1、 2022 Boston Consulting Group1Harnessing the Power of Cloud FinOpsNOVEMBER 07,2022 By Eric Lam,Daniel Pettibone,Pathik Sharma,Bruce Warner,Silvio Palumbo,Sam Liu,and Andy MoonCloud FinOps helps companies manage and get more value from their cloudspending.Getting it right requires robust change manag

2、ement.The cloud ignites digital transformation and growthbut oen the spark isdampened because of difficulties in one key area:managing cloud spending.For many companies,the link between their cloud investments and returns ismurky.Financial forecasting can be tricky,given the clouds variable spend mo

3、del.And because development teams are able to buy cloud resources on demand,it is 2022 Boston Consulting Group2not unusual for costs to become unmanageable.The result:Companies struggle tomove beyond proof of concept to operate at scale in the cloud.They are either notlaunching or are slow to launch

4、 important new use cases,particularly in artificialintelligence.It doesnt have to be this way.Over the past couple of years,a new approach tocloud spending has been gaining traction.Cloud FinOps,as the framework isknown,fosters financial accountability and transparency across an organization.Everyon

5、e takes ownership of their cloud spending,understanding exactly whattheyre spending and what theyre getting from that investment.But cloud FinOps is not a plug-and-play solution.It is a cultural shi that bringstechnology,finance,and business teams together to drive financial accountabilityand accele

6、rate business value realization through cloud transformation.Companies that are leaders in cloud FinOps dont simply acknowledge thesechangesthey fuel them.They understand that none of this works without robustchange management,practices that ingrain cloud FinOps in both the methods andmindset of the

7、 business.The good news is,theres an approach for this,too.Cloud FinOps 101The core of cloud FinOps consists of three phases:First,make information available.This means allocating cloud costs to specificteams and projects,and providing easy access to this data,typically throughdashboards.It also mea

8、ns sharing forecasts(which become more accurate underCloud FinOps fosters financial accountability andtransparency across an organization.2022 Boston Consulting Group3cloud FinOps),so teams can track how their actual spending compares to theirprojected spending.You want to define and track success m

9、etrics,as well:KPIsthat help you gauge the ROI of your cloud investments.Second,use this information to optimize spending.The idea is to leverage theinsights you gainon what youre spending,what youre using,and how usagecorresponds to resultsto apply cost-saving levers like spot instances andcommitte

10、d-use discounts.Finally,embed your FinOps practices across the organization,so they become partof your culture.Cloud FinOps is a continuous process,and with each cycle,yourefine your cloud spending,so its always synced and optimized to business needsand strategic priorities.To put cloud FinOps into

11、action,you need certain building blocksprocesses andbehaviors that enable financial accountability across the organization,improve costmanagement and control,provide better visibility into cloud costs,and automate(as much as possible)continuous cost recalibration.They fall into the followingcategori

12、es:1 Accountability and enablement.Cloud FinOps democratizes financialresponsibility,with teams taking charge of their cloud spending.But at thesame time,you need guardrails on that autonomy.Striking the right balance iskey,and the best way to do it is through a central cloud FinOps team,withmembers

13、 representing the technology,finance,and business sides of thecompany.One of the firstand most importantthings this team does isestablish the governance for cloud FinOps.For example,we find it works bestwhen the central team makes decisions on pricing optimization,since ratescan be set in advance an

14、d in bulk.But it is best for decentralized teams tomake decisions on reducing or increasing usage,since cloud end users knowbetter than anyone how to fine-tune their utilization.Measurement and realization.To optimize cloud investments,you need timely,accurate information on costs,usage,and returns.

15、A tagging system can 2022 Boston Consulting Group4This is a lot of new ground for many companies.So not surprisingly,perhaps themost crucial accelerator of cloud FinOps is change management.You need toallocate costs and consumption,enabling you to tie the use of specificresources to individual teams

16、.Reports,ideally delivered through customizedviews,allow each team to zero in on their cost and usage information quickly.KPIs are essential,but they should align with business priorities.By linkingcloud costs to business outcomes,you can gauge the efficiency of your cloudinvestmentsand better under

17、stand where to tweak spending.Cost optimization.There are multiple ways to optimize cloud costs,but they fallinto three main buckets:resource usage,pricing,and architecture.Tacticsinclude auto-detection of cost anomalies,auto-sizing of under-or over-utilizedresources,and committed-use discounts.Most

18、 companies start by right-sizingcloud resources manually and utilizing cloud credits and discounts to optimizespending.Later,they leverage automation to adjust dynamically for under-and over-utilization.Ultimately,they transition their applications to a cloud-native architecture,which brings advanta

19、ges in scalability and cost efficiency.Planning and forecasting.By allocating cloud costs,monitoring cloudconsumption trends,and benchmarking efficiency,cloud FinOps allowscompanies to create accurate financial forecasts.Here,too,most companieswill develop their capabilities steadily,starting by rec

20、onciling cloud budgetswith actual spending and progressing to where they can zero in on seasonalitypatterns and common drivers of cloud spending,such as heavy usage of dataanalytics or memory-intensive computing services.At an advanced stage,many companies integrate cloud-unit economicsthe relations

21、hip betweenthe cloud costs of an action(such as sending a personalized email to acustomer)and the revenue that action generatesinto financial planning.Tools and accelerators.A host of catalysts can speed up the cloud FinOpsjourney.These include automated resource management policies,updatedgovernanc

22、e to reallocate funds to more-effective cloud resources,andautomated reports on cloud usage and costs.2022 Boston Consulting Group5support,encourage,even evangelize the shis cloud FinOps bringsand requires.But how exactly do you do that?Most companies have yet to embrace cloudFinOps,but even among t

23、he adopters,its largely still early innings.In a 2022survey by the FinOps Foundation of cloud FinOps practitioners,of the 572respondents who answered a question about the maturity level of their cloudFinOps efforts,37.1%said they were in the“crawl”stagegetting the basics inplace.Another 42.8%were in

24、 the“walk”stage,where practitioners haveestablished,but not yet perfected,their practices.Just 12.6%of participants were atthe leading edge of maturity,or the“run”stage,where cloud FinOps is business asusual.The remaining respondents comprised a“pre-crawl”segment.Many cloud FinOps practitioners are

25、thus aware of the gap between where they areand where their cloud FinOps efforts need to be.Change management is the wayto get there.Implementing Change Management in Cloud FinOps Weve found that companies achieve the best results when they focus changemanagement around five imperatives:Demonstrate

26、the value of cloud FinOps.Show,dont tell.Cloud FinOps candeliver 20%to 40%savings on monthly cloud costs,savings that can fund newdigital and AI use casesand new value creation.Articulating that clearly todecision makers,using the language of the business and skipping the tech jargon,can help win th

27、eir support and buy-in.Demonstrating that value can close the deal.Cloud FinOps is best implemented through a sequenced approach where youMost companies have yet to embrace cloud FinOps.2 2022 Boston Consulting Group6steadily build your capabilities.That means you can start delivering value early,re

28、apingand showingthe first fruits of the approach.Consider,for example,a Fortune 50 retailer that embraced cloud FinOps.Itbenefited from a close to a 50%reduction in cloud costs for computing and storageresources aer implementing some early journey measures.These measuresincluded automated compressio

29、n and deletion of tables,as well as predictivemodels to manage the shutdown of idle clusters.The company then steered thesavings into AI initiatives to generate cross-sell recommendationsand drive moresales.That kind of early,visible win can be a powerful argument for supportingand expanding a cloud

30、 FinOps transformation.The idea is to think big but start small and scale fast.Explain the initial actions thecompany should takebe specific,but again,use the language of the business,notthe language of FinOpsand the value you expect to create.By delivering thatinitial value,you generate buy-in(and

31、funding)for the next wave of actions.Andyou set the stage for even greater value creation.Foster open and instant communications.Cloud FinOps is a collaborativeeffort,and for many companies,it will bring together finance,technology,andbusiness experts for the first time.To work in partnership,centra

32、l team membersneed a communications channel that crosses traditional silos.At the same time,the central team needs open channels to the engineering and business teams nowaccountable for their own cloud spending.The easier it is to communicate,theeasier it is to provide support,something that is cruc

33、ial to both the adoption andevolution of cloud FinOps.Indeed,the central team is really your cloud FinOpsRobust change management is key to the success of acompanys cloud FinOps efforts.2022 Boston Consulting Group7center of excellence,and as such,youll want to encourageand facilitateinteractions be

34、tween it and the rest of the organization.Workshops and officehours,hosted by the cloud FinOps team,can be an effective way to fostercommunicationsand best practices.Develop the right enablers.A key catalyst for cloud FinOps is stakeholderengagement.The central team,for example,should meet regularly

35、.As companiesembracing agile have discovered,a cadence is extremely effective in promotingcollaboration.But collaboration is just one part of the equation.You also want tofoster financial accountability across the organization.To that end,its critical toalign on primary KPIs.This ensures that when i

36、t comes to costs and ROI,allbusiness units are measured against the same yardstick.Just be sure there is enoughgranularity in reporting that you can track cloud unit costs.This helps you attributerevenue to cloud spendingand gauge the efficiency of that spending.Promote a“blameless”culture.One of th

37、e foundations of cloud FinOps iscontinuous improvement on everything from process to results.Savvy companieswill adopt a blameless culture in which mistakes and capability gaps are treated asopportunities to learn and improve.Its a battle-tested approach that acceleratesinnovation and growth.And it

38、can help an organization increase its cloud FinOpsmaturity.One best practice:document the learnings so others can benefit fromthem,too.Share knowledge across the organization.Practices like documenting learningsand offering workshops highlight a key point:you want to spread the word on thedos and do

39、nts of cloud FinOps.Webinars and training sessions can be invaluable,but the presenters dont have to come exclusively from the central team.Cloudproviders are a natural resource here,as they have a deep knowledge of theirtechnology and the best ways to use and manage it.We also recommend creating ac

40、entralized knowledge repository,which can function as a cloud FinOps referencedesk.And get creative,too.A newsletter,for example,can be an effective way tokeep your organization up to date on cloud FinOps.2022 Boston Consulting Group8The cloud is transforming business.It speeds up innovation and tim

41、e to market;itboosts agility and responsiveness to change.Cloud FinOps accelerates thattransformation by fundamentally changing the way companiesand their teamsmanage cloud spending.To harness the power cloud FinOps,you need to develop the right building blocks.But just as crucially,you need to unde

42、rstand,embrace,and facilitate the changesthis new approach brings.Its an effort well worth making.For when you embracethe disciplines of cloud FinOps,you do more than manage costs.You seize moreopportunities,generate more value,and create more distance between you and therest of the pack.2022 Boston

43、 Consulting Group9AuthorsEric LamHead of Cloud FinOps,Google CloudDaniel PettiboneDirector,Head of Digital Transformation,Google CloudPathik SharmaCost Optimization Lead,Cloud FinOps,Google CloudBruce WarnerSenior Principal,Customer Value&Transformation Advisory,Google CloudSilvio PalumboManaging Di

44、rector&PartnerNew YorkSam LiuAssociate Director,Data ScienceBostonAndy MoonGamma AI Senior Soware Engineer1Three of the coauthors of this articleEric Lam,Pathik Sharma,and Bruce Warnerdetailed these categories with Sheri Cunningham and Jon Naseath in a Google whitepaper,“Maximize Business Value with

45、 Cloud FinOps,”https:/ Boston Consulting Group10ABOUT BOSTON CONSULTING GROUPBoston Consulting Group partners with leaders in business and society to tackle theirmost important challenges and capture their greatest opportunities.BCG was thepioneer in business strategy when it was founded in 1963.Tod

46、ay,we work closely withclients to embrace a transformational approach aimed at benefiting all stakeholdersempowering organizations to grow,build sustainable competitive advantage,and drivepositive societal impact.Our diverse,global teams bring deep industry and functional expertise and a range ofper

47、spectives that question the status quo and spark change.BCG delivers solutionsthrough leading-edge management consulting,technology and design,and corporateand digital ventures.We work in a uniquely collaborative model across the firm andthroughout all levels of the client organization,fueled by the

48、 goal of helping our clientsthrive and enabling them to make the world a better place.Boston Consulting Group 2022.All rights reserved.For information or permission to reprint,please contact BCG at .To find the latest BCG content and register to receive e-alerts on this topic or others,please visit .Follow Boston Consulting Group on Facebook and Twitter.2FinOps Foundation,The State of FinOps 2022,https:/data.finops.org/.