book

Cloud FinOps, 2nd Edition

by J.R. Storment, Mike Fuller

January 2023

Intermediate to advanced

456 pages

12h 39m

English

O'Reilly Media, Inc.

Audiobook available

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Preface
The World Turned Upside DownWho Should Read This BookAbout This BookWhat You Need to Know Before Reading OnFinOps Is EvolvingConventions Used in This BookO’Reilly Online LearningHow to Contact UsAcknowledgments
I. Introducing FinOps
1. What Is FinOps?
Defining the Term “FinOps”The FinOps Hero’s JourneyWhere Did FinOps Come From?Data-Driven Decision MakingReal-Time Feedback (aka the “Prius Effect”)Core Principles of FinOpsWhen Should You Start FinOps?Starting with the End in Mind: Data-Driven Decision MakingConclusion
2. Why FinOps?
Use Cloud for the Right ReasonsCloud Spend Keeps AcceleratingThe Impact of Not Adopting FinOpsInformed Ignoring: Why Start Now?Conclusion
3. Cultural Shift and the FinOps Team
Deming on Business TransformationWho Does FinOps?Why a Centralized Team?The FinOps Team Doesn’t Do FinOpsThe Role of Each Team in FinOpsExecutives and LeadershipEngineering and DevelopersFinanceProcurement and SourcingProduct or Business TeamsFinOps PractitionersA New Way of Working TogetherWhere Does Your FinOps Team Report?Understanding MotivationsEngineersFinance PeopleExecutives and LeadershipProcurement and Sourcing PeopleFinOps Throughout Your OrganizationHiring for FinOpsFinOps Culture in ActionDifficulty Motivating People Is Not NewContributors to ActionDetractors from ActionTipping the Scales in Your FavorConclusion
4. The Language of FinOps
Defining a Common LexiconDefining the Basic TermsDefining Finance Terms for Cloud ProfessionalsAbstraction Assists UnderstandingCloud Language Versus Business LanguageCreating a Universal Translator Between Your DevOps and Finance TeamsThe Need to Educate All the DisciplinesBenchmarking and GamificationConclusion
5. Anatomy of the Cloud Bill
Types of Cloud BillCloud Billing ComplexityBasic Format of Billing DataTime, Why Do You Punish Me?Sum of the Tiny PartsA Brief History of Cloud Billing DataThe Importance of Hourly DataA Month Is Not a MonthA Dollar Is Not a DollarTwo Levers to Affect Your BillWho Should Avoid Costs and Who Should Reduce Rates?Centralizing Rate ReductionWhy You Should Decentralize Usage ReductionConclusion
6. Adopting FinOps
A ConfessionDifferent Executive Pitches for Different LevelsStarting PitchAdvancing PitchSample Headcount Plan for Advancing a FinOps TeamPitching the Executive SponsorPlaying to Your AudienceKey Personas That the Driver Must InfluenceCEO PersonaCTO/CIO PersonaCFO PersonaEngineering Lead PersonaRoadmap for Getting Adoption of FinOpsStage 1: Planning for FinOps in an OrganizationStage 2: Socializing FinOps for Adoption in an OrganizationStage 3: Preparing the Organization for FinOpsType of Alignment to the OrganizationFull Time, Part Time, Borrowed Time: A Note on ResourcesA Complex System Designed from Scratch Never WorksConclusion
7. The FinOps Foundation Framework
An Operating Model for Your PracticeThe Framework ModelPrinciplesPersonasMaturityPhasesDomains and CapabilitiesStructure of a DomainStructure of CapabilitiesAdapting the Framework to Fit Your NeedsConnection to Other Frameworks/ModelsConclusion
8. The UI of FinOps
Build Versus Buy Versus NativeWhen to Use Native ToolingWhen to BuildWhy to BuyOperationalized ReportingData QualityPerfect Is the Enemy of GoodReport TieringRolling Out ChangesThe Universal ReportAccessibilityColorVisual HierarchyUsability and ConsistencyLanguageConsistency of Color and Visual RepresentationRecognition Versus RecallPsychological ConceptsAnchoring BiasConfirmation BiasThe Von Restorff EffectHick’s LawPerspectives on ReportsPersonasMaturityMulticloudPutting Data in the Path of Each PersonaData in the Path of FinanceData in the Path of LeadershipData in the Path of EngineersConnecting FinOps to the Rest of the BusinessSeek First to UnderstandConclusion

II. Inform Phase
9. The FinOps Lifecycle
The Six Principles of FinOps#1: Teams Need to Collaborate#2: Decisions Are Driven by the Business Value of Cloud#3: Everyone Takes Ownership of Their Cloud Usage#4: FinOps Reports Should Be Accessible and Timely#5: A Centralized Team Drives FinOps#6: Take Advantage of the Variable Cost Model of the CloudThe FinOps LifecycleInformOptimizeOperateConsiderationsWhere Do You Start?You Don’t Have to Find All the AnswersConclusion
10. Inform Phase: Where Are You Right Now?
Data Is Meaningless Without ContextSeek First to UnderstandOrganizational Work During This PhaseTransparency and the Feedback LoopBenchmarking Team PerformanceWhat Great Looks LikeConclusion
11. Allocation: No Dollar Left Behind
Why Allocation MattersAmortization: It’s Accrual WorldCreating Goodwill and Auditability with AccountingThe “Spend Panic” Tipping PointSpreading Out Shared CostsChargeback Versus ShowbackA Combination of Models Fit for PurposeAccounts, Tagging, Account Organization HierarchiesThe Showback Model in ActionChargeback and Showback ConsiderationsConclusion
12. Tags, Labels, and Accounts, Oh My!
Tag- and Hierarchy-Based ApproachesGetting Started with Your StrategyCommunicate Your PlanKeep It SimpleFormulate Your QuestionsComparing the Allocation Options of the Big ThreeComparing Accounts and Folders Versus Tags and LabelsOrganizing Accounts and Projects into GroupsTags and Labels: The Most Flexible Allocation OptionUsing Tags for BillingGetting Started Early with TaggingDeciding When to Set Your Tagging StandardPicking the Right Number of TagsWorking Within Tag/Label RestrictionsMaintaining Tag HygieneReporting on Tag PerformanceGetting Teams to Implement TagsConclusion
13. Accurate Forecasting
The State of Cloud ForecastingForecasting MethodologiesForecasting ModelsCloud Forecasting ChallengesManual Versus Automated ForecastsInaccuraciesGranularityForecast FrequencyCommunicationFuture ProjectsCost EstimationImpacts of Cost Optimization on ForecastsForecast and BudgetingThe Importance of Managing Teams to BudgetsConclusion
III. Optimize Phase
14. Optimize Phase: Adjusting to Hit Goals
Why Do You Set Goals?The First Goal Is Good Cost AllocationIs Savings the Goal?The Iron Triangle: Good, Fast, CheapHitting Goals with OKRsOKR Focus Area #1: CredibilityOKR Focus Area #2: MaintainableOKR Focus Area #3: ControlGoals as Target LinesBudget VariancesUsing Less Versus Paying LessConclusion
15. Using Less: Usage Optimization
The Cold Reality of Cloud ConsumptionWhere Does Waste Come From?Usage Reduction by Removing/MovingUsage Reduction by Resizing (Rightsizing)Common Rightsizing MistakesRelying on Recommendations That Use Only Averages or PeaksFailing to Rightsize Beyond ComputeNot Addressing Your Resource “Shape”Not Simulating Performance Before RightsizingHesitating Due to Reserved Instance UncertaintyGoing Beyond Compute: Tips to Control Cloud CostsBlock StorageObject StorageNetworkingUsage Reduction by RedesigningScalingScheduled OperationsEffects on Reserved InstancesBenefit Versus EffortServerless ComputingNot All Waste Is WasteMaturing Usage OptimizationAdvanced Workflow: Automated Opt-Out RightsizingTracking SavingsConclusion
16. Paying Less: Rate Optimization
Compute PricingOn-Demand/Pay-As-You-GoSpot Resource UsageCommitment-Based DiscountsStorage PricingVolume/Tiered DiscountsUsage-BasedTime-BasedNegotiated RatesCustom PricingSeller Private OffersBYOL ConsiderationsConclusion
17. Understanding Commitment-Based Discounts
Introduction to Commitment-Based DiscountsCommitment-Based Discount BasicsCompute Instance Size FlexibilityConversions and CancellationsOverview of Usage Commitments Offered by the Big ThreeAmazon Web ServicesWhat Does an RI Provide?AWS Commitment ModelsAWS Reserved InstanceMember Account AffinityStandard Versus Convertible RIsInstance Size FlexibilityAWS Savings PlansSavings BundlesMicrosoft AzureAzure ReservationsInstance Size FlexibilityAzure Savings PlansGoogle CloudGoogle Committed Use DiscountsPaying for Cores, Not Hours, in GoogleGoogle Billing and Sharing CUDsGoogle Billing Account and OwnershipApplying Google CUDs in a ProjectGoogle Flexible Committed Use DiscountsConclusion
18. Building a Commitment-Based Discount Strategy
Common MistakesSteps to Building a Commitment-Based Discount StrategyStep 1: Learn the Fundamentals of Each ProgramStep 2: Understand Your Level of Commitment to Your Cloud Service ProviderStep 3: Build a Repeatable Commitment-Based Discount ProcessStep 4: Purchase Regularly and OftenStep 5: Measure and IterateStep 6: Allocate Up-Front Commitment Costs AppropriatelyHow to Manage the Commitment StrategyPurchasing Commitments Just-in-TimeWhen to Rightsize Versus CommitThe Zone ApproachWho Pays for Commitments?Strategy TipsConclusion
19. Sustainability: FinOps Partnering with GreenOps
What Are Cloud Carbon Emissions?Scope 1, 2, and 3 EmissionsAre Cloud Providers Green?AccessCompletenessGranularityPartnering with Engineers on SustainabilityFinOps and GreenOps Better Together?GreenOps RemediationsAvoid FinOps Working Against GreenOpsConclusion
IV. Operate Phase
20. Operate: Aligning Teams to Business Goals
Achieving GoalsStaffing and Augmenting Your FinOps TeamProcessesOnboardingResponsibilityVisibilityActionHow Do Responsibilities Help Culture?Carrot Versus Stick ApproachHandling InactionPutting Operate into ActionConclusion
21. Automating Cost Management
What Is the Outcome You Want to Achieve?Automated Versus Manual TasksAutomation ToolsCostsOther ConsiderationsTooling Deployment OptionsAutomation Working TogetherIntegrationAutomation ConflictSafety and SecurityHow to StartWhat to AutomateTag GovernanceScheduled Resource Start/StopUsage ReductionConclusion
22. Metric-Driven Cost Optimization
Core PrinciplesAutomated MeasurementTargetsAchievable GoalsData DrivenMetric-Driven Versus Cadence-Driven ProcessesSetting TargetsTaking ActionBring It All TogetherConclusion
23. FinOps for the Container World
Containers 101The Move to Container OrchestrationThe Container FinOps LifecycleContainer Inform PhaseCost AllocationContainer ProportionsTags, Labels, and NamespacesContainer Optimize PhaseCluster PlacementContainer Usage OptimizationServer Instance Rate OptimizationContainer Operate PhaseServerless ContainersConclusion
24. Partnering with Engineers to Enable FinOps
Integrating Us with ThemWhat’s on the Mind of the Engineer?Constraints and the Solving of Hard ProblemsPrinciples for Enabling Cost-Efficient Engineering#1: Maximize Value Rather Than Reduce Cost#2: Remember That We Are on the Same Team#3: Prioritize Improving Communication#4: Introduce Financial Constraints Early in the Product Development#5: Enablement, Not Control#6: Leadership Support Isn’t Helpful, It Is EssentialData in the Path of the EngineerModels for Partnering with Engineering TeamsDirect ContributionIndirect CollaborationIndirect Collaboration with Targeted ContributionConclusion
25. Connectivity to Other Frameworks
Total Cost of OwnershipWorking with Other Methodologies and FrameworksFind Out Who’s Out ThereMake Friends and Share GoalsShare Influence, Terminology, and ProcessesShare InfrastructureShare KnowledgeConclusion
26. FinOps Nirvana: Data-Driven Decision Making
Unit Economics and MetricsUnit Economics Don’t Have to Be About RevenueCalculating Unit Economic MetricsSpending Is Fine, Wasting Is NotActivity-Based CostingComing Back to the Iron TriangleWhat’s Missing from the Equation?When Have You Won at FinOps?Conclusion
27. You Are the Secret Ingredient
Call to Action
Afterword on What to Prioritize (from J.R.)
Index
About the Authors

Content preview from Cloud FinOps, 2nd Edition

Part II. Inform Phase

Now that you understand the fundamentals of FinOps, it is time for the fun stuff. In this part we cover the inform phase of the FinOps lifecycle, walking you through the finer details of allocating costs, forecasting, surfacing changes in your bill, and monitoring the performance of your optimizations. This is the phase of the lifecycle that drives accountability to your teams and readies you to set goals for future improvements.

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Publisher Resources

ISBN: 9781492098348Errata Page

Cloud Computing

Data Engineering

Data Science

AI & ML

Programming Languages

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IT/Ops

Security

Design

Business

Soft Skills

Cloud FinOps, 2nd Edition

by J.R. Storment, Mike Fuller

Part II. Inform Phase

Become an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
and much more.