Overview 

Impacts 

• Senior executives are starting to challenge the value of digital transformation, having encountered dramatic growth in software and cloud usage without adequate management and optimization. 
• Where software asset management (SAM) and FinOps do exist, they have limited influence or authority to optimize consumption and value across a growing, increasingly complex set of environments. 
• Despite their interdependencies, SAM and FinOps often operate independently, in different silos and with limited resources, eroding their value-maximization potential. 

Recommendations 

Executive leaders responsible for maturing software and cloud governance disciplines should: 

• Consolidate and mandate SAM and FinOps disciplines to drive enhanced visibility and understanding that maximizes value and opportunity while minimizing cost and risk. 
• Create an integrated unit that profits from the synergy of both disciplines to deliver optimum benefit across an increasingly complex technology environment. 
• Check that the consolidated functions are adequately staffed with skilled team members to work with key stakeholders to eliminate unproductive cost overruns. 

Strategic Planning Assumption 

By 2025, 50% of organizations will unify SAM and FinOps into a consolidated discipline delivering portfolio cost management and governance. 

Impacts and Recommendations 

Mandate SAM and FinOps to Optimize Cost and Value 

 
FinOps and SAM are kindred spirits; although founded from different eras of technology adoption, their disciplines share objectives. Both represent coordinated, continuous undertakings to realize value from evolving investments and expenditures. Their frameworks exploit many of the same cost-efficiency principles and capabilities, incorporating a combination of consumption, rightsizing, optimization and mitigation management fundamentals. 

Rightsize SaaS With SAM 

As the organization becomes dependent on each cloud service and its features, buyer bargaining power is eroded (see Predicts 2023: Inflation’s Permanent Impact on SaaS/Software Costs, Commercials and Business Practices). While procurement experts earnestly attempt to resolve these issues, they are often frustrated by their inability to limit cost increases at each contract renewal. 
 
Options to switch to an alternative may be limited and/or costly to execute (see Identify and Mitigate SaaS Switching Costs), while cost increases are most dramatic in monopolistic scenarios. Therefore, organizations require consumption management to offset or limit cost increases in advance of renewal, with estimates of unused applications ranging from 30% to 50%.² Execution requires a well-resourced, adept SAM team with the directive to manage consumption and eradicate waste. 
 

Confront CIPS Wastage With FinOps  

As a core contributor to the cloud center of excellence (CCOE), FinOps fills a key role in reducing waste and costs. In parallel with SAM processes, FinOps-driven optimization will minimize waste.³ For example: 

• Scale back or retire services provisioned without ongoing use cases that remain unutilized. 
• Scale down valid yet underutilized services, including; underutilized CPU, memory, storage, backup or bandwidth, triggering actions to rightsize and reprovision the relevant instances. 
• Deprovision services that served a useful term but have since remained running without any delivered value. Switch off or reassign services accordingly. 

Without effective SAM and FinOps disciplines, waste is inevitable, with the majority of applications and environments significantly underutilized. Meanwhile, unplanned consumption growth in CIPS environments can turn into toxic overconsumption if left unchecked, resulting in significant, ongoing unproductive costs. The combined SAM and FinOps functions must be tasked with eliminating growth of unnecessary costs as one of their key goals. 

Recommendations for Executive Leaders: 

• Establish budget risks by reviewing software and cloud cost escalation rates. 
• Create a mandate for investing in SAM and FinOps as key mechanisms to offset material risks of continually escalating costs. 
• Establish an expectation that both disciplines operate with a shared understanding of what assets and resources are used within each environment or platform. 
• Create authorization, empowerment and a culture that drives action and realization from SAM and FinOps optimization and mitigation recommendations executed throughout IT. 

SAM and FinOps Role in Delivering Business Value From Cloud Adoption 

Cloud services and software both deliver significant value to the organization and its customers, thus representing high-value business capabilities that necessitate management. Executive leaders seek to ensure they’re not only benefiting from rapid adoption, but also seeing broader benefits including understanding costs and leveraging robust processes, particularly in regulated industries. 

SAM plays a critical role in advancing cloud adoption and providing a platform for driving optimization maturity, laying the platform for forecasting future requirements and the resulting costs. Assessing consumption against projections while identifying underutilized licenses must be incorporated into the organization’s overall cloud strategy. Unlike predictable costs of preinvested assets, cloud services scale rapidly, requiring continuous management. SAM professionals have previously addressed virtual server sprawl and its impacts, however, unlike the virtual on-premises data center, cloud services are an unlimited, direct and immediate cost. Accordingly, continuous discipline is required to drive value (see Figure 3). 
 

Ephemeral cloud systems are subject to consumption spikes where costs may rapidly erode expected benefits; accordingly, anomaly detection and management are fundamental to protecting business value. The key is being able to tell the difference between bad growth, creating unnecessary cost and good growth that delivers business value. Therein lies the role of FinOps in underpinning value. For example, alerts for consumption growth trigger investigation to validate authentic spikes in consumption, finding that the spike was driven by onboarding a large new client, supporting validation of valuable use rather than unproductive use. 

Detailed usage data collection and reporting and effective use of analytics depend on asset life cycle management processes, interpreting data and executing the actions they inform. For example, by implementing effective provisioning and metering processes, SAM can align the licensable functionality of an application to appropriate use cases, reducing the likelihood of inflated costs. 

Recommendations for Executive Leaders: 

• Sponsor the governance mandate for software and cloud services management, with clear roles and responsibilities across consolidated SAM and FinOps teams. 
• Verify that SAM and FinOps teams have the skills, resources and processes needed to manage cloud service consumption. 

Conclusion 

In conclusion, the integration of SAM and FinOps is essential for organizations to navigate the complexities of software and cloud governance. By leveraging the synergies between these disciplines, organizations can achieve enhanced visibility, cost optimization, and value maximization across their technology portfolios. With the right resources and strategic direction, SAM and FinOps will continue to play pivotal roles in driving business value and ensuring cost containment in an ever-evolving technological landscape. 

Attributions and Disclaimers: 

¹Gartner, “Target Software and Cloud Costs by Uniting Software Asset Management and FinOps” by analysts Stephen White, Yoann Bianic, Stewart Buchanan, 6 April 2023.   

²Unused application rates from Flexera’s October 2022 survey data: desktop, 38%; data center, 34%; SaaS, 33%. According to Nexthink 49% of all software is unused, and according to Zylo, 40% of software licenses are wasted. 

³Reducing Waste Opportunities, FinOps Foundation, and State of ITAM Report, Flexera, which reports that 33% of integration-as-a-service/platform-as-a-service spending is underutilized or wasted. 

³Licensing Oracle Software in the Cloud Computing Environment, Oracle, and Microsoft Product Terms for Azure Services, Microsoft. 

Disclaimer:  
These graphics were published by Gartner, Inc. as part of a larger research document and should be evaluated in the context of the entire document. The Gartner document is available upon request from Snow Software. 

Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.   

Gartner is a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and internationally and is used herein with permission. All rights reserved.   

The post How To Target Software and Cloud Costs by Uniting Software Asset Management and FinOps: Insights from Gartner® appeared first on Snow Software.

In the third blog of our FinOps and ITAM series, we explore more use cases where FinOps and ITAM intersect, providing a comprehensive overview of how they can work together to optimize resource utilization, manage costs, and ensure efficient cloud management. These use cases are from the framework the FinOps Foundation has established on how ITAM intersects with FinOps capabilities.  

Resource utilization and efficiency

FinOps activities: 
FinOps professionals seek to understand cloud service providers’ (CSPs) and their associated costs to inform utilization and cost-efficiency analyses. They also collaborate with other teams like Finance, Procurement, IT, Engineering and more as needed. 

ITAM activities: 
ITAM plays a crucial role in assessing and adjusting licensing requirements, working alongside FinOps during right-sizing or resource cleanup efforts. ITAM ensures that resources are used efficiently, licenses are allocated appropriately, and keeps a watch on governance and security to know who is accessing what and if they have the proper rights to do so. 

How ITAM and FinOps intersect: 
Collaboration between ITAM and FinOps is essential to achieve the right balance between resource utilization and licensing optimization. Together, they can ensure that cloud resources are used efficiently, leading to cost savings and improved management of cloud assets.  

Measuring unit costs

FinOps activities: 
FinOps professionals work with stakeholders to develop and report unit economic metrics, aligning cost allocation with organizational strategy. They use data and analysis to understand changes in unit economics and assess whether cost variances are favorable or unfavorable. Unit economics in FinOps is a way of measuring the revenues and costs of cloud spending in relation to one unit of business. It helps FinOps teams to correlate cloud spending growth to overall business growth, and to optimize profit based on objective metrics. Unit economics can be applied to different units, such as a customer served, a unit sold, or a feature delivered. 

ITAM activities: 
ITAM evaluates the use of licenses, identifying underutilization or overuse to manage resource deployment efficiently. ITAM also assesses the costs of licenses, including maintenance, contributing to the cost-per-customer calculation. 

How FinOps and ITAM intersect: 
Collaboration between ITAM and FinOps is crucial when calculating unit costs. Including licensing costs in unit cost calculations ensures that all aspects of cloud management are considered, promoting transparency and cost optimization. 

Chargeback and finance integration 

FinOps activities: 
FinOps professionals implement systems for expenses, identify costs based on the allocation strategy, and integrate financial data into internal reporting systems. They maintain visibility and accountability for expenses at the department or product level. Accountability for expenses may look different, depending on the organization. The person most likely accountable for expenses is a financial controller, who may or may not be on the FinOps team, or someone who sits elsewhere, not on the cloud team. 

ITAM activities: 
ITAM oversees license costs to ensure accurate inclusion in the chargeback process. It supports the implementation of tagging strategies to allocate expenses, maintaining visibility and accountability for IT asset expenses. 

How FinOps and ITAM intersect: 
Collaboration in chargeback processes ensures that licensing costs are accurately allocated, benefiting both ITAM and FinOps. By working together, they can optimize cost allocation and improve financial accountability. 

Data ingestion and normalization 

FinOps activities: 
FinOps professionals determine the necessary data sources for reporting and operations, establish data normalization processes (tagging), reporting and clarifying line items, and maintain the accuracy of cost and usage information. Data ingestion from FinOps revolves around cloud billing services. They work with various teams to define the metrics and metadata required for official output.  

ITAM activities: 
ITAM ensures that relevant asset data is available for data ingestion and normalization (particularly when it comes to establishing and standardizing cloud and licensing terminology across the organization), contributing to the accuracy of cost management processes. The data ingested by ITAM teams includes software data running on-premises and in the cloud. 

How ITAM and FinOps intersect: 
Although data ingestion and normalization have traditionally been parallel processes, ITAM and FinOps can work together to consolidate data into a report under a consolidated view. This collaboration enhances the accuracy and efficiency of cloud cost management. 

Establishing FinOps culture 

FinOps activities: 
FinOps professionals establish best practices, benchmarks, and visibility in cloud cost management. They promote a culture of accountability, collaboration and empowerment. 

ITAM activities: 
ITAM actively participates in the FinOps culture, emphasizing the synergies between ITAM and FinOps practices. 

How FinOps and ITAM intersect: 
To promote a unified approach, ITAM and FinOps must collaborate transparently and in a centralized way, ensuring that they work together to maximize their impact and cover each other’s blind spots. This joint effort creates a cohesive, centralized, effective cloud management culture. 

Onboarding workloads 

FinOps activities: 
FinOps professionals collaborate with teams to ensure cost visibility during workload onboarding. They monitor new workloads for optimization, incorporate costs into forecasts, and engage in funding review processes. 

ITAM activities: 
ITAM reviews licensing needs for new workloads, ensuring that the necessary licenses are in place. It checks compatibility with existing IT assets and supports budgeting, license reharvesting and retirement. This also includes hybrid license management, where a bridge between ITAM and FinOps is needed to consult the ITAM team to see what cloud services have already been paid for and can be repurposed. 

How FinOps and ITAM intersect: 
Consultation between FinOps and ITAM during workload planning ensures that licensing needs are met, and the best procurement methods are selected, reducing unexpected costs and optimizing resources. 

Cloud policy and governance 

FinOps activities: 
FinOps professionals recommend and document cloud usage guidelines, monitor policy and governance, tag cloud resources, and collaborate with stakeholders on established guidelines. 

ITAM activities: 
ITAM establishes procurement policies, aids in creating unified tagging policies of on-premises hardware and software, and defines governance for policy-compliant actions. 

How FinOps and ITAM intersect: 
Collaboration between FinOps and ITAM is essential to create and enforce cloud usage guidelines, governance, and procurement policies, ensuring compliance and optimized resource usage. 

FinOps education and enablement 

FinOps activities: 
FinOps professionals educate the organization on FinOps and promote a culture of accountability, collaboration and empowerment. 

ITAM activities: 
ITAM participates in training programs offered by FinOps and collaborates on education sessions to understand the interdependencies and overlap in their roles. 

How FinOps and ITAM intersect: 
ITAM and FinOps should conduct joint education sessions for stakeholders, focusing on cloud cost management, software licensing, compliance and asset optimization. A shared understanding and common language improve communication and efficiency.  

Exploring the relationship between FinOps and ITAM teams

The intersection of FinOps and ITAM is crucial for effective cloud management. We’ve started to explore this relationship in our three-part blog series. Catch the first part, Bridging ITAM and FinOps for Success Today and in the Future to gain perspective on what this burgeoning relationship looks like in practice. 
 
And in case you missed it, we covered another set of real-world use cases on how FinOps and ITAM teams can collaborate. By working together in various use cases, these two disciplines can drive digital transformation, have organizations move quicker, optimize resource utilization, reduce costs, enhance transparency, and foster a culture of accountability. Through transparent collaboration, businesses can unlock the full potential of their cloud investments, boost profits, and drive sustainable success. 

The post How FinOps and ITAM Teams Can Work Together in Real-Life Scenarios appeared first on Snow Software.

These use cases are from the framework the FinOps Foundation has established on how ITAM intersects with FinOps capabilities. 

Use case #1: Cost allocation

Cost allocation is a fundamental aspect of financial management, and it’s where FinOps and ITAM converge effectively. 

FinOps cost allocation activities: 

• Developing strategic naming standards and hierarchical groupings. 
• Defining governance standards for various groups. 
• Tagging groups such as by team, project, application, region, etc. 
• Reporting on key financial metrics such as cost per group/user. 
• Allocating costs with any associated commitment-based discounts. 

ITAM cost allocation activities: 

• Using naming standards for license allocation. 
• Applying cloud naming standards for Bring Your Own License (BYOL). 
• Developing reporting standards for BYOL usage. 

FinOps and ITAM intersection – Cost allocation: 

• Shared understanding and utilization of naming standards. 
• Overlaps in areas like BYOL and cloud service provider (CSP) marketplace, necessitating collaboration for optimal cost allocation.

Use case #2: Managing shared costs

Shared costs present unique challenges, but collaboration between FinOps and ITAM can ensure equitable distribution. 

FinOps activities with managing shared costs: 

• Identifying shared cost types. 
• Establishing mechanisms for dividing shared costs. 
• Applying shared cost models. 
• Reporting on shared costs.

ITAM activities for managing shared costs: 

• Collaborating with Finance to establish cost-sharing methodologies. 
• Agreeing on a methodology for distributing monthly costs. 

FinOps and ITAM intersection – Managing shared costs: 

• Overlaps in support costs (CSP or software). 
• Collaborating with application owners for shared cost allocation. 
• Handling products with prepaid lump sums and variable monthly usage costs.

Use case #3: Managing anomalies

Identifying and managing anomalies is crucial to preventing financial leakages and ensuring IT organizational processes are followed.

FinOps activities with managing anomalies: 

• Establishing an anomaly management process. 
• Detecting, documenting, and communicating about the peaks and valleys of cloud activity. 
• Generating alert reports to surface anomalous spending. 

ITAM activities with managing anomalies: 

• Conducting regular license compliance reviews (for example, when cloud spending spikes, it’s possible the associated license use spikes as well. It becomes a difficult situation when you don’t have enough licenses to cover the increase, leading you to fall out of compliance).
• Investigating license shortages and underutilization. 
• Addressing unauthorized/unsupported applications. 

FinOps and ITAM intersection – Managing anomalies: 

• Managing license usage, particularly overages. 
• Addressing unauthorized/unsupported use of services and products. 
• Rightsizing licenses in response to overages. 

Use case #4: Forecasting

FinOps and ITAM come together to make stronger forecasts for the business as a whole. 

FinOps activities with forecasting: 

• Collaborating with multiple teams to develop a forecasting methodology and process. 
• Leveraging historical data and future plans to create forecasts. 
• Coordinating with budget leaders to ensure budgets align with business goals. 
• Tracking and reporting on KPIs. 

ITAM activities with forecasting: 

• Projecting cost increases, reductions, and requirements based on license reviews. 
• Collaborating with stakeholders to determine license requirements and cost adjustments. 

FinOps and ITAM intersection – Forecasting: 

• ITAM engages in forecasting, particularly related to licenses, while cloud forecasting is generally outside its scope. 
• Overlaps occur in areas like BYOL, CSP marketplace, and standalone SaaS, requiring collaborative planning and forecasting. 

Use case #5: Budget management

ITAM and FinOps teams can work together to optimize budgets for greater efficiency.  

FinOps activities with budget management: 

• Planning with budget leaders for efficient budget plans. 
• Tracking and reporting KPIs to monitor cloud spend versus budget. 
• Exploring optimization opportunities and overspending by alerting teams projected to exceed budgets. 
• Communicating with leadership when underspending is expected. 

ITAM activities on budget management: 

• Advising Finance on budget expectations based on licensing insights. 
• Conducting annual reviews of renewal expenditures. 

FinOps and ITAM intersection – Budget management: 

• FinOps collaborates with ITAM to ensure license and consumption-based usage aligns with budget expectations. 

Use case #6: Workload management and automation

Workload management and automation prioritize efficient resource usage by ensuring that resources are active only when necessary.  

FinOps activities with workload management and automation: 

• Collaborating with application owners to tag resources effectively. 
• Communication of performance statistics regarding automation and non-tagged resources. 

ITAM activities with workload management and automation: 

• Establishing protocols for transparent communication of performance metrics related to resource usage and automation. 

FinOps and ITAM intersection – Workload management and automation: 

• ITAM reviews license usage and collaborated with FinOps to clean up temporary or abandoned assets. 
• Collaboration ensures that licensed assets align with elasticity and scaling considerations, factoring in license rights and entitlements. 

The intersection of FinOps and ITAM offers a powerful synergy for organizations seeking to enhance their cost management efforts. By leveraging the strengths of both disciplines, organizations navigate the complexities of cost allocation, data analysis, anomaly management, shared cost distribution, and more. This is the second post in a series exploring the intersection of FinOps and ITAM.

Read the next post in this series, How FinOps and ITAM Teams Can Work Together in Real-Life Scenarios.

The post 6 Collaborative Use Cases for FinOps and ITAM Teams appeared first on Snow Software.

In this hybrid reality, FinOps professionals are tasked to derive the business value of cloud and work with other parts of the business such as engineering, finance, and business teams to collaborate on data-driven spending decisions.

The north star principle¹ from the FinOps Foundation is, “Teams must collaborate.” Among those teams and personas are the IT asset management (ITAM) leader and ITAM practitioner, and they lay the groundwork for a successful cloud cost program.

The FinOps Foundation also says that FinOps professionals are coming together with allies such as ITAM leaders in defining a common language, building enablement strategies to elevate business objectives, and developing communication programs.

Gartner talks about combining ITAM and FinOps to create a robust governance framework and iterative optimization activities². Gartner also says that executives need to create a new operating model to achieve shared objectives of reducing waste and avoiding costly licensing and contracting issues.  

Gartner doesn’t stop there, but urges executive leaders for mature software and cloud governance disciplines to, “Create an integrated unit that profits from the synergy of both disciplines to deliver optimum benefit across an increasingly complex technology environment.”

Discovering blind spots and finding a model for working together

In a recent conversation between the FinOps Foundation and Amy Ashby, the FinOps lead at Under Armour, Amy echoes the same thought process saying that senior leadership plays a key role in bringing the two disciplines together:

“[Our processes] naturally put FinOps and ITAM together, and if we can come together and tackle it from being on the same team, then we can do more and optimize more. There are lot of blind spots on both sides and we can help each other. There is so much value in knowing what is in the environment – across cloud, on prem.”

amy ashby, finops lead at under armour

To make this a reality, ITAM and FinOps professionals must collaborate to cover the blind spots and work in tandem to close the gaps that exist for each other.

FinOps professionals cannot do the heavy lifting of driving visibility and accountability of cloud costs alone. There aren’t many FinOps professionals around the world and even The FinOps Foundation tells us that 62% of organizations with less than one million dollars don’t have a formal FinOps position³. And even if organizations do have a FinOps person or team, they lean on other teams to drive business value out of cloud.

The blind spot for FinOps is that they ignore software and SaaS applications that are not on cloud and they stick only to assets that appear on the cloud bill. For ITAM, they have limited visibility into the cloud unless they have a SAM tool agent deployed into an instance. The other tricky area is that software license agreements have bring-your-own-license (BYOL) terms that are complex, which need to be carefully read and interpreted to avoid compliance risks. A common software vendor option, BYOL can yield substantial savings over demand pricing when used effectively, and ITAM professionals are well equipped to advise on this.

The ITAM team also does not have a view of containers and newer technologies hosted on cloud. With that said, they have an important, shared goal to pursue: to maximize IT investment. CIOs and CTOs need a single-pane-of-glass view across their entire infrastructure to make data-driven decisions.

The way to progress this relationship depends on the nature of the company, team size, culture and practices. There is no one-size-fits-all solution to solve for this. The ideal way to go is take a slow and steady approach, or follow the FinOps Foundation’s maturity model, called the “crawl, walk and run” approach.

Using the crawl, walk, run approach for better collaboration between FinOps and ITAM teams

A crawl, walk, run approach enables organizations to start small, and grow in scale, scope and complexity. Taking quick action at a small scale and limited scope allows both teams to assess the outcomes of their actions, and to gain insights into the value of taking further action in a larger, faster or more granular way.

If you are an ITAM professional, work with your FinOps professionals on the following recommendations:

• Establish and maintain clear lines of communication and coordination with FinOps professionals or Cloud Center of Excellence (CCOE) within the organization. 
• Determine which cloud services are billed with software licenses, including bundled with a service or purchased from a cloud provider marketplace.
• Determine which cloud services have been configured as BYOL.
• Look at software license agreements and determine which cloud services are eligible for BYOL to leverage unallocated licenses.
• Ask for service usage metrics, so that you can determine which cloud services need further OS or container-level inspection. 
• Ask FinOps to track licensing costs and realized savings from BYOL licenses. 

Read the next post in this series, 6 Collaborative Use Cases for FinOps and ITAM Teams.

[1] Establishing FinOps Culture

[2] Target Software and Cloud Costs by Uniting Software Asset Management and FinOps by Gartner

[3]FinOps Foundation April ’23 Summit: State of FinOps Tooling Insights, Normalizing Multi-Cloud Billing Data, and FOCUS

The post Bridging ITAM and FinOps for Success Today and in the Future appeared first on Snow Software.

Understanding the impact

As per Gartner report, senior executives are starting to challenge the value of digital transformation, having encountered dramatic growth in software and cloud usage without adequate management and optimization. Where software asset management (SAM) and FinOps do exist, they have limited influence or authority to optimize consumption and value across a growing, increasingly complex set of environments. Despite their interdependencies, SAM and FinOps often operate independently, in different silos and with limited resources, eroding their value-maximization potential.

Key considerations

To address these challenges and enhance visibility & understanding while maximizing value and minimizing costs, executive leaders should consider the following recommendations:

• Consolidate SAM and FinOps: Consolidate and mandate SAM and FinOps disciplines to drive enhanced visibility and understanding that maximizes value and opportunity while minimizing cost and risk. Create an integrated unit that profits from the synergy of both disciplines to deliver optimum benefit across an increasingly complex technology environment.

• Adequately staff the consolidated functions: Ensure that the consolidated SAM and FinOps team is equipped with skilled team members who can effectively collaborate with key stakeholders and eliminate unproductive cost overruns.
  
• Mandate SAM and FinOps disciplines: Establish a mandate for SAM and FinOps as key mechanisms to offset material risks of continually escalating costs. Create authorization, empowerment and a culture that drives action and realization from SAM and FinOps optimization and mitigation recommendations executed throughout IT.

By 2025, it is predicted that 50% of organizations will unify SAM and FinOps into a consolidated discipline that delivers portfolio cost management and governance. SAM and FinOps are critical disciplines for managing software and cloud costs effectively. By consolidating these disciplines, organizations can achieve enhanced visibility, optimize consumption and minimize unnecessary cost overruns. 

To fully understand how you can increase collaboration between SAM and FinOps, and enable delivery of maximum value across your technology portfolio, we believe you should download the full Gartner® report: Target Software and Cloud Costs by Uniting Software Asset Management and FinOps.

Gartner, Target Software and Cloud Costs by Uniting Software Asset Management and FinOps, Stephen White, Yoann Bianic, Stewart Buchanan, 6 April 2023.

Disclaimer: Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.  

Gartner is a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and internationally and is used herein with permission. All rights reserved.  

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Guiding principles such as collaboration, timely reporting, centralized teams, cloud usage ownership and business-value driven decisions are at the heart of the FinOps mission. We’ve identified three fundamental building blocks that help organizations build a robust FinOps discipline upon that foundation. These components are setting up the FinOps team, implementing FinOps and leveraging software tools designed for FinOps. 

Organizational mapping

The collaboration of various stakeholders is key to building a successful FinOps discipline. They keep cloud costs under control and detect cost anomalies to prevent unexpected expenses. Building effective collaboration around cloud financial management requires aligning competing priorities of fast development, watching spend and ensuring quality work. FinOps managers are responsible for overseeing cloud costs and enabling transparency with cross-functional stakeholders. Each stakeholder group owns a set of issues that need to be solved to achieve cost excellence with FinOps.

• Cloud Operations are responsible for supporting and architecting all cloud platform environments and applications. They continually monitor the applications to ensure resources are used effectively and provide recommendations for optimizing performance and operational resilience.
• Infrastructure and Operations teams establish technology roadmaps, operationalize technologies, and enforce governance, standards and processes. They require platforms and tools to ensure an organization’s IT estate is operating optimally.
• Finance must drive financial accountability and predictability in cloud costs. Forecast accuracy, effective cost allocation and the promotion of good governance ensure the enterprise is cost-efficient in the cloud.
• Engineering wants to create great products that are easily adopted and offer value to end users internally and externally. Moving the needle on cloud cost through initiatives such as cost transparency, staying on budget and monitoring application performance is important to this team.
• Leadership teams make strategic decisions based on the value the cloud drives for the business and customers that ultimately result in innovative solutions, satisfaction and loyalty. They strive for revenue to outpace cloud spend, accelerate savings, sponsor FinOps teams and hold them accountable for outcomes.

Implementing FinOps

Cost optimization will save money, but that should not be the main goal. The goal of a successful FinOps implementation is to get as much as possible from investment in the cloud.

Every situation is different and there isn’t a single way to handle cloud optimization in FinOps. However, many organizations can achieve better control and manage their cloud spending by building upon the 4 strategies which we’ll examine in this section.

• Analysis. FinOps teams must have access to the latest data and analytics to make informed decisions. Data analysis, chargeback and showback push spend accountability to those that are responsible for creating the expense. It calls attention to total costs for the business entity, opportunities for cost avoidance and financial KPIs.
• Benchmarking. Well-defined success metrics are critical for measuring the impact of FinOps strategies. Knowing where to spend money, budget and forecast accuracy, monitor cloud-instance performance are just a few success benchmarks for successful FinOps transformation.
• Optimization. Organizations need to understand how spending fluctuates relative to cloud management decisions. Rightsizing instances and repositioning workloads are actions that improve cost and performance in the cloud. It’s easy to forget to turn off resources when not in use. While tempting to shut down unused resources to lower running costs, it can be dangerous to do so without knowledge of the downstream impact on production or other processes.
• Governance. When it comes to improving the efficiency of the organization, the establishment of effective controls and governance is critical. Organizations need a policy engine that ensures cloud optimization objectives are being followed, budgets are maintained, costs are properly allocated, reports are generated, and that communication is taking place across the enterprise.

Technology tools

FinOps practitioners know that technology is limitless, and intelligence is priceless. Optimizing IT spend, reducing risk and leveraging technology all help to prevent cloud usage and cost from spiraling out of control. This is especially important for organizations with large and disparate user bases. Software tools help cross-discipline FinOps team members to effectively track, manage and reduce cloud costs. Their capabilities include the following:

• Visibility. A top challenge for FinOps teams is the ability to visualize, understand and manage cloud costs and usage over time. Software tools analyze cloud data (including containers) from multiple cloud service providers. These tools allow teams to gain insight into cloud provider bills, identify trends, pinpoint cost drivers and detect anomalies.
• Cost Allocation. It’s impossible to accurately attribute costs to users until you know where each teams’ resources live. Cloud provider billing accounts often lack the granularity required for allocation. Software features such as tagging allow for efficient cost chargeback and drive greater accountability based on resources that are consumed.
• Reporting. FinOps teams face the challenge of investigating changes in cloud spend by cost center, application, service and resource. Software consolidates and visualizes billing, containers and other data from multiple cloud providers into a single, unified view. This makes it easy for teams to share and work from the same data set.
• Budgeting. Forecasting cloud budgets can be difficult because of the large number of services, resources and pricing variables involved. With FinOps tools, stakeholders can analyze historical spending data to accurately forecast cloud spend and usage.

FinOps inextricably links people, process and technology to break down organizational silos, facilitate information flow, improve decision making and more. While needs and usage may change over time, developing an effective plan for cloud financial management will help maintain balance between cloud performance and cost well into the future. A good FinOps strategy ensures that everyone who needs to be involved is included in the planning process.

Ready to take the next steps to improving your cloud visibility and lowering costs? We’re ready to help.

The post The Fundamentals of FinOps: Cloud Cost Transparency and Optimization appeared first on Snow Software.

A complete understanding of usage and spend across all cloud assets will serve teams well. With this view, these teams can: 

• Accurately forecast and budget 
• Allocate costs based on usage to drive accountability 
• Detect anomalies and sudden cost fluctuations  
• Embrace the underlying processes that glue their financial picture together  

Let’s look at the following functional areas and how a FinOps approach effectively addresses the management of cloud costs and propels your organization forward within each one. 

Finance teams

Finance teams have various ways to control cloud costs: by instituting and enforcing financial and accounting process rules, establishing budget allocations by team, negotiating contracts and other strategies. Because financial management involves all levels of an organization top down and bottom up, such as cloud spend rolling up to IT spend, or the cloud budget stemming from a percent of total expenses, it’s important to accurately forecast and budget cloud spend as granularly as possible.  

Another important metric Finance considers when planning for projects to invest in is ROI to understand one project’s expected revenues in relation to costs against other projects.  In order to do this effectively, Finance must evaluate the unit economics for each project i.e., cost divided by a unit (such as applications, BU, region). A Finance controller may allocate those costs proportional to the unit’s cloud usage. Understanding the revenue relative to the associated costs enables decision-making for the projects and efforts that are the most profitable for the company. It also sets a benchmark for success.   

Allocating costs also drives accountability. In the past, IT was considered a cost center that absorbed all technology costs. Now, with an increase in decentralized decision-making and budgets, finance can properly chargeback users based on their usage. 

With CAPEX (long-term costs) and OPEX (expense-as-you-go), moving to the cloud has forced many finance teams to embrace OPEX financial strategies. Spending on “as-you-need” public cloud services is a big change for organizations that, just a few years ago, would’ve spent millions on a datacenter. It has significant implications for the CFO and their team in context of profitability and Wall Street expectations. This should be a careful consideration.

Cloud operations teams

Cloud operations/cloud center of excellence (CCOE) teams are the administrators of the public cloud, and they hold the access keys for the software development team. In larger enterprises, it is possible that one manager will be assigned to one cloud service provider. This team is likely a part of regular cloud vendor negotiations. Some of their tasks include: 

• Provisioning cloud access 
• Setting up computing, storage, database and networking needs for specific users/teams 
• Monitoring usage and costs 
• Configuring capacity and workload rules 
• Maintaining data security 
• Accelerating digital projects 

The cloud operations team also has visibility to the cloud billing. They are expected to minimize overspend or waste. 

CCOE teams should make proactive decisions on which cloud service providers (CSPs) are the best for certain executions, how to scale operations and how to maintain high up-time in line with developer productivity. 

Software engineering and Dev teams

Software developers and their ability to create test, development, and production environments are an integral part of your organization’s product innovation, revenue scaling, and employee productivity. Without governance or clear rules of when and how to use what cloud resource however, they will simply do “what it takes” to get work done.  

While developers usually try to maximize their efforts in launching cool new features, products, and capabilities, they don’t often keep track of their cloud spend. Finance teams will notice big run ups on cloud costs, however. In some organizations, they will attempt to curb the spend if it exceeds budget or escalates exponentially. Alternatively, because some specialized software developers can be considered “expensive” resources, another approach is to allow them free rein to do their work, at any cost.  

In both scenarios, FinOps can look at the importance of the workstream to downstream projects and the revenue associated with the cloud spend before making decisions about the spend itself.

IT Ops and Services teams

In some companies, the person with the IT operations role has evolved into the cloud operations or application owners. On the path to digital transformation, many IT teams have been tasked with migrating applications from the datacenter to the cloud. They re-platform, refactor, and rebuild to be cloud native. Because the IT team’s goal is to drive efficiency for both tools and personnel, this team should work to optimize IT costs across multi-cloud environments. 

In the interest of delivering to business unit expectations, IT Ops strives to have high up-time with low time to resolve issues in a compliant and secure environment. That means that the workloads going to both private and public cloud need to be well-oiled and high functioning. They are stewards of cost and are often held responsible for knowing the licensing arrangements between what is paid on-premises and what might be “BYOL” in the cloud. An IT asset management (ITAM) program can be used to manage the user lifecycle across all hardware and software and SaaS licensing for maximum cost efficiency. 

FinOps becomes a powerful enabler

As discussed in our first blog post in this series, FinOps isn’t just about capping cloud spend. It isn’t meant to place limits on creativity, productivity and innovation. Instead, FinOps is an organizational mindset that enables your organization to achieve strategic goals while effectively managing costs. In the spirit of creating visibility and reducing cost and risk, it’s closely aligned with ITAM programs and SaaS management. FinOps also includes the drive to understand and manage all technology. At Snow, we call this Technology Intelligence.  

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Spreading the effort among multiple teams (e.g., FinOps and IT asset management) with their own blind spots and ways of getting and interpreting data compounds the problem. To combat that issue, these teams need to collaborate over a common source of Technology Intelligence on their assets.

Snow Cloud Control: Full visibility into cloud and SaaS spend

Snow Cloud Control provides complete visibility into both your public cloud and your SaaS environments. For cloud assets, you can discover and optimize cloud spend on Amazon Web Services, Microsoft Azure, Google Cloud Platform and Kubernetes. For SaaS usage, Snow Cloud Control discovers and optimizes spend across paid, unpaid, sanctioned and unsanctioned applications from across your organization.

Snow Cloud Control also supports cross-functional collaboration. Everyone can view the same dashboard and personalized reporting tied to their respective function. For example, Finance and/or FinOps teams can allocate costs by:

• Business purpose
• Forecast cloud spend
• Budget for cloud spend

With an easy-to-use user interface, customers also achieve quick time to value by seeing cloud infrastructure and SaaS consumption along with insights and recommendations for optimization.

A holistic view of public cloud server spend

With server usage spread throughout the organization, understanding when and where there are opportunities to eliminate waste can be challenging, to say the least. Do you have virtual machines that were spun up on Amazon Web Services or Azure and then forgotten? Are there servers running 24/7 that only need to be on during the workday? 

Eliminating this waste isn’t a one-time fix; it’s an ongoing effort. It requires regular monitoring, controls, and actionable insights to spot anomalies and identify opportunities for discounts or cost savings. Snow Cloud Control provides a holistic view of cloud spend and enables you to act quickly on cloud cost spikes across all your cloud assets. You’ll get an accurate picture of your cloud resources and Kubernetes costs with prescriptive recommendations for savings. What’s more, you can also properly allocate costs based on team, project, application, or your definition and the corresponding cloud consumption. Armed with this data, you can begin to eliminate waste, right-size infrastructure based on your cloud workloads and establish enforceable guidelines to prevent future waste.

Get insight into your SaaS portfolio and eliminate wasteful spending

With Snow Cloud Control, you can also manage SaaS spend. Managing SaaS spend is every bit as difficult as managing server infrastructure and cloud services. The first challenge is discovering what applications are in use within the business. To address that challenge, Snow goes straight to the source – the user.

With user data, you’re not only able to discover all the applications activated outside of your approved procurement processes, but also see how (or if) teams are using SaaS. This allows you to identify the applications that are adding value and those that are unnecessary.

These insights allow you to eliminate unused applications, repurpose licenses and appropriately match users with feature bundles. They also allow you to spot redundancies and overlapping functionality. For example, do you really need four file sharing, three project management and two video conferencing tools? Consolidating to a single solution can save money on license (through contract negotiations) and support costs.

Get started with Snow Cloud Control

Snow Cloud Control allows you to monitor, optimize and govern your technology spending across public cloud service providers and SaaS applications. And, as a customer, you get access to Snow’s global cloud experts and partners who know and share best practices to efficiently manage cloud usage and cost.

To learn more about how you can save money in the cloud, register for our webinar on November 3, 2022.

The post Discover How to Optimize Technology Spend with New Snow Cloud Control appeared first on Snow Software.

Starting the journey with a team-based framework

Getting a cross-functional team united and focused on the same mission is the foundation of addressing cloud costs and achieving a more future-ready FinOps framework. This framework prevents siloed teams (e.g., Finance) from identifying cost savings and cutting off services without context as to what is mission critical. FinOps provides for cross-functional collaboration from engineering, operational, finance and executive teams. Actions and decisions made by any one of these organizational teams influences the others.  

FinOps teams come together to:

• Define cloud use strategy
• Adjust cloud budgets
• Set cloud usage practices
• Review results and analyze value
• Make ongoing adjustments

This organizational collaboration allows teams to learn from each other and to build on collective knowledge. Pulling together technology, operations and finance teams also encourages everyone to take a fresh look at their tasks from the point of view of their collaborators. The FinOps team collaboration ultimately results in enhanced creativity, innovation and efficiency.

Establishing hands-on FinOps processes 

FinOps shines a light onto cloud resources and allows distributed engineering and business teams to make trade-offs between speed, cost and quality in their cloud architecture and investment decisions. These processes help drive financial accountability and accelerate business value realization by enabling frictionless cloud governance and controls. They align cloud activities to the organization’s overall goals and strategies to deploy and manage resources more efficiently. Meanwhile, the policies ensure cloud costs are predictable and manageable. All told, FinOps supports the consistent adoption of best practices across the organization. 

Tools to realize cross-functional FinOps benefits 

Cloud financial optimization tools help organizations optimize cloud usage and costs. These tools may be native to specific cloud providers, or third-party vendors may offer them. Some organizations have also developed in-house cloud cost optimization and cloud management tools. FinOps teams rely on software solutions to track cloud usage with users and projects, interpret lengthy invoices, generate reports and make cloud usage and optimization decisions. Traditional cloud financial management tools are usually tailored to reporting on the cloud resources an organization is using and how much those resources cost. FinOps tools serve a similar purpose, but the analysis and reporting are tailored to provide FinOps teams with actionable cloud financial management recommendations and optimizations.  

FinOps tool features and functionalities can include the following:

• Budget allocation tags 
• Detailed views of cloud use
• Cost reporting
• Budgeting and projection resources 

That’s just the half of it. All this functionality shows how these tools enable team members to improve performance and spend.

Let Snow help you experience a successful FinOps journey 

Your quest for an effective FinOps program will take your finance, engineering, operations and executive teams on quite the ride. FinOps is a continuous journey towards ensuring maximum value from the cloud for minimum spend. You don’t always know where you’re going, but you know you’re not going back to the old days of cloud financial and accountability challenges.  

Snow Software can help guide and enable your FinOps team with our latest solutions and platforms for cloud cost optimization. We take a unique approach by harnessing Technology Intelligence so you can understand and manage all your technology assets. Technology Intelligence captures all the key factors needed to drive FinOps programs and important business decisions around investments, operations and strategy.

The post Successful FinOps: Focusing on People, Processes and Tools appeared first on Snow Software.

Two-sided benefits to FinOps

Most people who know FinOps probably think maximizing cloud investments with FinOps equals reducing cloud costs. They may not realize, however, that FinOps implementation is a clever way to make money, too. Cloud spend can drive more revenue, grow a customer base, enable more product development and speed feature releases. FinOps is about removing roadblocks from these functions and empowering your engineering teams to deliver better results more frequently.

The culture of FinOps

As Al points out in the video, FinOps is a major departure from the datacenter and server management of past IT teams. According to the FinOps Foundation, of which Al is a certified member, FinOps is primarily a cultural practice. Finance and business leadership teams share a common language and processes to support the benefits of cloud without overspending. The cross-functional teams understand the vast value of cloud and the organization’s budget rationale. Together, they make informed trade-offs between agility, cost and quality. 

Principles of FinOps

The FinOps Foundation has outlined six primary principles to guide FinOps activities:

1. Teams need to collaborate
2. Everyone takes ownership for their cloud usage
3. A centralized team drives FinOps
4. Reports should be accessible and timely
5. The cloud’s business value drives decisions
6. Take advantage of the variable cost model of the cloud

State of FinOps in 2022

Undoubtedly, FinOps Foundation principles are important for FinOps teams to follow. However, research also shows there is no single path to success. The road to FinOps is a journey in which no two experiences are the same. The FinOps Foundation’s State of FinOps 2022 survey offers an in-depth look at the diversity of FinOps teams and their progress. They divide their respondents across maturity stages of pre-crawl, crawl, walk and run. Unfortunately, those who are crawling far outnumber those who are running.

The value of FinOps/ITAM collaborations

As FinOps teams try to maximize cloud investments with FinOps in a cost-effective manner, IT asset managers work in parallel toward the same goal. Together, they manage the entirety of an organization’s technology assets. In recent years, the shift of cloud application purchasing decisions from IT to individual business units has made this effort much more challenging for IT asset managers. This shift limits IT asset visibility for these managers. The resulting blind spots can mean overpayments, compliance failures and security risks. 

Maximizing cloud investments with FinOps and Snow Cloud Cost

FinOps and ITAM often address similar issues. Yet, as Snow EVP of Cloud Management Jay Litkey explains, there’s a significant financial information gap between FinOps and ITAM. Certainly, bridging this gap would streamline processes and provide visibility, cost savings, and governance to multicloud environments. 

To address this need and assist organizations with cloud cost optimization, Snow Software recently entered a strategic partnership with Anodot. Together, we announced the creation of Snow Cloud Cost. Snow Cloud Cost delivers full visibility into cloud consumption. As a result, teams can optimize usage, accurately forecast and budget costs, drive more informed decision-making and right-size their cloud services. 

At Snow, we believe data and insights around an organization’s complete technology stack — also known as Technology Intelligence — enable better decision-making, fuel more innovation, and increase collaboration while reducing risk. These insights are critical for FinOps and ITAM teams alike and we’re excited about what it will do for growing organizations. 

Have you seen our previous CIO Perspective posts on how to start an ITAM practice, technology visibility and how to free up funds for innovation? Also look out for our next installment on Snow Atlas, our next-generation platform for Technology Intelligence. 

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