manage costs is the need of the hour, and at Searce, we are doing just that.

Lately, we see many businesses thriving on their DevOps (a set of practices, tools, and a cultural philosophy that automates and integrates the processes between software development and IT teams) to help keep cloud costs under control.

However, we think that FinOps or financial operations can be an ideal way to help startups control and manage their operating costs in a cloud environment.

What is FinOps?

FinOps is an operational framework that brings technology, finance, and business together to drive financial accountability. One of the main aspects of FinOps is to drive everyone to take accountability for their costs. To that end, every user of the cloud should feel responsible for their spending and empowered to take action to optimise it.

How FinOps is disrupting the approach toward cloud-led transformation

Reports suggest that the adoption of FinOps is swiftly advancing across APAC, and rightly so. There are multiple ways in which your company can cut down costs and benefit from the implementation of FinOps.

Reduced cloud costs

FinOps enable businesses to avoid big cloud bills and effectively cut cloud costs through visibility, cost optimisation, control and collaboration. On average, Searce customers have saved around 15-20 per cent after onboarding to their free cloud acceleration programme just by going through an assessment workshop where we highlight some obvious optimisations for these customers.

Generally, this is what a FinOps cycle looks like:

Inform
Visibility and Allocation
Optimise
Utilisation
Operate
CI
Understanding the organisation’s resource consumption through context, data,
budgets and forecasting.
Setting clear goals and targets by determining cloud costs through
strategy, tracking, cost breakdown and cost growth boundary.
 Aligning the organisation’s teams to business goals through drive and action with a keen focus on getting results for the organisation.

Complete transparency for better cost management and control

Through the principle of visibility in FinOps, you are able to identify organisational units, such as business units, teams, individual engineers, applications, cloud services and asset pools, and map them onto the cloud while preserving historical data for future trend analysis. As cloud resources are dynamic and constantly changing, it is important not only to capture the status quo but also to develop a process of getting visibility in dynamics.

Scope for cloud optimisation and improved performance

From analysing unused resources to VM re-flavouring (reviewing performance metrics from your VMs to see whether you need to choose less expensive flavours) and choosing the right instances based on business needs to storage and networking optimisation – cloud cost optimisation under FinOps covers a wide range of touchpoints.

Also Read: 5 Market Obstacles That Kill Even Compelling Products

Implementing the principle of control in the FinOps process entails several items- creating dedicated budgets for granular items, setting TTL rules, creating clean-up scripts and so on.

Enables long-term optimisation and cost-saving processes

Lastly, collaboration in a FinOps cloud environment means cross-functional collaborations where engineers, operational, finance and executive teams are all involved. FinOps helps define cloud usage strategy, define and adjust cloud budgets, set cloud usage practices and review results and adjust if necessary.

Implementing FinOps

Now that it is clear how FinOps can help businesses manage cloud costs efficiently, it is also important to understand the ethos for the correct implementation of FinOps. Searce’s FinOps framework has been developed on the fundamentals of People, Process, and Technology.

PeopleProcessTechnology
This aspect entails the team. The people who are responsible for FinOps practices, such as the core FinOps team and cross-functional stakeholders, use the cloud.The Process dimension includes the steps (or Epics) you take to implement FinOps practices on the Cloud Platform.Finally, the technology aspect consists of tools that can be leveraged to support the process.

At Searce, dive deep into each of these pillars to analyse and establish one-time versus recurring actions, set clear goals and start measuring outcomes.

Cloud is an incredible solution that allows businesses to accomplish their goals and innovate at unparalleled speed. However, it requires methods to maintain financial discipline and ensure cloud costs don’t spiral out of control.

The mission of FinOps is to help businesses maintain this discipline while supporting their business goals. In other words, they preserve the reason the cloud is widely embraced in the first place – speed, flexibility, and capability. 

Yash Thakker

Yash Thakker

Yash is a technology enthusiast and has spent the last 5 years at Searce consulting enterprises in APAC to futurify their business by leveraging the power of Cloud, Data and AI. His interest lies in understanding the business impact of embracing new technologies and the people operations associated with the changes. He is based in Singapore and has an interest in anthropology.

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