Cloud FinOps, 2nd Edition

Cloud FinOps, 2nd Edition

by J.R. Storment, Mike Fuller
Released January 2023
Publisher(s): O'Reilly Media, Inc.
ISBN: 9781492098355

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Book description

FinOps brings financial accountability to the variable spend model of cloud. Used by the majority of global enterprises, this management practice has grown from a fringe activity to the de facto discipline managing cloud spend. In this book, authors J.R. Storment and Mike Fuller outline the process of building a culture of cloud FinOps by drawing on real-world successes and failures of large-scale cloud spenders.

Engineering and finance teams, executives, and FinOps practitioners alike will learn how to build an efficient and effective FinOps machine for data-driven cloud value decision-making. Complete with a road map to get you started, this revised second edition includes new chapters that cover forecasting, sustainability, and connectivity to other frameworks.

You'll learn:

  • The DNA of a highly functional cloud FinOps culture
  • A road map to build executive support for FinOps adoption
  • How to understand and forecast your cloud spending
  • How to empower engineering and finance to work together
  • Cost allocation strategies to create accountability for cloud and container spend
  • Strategies for rate discounts from cloud commitments
  • When and how to implement automation of repetitive cost tasks
  • How to empower engineering team action on cost efficiency

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Table of contents

  1. Preface
    1. The World Turned Upside Down
    2. Who Should Read This Book
    3. About This Book
    4. What You Need to Know Before Reading On
    5. FinOps Is Evolving
    6. Conventions Used in This Book
    7. O’Reilly Online Learning
    8. How to Contact Us
    9. Acknowledgments
  2. I. Introducing FinOps
  3. 1. What Is FinOps?
    1. Defining the Term “FinOps”
    2. The FinOps Hero’s Journey
    3. Where Did FinOps Come From?
    4. Data-Driven Decision Making
    5. Real-Time Feedback (aka the “Prius Effect”)
    6. Core Principles of FinOps
    7. When Should You Start FinOps?
    8. Starting with the End in Mind: Data-Driven Decision Making
    9. Conclusion
  4. 2. Why FinOps?
    1. Use Cloud for the Right Reasons
    2. Cloud Spend Keeps Accelerating
    3. The Impact of Not Adopting FinOps
      1. Informed Ignoring: Why Start Now?
    4. Conclusion
  5. 3. Cultural Shift and the FinOps Team
    1. Deming on Business Transformation
    2. Who Does FinOps?
    3. Why a Centralized Team?
    4. The FinOps Team Doesn’t Do FinOps
    5. The Role of Each Team in FinOps
      1. Executives and Leadership
      2. Engineering and Developers
      3. Finance
      4. Procurement and Sourcing
      5. Product or Business Teams
      6. FinOps Practitioners
    6. A New Way of Working Together
    7. Where Does Your FinOps Team Report?
    8. Understanding Motivations
      1. Engineers
      2. Finance People
      3. Executives and Leadership
      4. Procurement and Sourcing People
    9. FinOps Throughout Your Organization
    10. Hiring for FinOps
    11. FinOps Culture in Action
      1. Difficulty Motivating People Is Not New
      2. Contributors to Action
      3. Detractors from Action
      4. Tipping the Scales in Your Favor
    12. Conclusion
  6. 4. The Language of FinOps
    1. Defining a Common Lexicon
    2. Defining the Basic Terms
    3. Defining Finance Terms for Cloud Professionals
    4. Abstraction Assists Understanding
    5. Cloud Language Versus Business Language
    6. Creating a Universal Translator Between Your DevOps and Finance Teams
    7. The Need to Educate All the Disciplines
    8. Benchmarking and Gamification
    9. Conclusion
  7. 5. Anatomy of the Cloud Bill
    1. Types of Cloud Bill
    2. Cloud Billing Complexity
    3. Basic Format of Billing Data
    4. Time, Why Do You Punish Me?
    5. Sum of the Tiny Parts
    6. A Brief History of Cloud Billing Data
    7. The Importance of Hourly Data
    8. A Month Is Not a Month
    9. A Dollar Is Not a Dollar
    10. Two Levers to Affect Your Bill
    11. Who Should Avoid Costs and Who Should Reduce Rates?
    12. Centralizing Rate Reduction
    13. Why You Should Decentralize Usage Reduction
    14. Conclusion
  8. 6. Adopting FinOps
    1. A Confession
    2. Different Executive Pitches for Different Levels
      1. Starting Pitch
      2. Advancing Pitch
      3. Sample Headcount Plan for Advancing a FinOps Team
    3. Pitching the Executive Sponsor
    4. Playing to Your Audience
    5. Key Personas That the Driver Must Influence
      1. CEO Persona
      2. CTO/CIO Persona
      3. CFO Persona
      4. Engineering Lead Persona
    6. Roadmap for Getting Adoption of FinOps
      1. Stage 1: Planning for FinOps in an Organization
      2. Stage 2: Socializing FinOps for Adoption in an Organization
      3. Stage 3: Preparing the Organization for FinOps
    7. Type of Alignment to the Organization
    8. Full Time, Part Time, Borrowed Time: A Note on Resources
    9. A Complex System Designed from Scratch Never Works
    10. Conclusion
  9. 7. The FinOps Foundation Framework
    1. An Operating Model for Your Practice
    2. The Framework Model
      1. Principles
      2. Personas
      3. Maturity
      4. Phases
    3. Domains and Capabilities
      1. Structure of a Domain
      2. Structure of Capabilities
    4. Adapting the Framework to Fit Your Needs
    5. Connection to Other Frameworks/Models
    6. Conclusion
  10. 8. The UI of FinOps
    1. Build Versus Buy Versus Native
      1. When to Use Native Tooling
      2. When to Build
      3. Why to Buy
    2. Operationalized Reporting
      1. Data Quality
      2. Perfect Is the Enemy of Good
      3. Report Tiering
      4. Rolling Out Changes
      5. The Universal Report
    3. Accessibility
      1. Color
      2. Visual Hierarchy
      3. Usability and Consistency
      4. Language
      5. Consistency of Color and Visual Representation
      6. Recognition Versus Recall
    4. Psychological Concepts
      1. Anchoring Bias
      2. Confirmation Bias
      3. The Von Restorff Effect
      4. Hick’s Law
    5. Perspectives on Reports
      1. Personas
      2. Maturity
      3. Multicloud
    6. Putting Data in the Path of Each Persona
      1. Data in the Path of Finance
      2. Data in the Path of Leadership
      3. Data in the Path of Engineers
      4. Connecting FinOps to the Rest of the Business
    7. Seek First to Understand
    8. Conclusion
  11. II. Inform Phase
  12. 9. The FinOps Lifecycle
    1. The Six Principles of FinOps
      1. #1: Teams Need to Collaborate
      2. #2: Decisions Are Driven by the Business Value of Cloud
      3. #3: Everyone Takes Ownership of Their Cloud Usage
      4. #4: FinOps Reports Should Be Accessible and Timely
      5. #5: A Centralized Team Drives FinOps
      6. #6: Take Advantage of the Variable Cost Model of the Cloud
    2. The FinOps Lifecycle
      1. Inform
      2. Optimize
      3. Operate
    3. Considerations
    4. Where Do You Start?
    5. You Don’t Have to Find All the Answers
    6. Conclusion
  13. 10. Inform Phase: Where Are You Right Now?
    1. Data Is Meaningless Without Context
    2. Seek First to Understand
    3. Organizational Work During This Phase
    4. Transparency and the Feedback Loop
    5. Benchmarking Team Performance
    6. What Great Looks Like
    7. Conclusion
  14. 11. Allocation: No Dollar Left Behind
    1. Why Allocation Matters
    2. Amortization: It’s Accrual World
    3. Creating Goodwill and Auditability with Accounting
    4. The “Spend Panic” Tipping Point
    5. Spreading Out Shared Costs
    6. Chargeback Versus Showback
    7. A Combination of Models Fit for Purpose
    8. Accounts, Tagging, Account Organization Hierarchies
    9. The Showback Model in Action
    10. Chargeback and Showback Considerations
    11. Conclusion
  15. 12. Tags, Labels, and Accounts, Oh My!
    1. Tag- and Hierarchy-Based Approaches
    2. Getting Started with Your Strategy
      1. Communicate Your Plan
      2. Keep It Simple
      3. Formulate Your Questions
    3. Comparing the Allocation Options of the Big Three
    4. Comparing Accounts and Folders Versus Tags and Labels
    5. Organizing Accounts and Projects into Groups
    6. Tags and Labels: The Most Flexible Allocation Option
      1. Using Tags for Billing
      2. Getting Started Early with Tagging
      3. Deciding When to Set Your Tagging Standard
      4. Picking the Right Number of Tags
      5. Working Within Tag/Label Restrictions
      6. Maintaining Tag Hygiene
      7. Reporting on Tag Performance
      8. Getting Teams to Implement Tags
    7. Conclusion
  16. 13. Accurate Forecasting
    1. The State of Cloud Forecasting
    2. Forecasting Methodologies
    3. Forecasting Models
    4. Cloud Forecasting Challenges
      1. Manual Versus Automated Forecasts
      2. Inaccuracies
      3. Granularity
      4. Forecast Frequency
      5. Communication
      6. Future Projects
      7. Cost Estimation
      8. Impacts of Cost Optimization on Forecasts
    5. Forecast and Budgeting
    6. The Importance of Managing Teams to Budgets
    7. Conclusion
  17. III. Optimize Phase
  18. 14. Optimize Phase: Adjusting to Hit Goals
    1. Why Do You Set Goals?
    2. The First Goal Is Good Cost Allocation
    3. Is Savings the Goal?
    4. The Iron Triangle: Good, Fast, Cheap
    5. Hitting Goals with OKRs
      1. OKR Focus Area #1: Credibility
      2. OKR Focus Area #2: Maintainable
      3. OKR Focus Area #3: Control
    6. Goals as Target Lines
    7. Budget Variances
    8. Using Less Versus Paying Less
    9. Conclusion
  19. 15. Using Less: Usage Optimization
    1. The Cold Reality of Cloud Consumption
    2. Where Does Waste Come From?
    3. Usage Reduction by Removing/Moving
    4. Usage Reduction by Resizing (Rightsizing)
    5. Common Rightsizing Mistakes
      1. Relying on Recommendations That Use Only Averages or Peaks
      2. Failing to Rightsize Beyond Compute
      3. Not Addressing Your Resource “Shape”
      4. Not Simulating Performance Before Rightsizing
      5. Hesitating Due to Reserved Instance Uncertainty
    6. Going Beyond Compute: Tips to Control Cloud Costs
      1. Block Storage
      2. Object Storage
      3. Networking
    7. Usage Reduction by Redesigning
      1. Scaling
      2. Scheduled Operations
    8. Effects on Reserved Instances
    9. Benefit Versus Effort
    10. Serverless Computing
    11. Not All Waste Is Waste
    12. Maturing Usage Optimization
    13. Advanced Workflow: Automated Opt-Out Rightsizing
    14. Tracking Savings
    15. Conclusion
  20. 16. Paying Less: Rate Optimization
    1. Compute Pricing
      1. On-Demand/Pay-As-You-Go
      2. Spot Resource Usage
      3. Commitment-Based Discounts
    2. Storage Pricing
    3. Volume/Tiered Discounts
      1. Usage-Based
      2. Time-Based
    4. Negotiated Rates
      1. Custom Pricing
      2. Seller Private Offers
    5. BYOL Considerations
    6. Conclusion
  21. 17. Understanding Commitment-Based Discounts
    1. Introduction to Commitment-Based Discounts
    2. Commitment-Based Discount Basics
      1. Compute Instance Size Flexibility
      2. Conversions and Cancellations
    3. Overview of Usage Commitments Offered by the Big Three
    4. Amazon Web Services
      1. What Does an RI Provide?
      2. AWS Commitment Models
      3. AWS Reserved Instance
      4. Member Account Affinity
      5. Standard Versus Convertible RIs
      6. Instance Size Flexibility
      7. AWS Savings Plans
      8. Savings Bundles
    5. Microsoft Azure
      1. Azure Reservations
      2. Instance Size Flexibility
      3. Azure Savings Plans
    6. Google Cloud
      1. Google Committed Use Discounts
      2. Paying for Cores, Not Hours, in Google
      3. Google Billing and Sharing CUDs
      4. Google Billing Account and Ownership
      5. Applying Google CUDs in a Project
      6. Google Flexible Committed Use Discounts
    7. Conclusion
  22. 18. Building a Commitment-Based Discount Strategy
    1. Common Mistakes
    2. Steps to Building a Commitment-Based Discount Strategy
      1. Step 1: Learn the Fundamentals of Each Program
      2. Step 2: Understand Your Level of Commitment to Your Cloud Service Provider
      3. Step 3: Build a Repeatable Commitment-Based Discount Process
      4. Step 4: Purchase Regularly and Often
      5. Step 5: Measure and Iterate
      6. Step 6: Allocate Up-Front Commitment Costs Appropriately
    3. How to Manage the Commitment Strategy
    4. Purchasing Commitments Just-in-Time
    5. When to Rightsize Versus Commit
      1. The Zone Approach
      2. Who Pays for Commitments?
      3. Strategy Tips
    6. Conclusion
  23. 19. Sustainability: FinOps Partnering with GreenOps
    1. What Are Cloud Carbon Emissions?
    2. Scope 1, 2, and 3 Emissions
    3. Are Cloud Providers Green?
      1. Access
      2. Completeness
      3. Granularity
    4. Partnering with Engineers on Sustainability
    5. FinOps and GreenOps Better Together?
    6. GreenOps Remediations
    7. Avoid FinOps Working Against GreenOps
    8. Conclusion
  24. IV. Operate Phase
  25. 20. Operate: Aligning Teams to Business Goals
    1. Achieving Goals
    2. Staffing and Augmenting Your FinOps Team
    3. Processes
      1. Onboarding
      2. Responsibility
      3. Visibility
      4. Action
    4. How Do Responsibilities Help Culture?
      1. Carrot Versus Stick Approach
      2. Handling Inaction
    5. Putting Operate into Action
    6. Conclusion
  26. 21. Automating Cost Management
    1. What Is the Outcome You Want to Achieve?
    2. Automated Versus Manual Tasks
    3. Automation Tools
      1. Costs
      2. Other Considerations
      3. Tooling Deployment Options
    4. Automation Working Together
      1. Integration
      2. Automation Conflict
    5. Safety and Security
    6. How to Start
    7. What to Automate
      1. Tag Governance
      2. Scheduled Resource Start/Stop
      3. Usage Reduction
    8. Conclusion
  27. 22. Metric-Driven Cost Optimization
    1. Core Principles
      1. Automated Measurement
      2. Targets
      3. Achievable Goals
      4. Data Driven
    2. Metric-Driven Versus Cadence-Driven Processes
    3. Setting Targets
    4. Taking Action
    5. Bring It All Together
    6. Conclusion
  28. 23. FinOps for the Container World
    1. Containers 101
    2. The Move to Container Orchestration
    3. The Container FinOps Lifecycle
    4. Container Inform Phase
      1. Cost Allocation
      2. Container Proportions
      3. Tags, Labels, and Namespaces
    5. Container Optimize Phase
      1. Cluster Placement
      2. Container Usage Optimization
      3. Server Instance Rate Optimization
    6. Container Operate Phase
    7. Serverless Containers
    8. Conclusion
  29. 24. Partnering with Engineers to Enable FinOps
    1. Integrating Us with Them
    2. What’s on the Mind of the Engineer?
    3. Constraints and the Solving of Hard Problems
    4. Principles for Enabling Cost-Efficient Engineering
      1. #1: Maximize Value Rather Than Reduce Cost
      2. #2: Remember That We Are on the Same Team
      3. #3: Prioritize Improving Communication
      4. #4: Introduce Financial Constraints Early in the Product Development
      5. #5: Enablement, Not Control
      6. #6: Leadership Support Isn’t Helpful, It Is Essential
    5. Data in the Path of the Engineer
    6. Models for Partnering with Engineering Teams
      1. Direct Contribution
      2. Indirect Collaboration
      3. Indirect Collaboration with Targeted Contribution
    7. Conclusion
  30. 25. Connectivity to Other Frameworks
    1. Total Cost of Ownership
    2. Working with Other Methodologies and Frameworks
      1. Find Out Who’s Out There
      2. Make Friends and Share Goals
      3. Share Influence, Terminology, and Processes
      4. Share Infrastructure
      5. Share Knowledge
    3. Conclusion
  31. 26. FinOps Nirvana: Data-Driven Decision Making
    1. Unit Economics and Metrics
    2. Unit Economics Don’t Have to Be About Revenue
    3. Calculating Unit Economic Metrics
    4. Spending Is Fine, Wasting Is Not
    5. Activity-Based Costing
    6. Coming Back to the Iron Triangle
    7. What’s Missing from the Equation?
    8. When Have You Won at FinOps?
    9. Conclusion
  32. 27. You Are the Secret Ingredient
    1. Call to Action
  33. Afterword on What to Prioritize (from J.R.)
  34. Index
  35. About the Authors

Product information

  • Title: Cloud FinOps, 2nd Edition
  • Author(s): J.R. Storment, Mike Fuller
  • Release date: January 2023
  • Publisher(s): O'Reilly Media, Inc.
  • ISBN: 9781492098355