Cloud FinOps

Book Description

Despite many uncertainties in cloud computing, one truth is evident: costs will always tend to go up unless you’re actively engaged in the process. Whether you’re new to managing cloud spend or a seasoned pro, this book will clarify the often misunderstood workings of cloud billing fundamentals and provide expert strategies on creating a culture of cloud cost management in your organization.

Drawing on real-world examples of successes and failures of large-scale cloud spenders, this book outlines a road map for building a culture of FinOps in your organization. Beginning with the fundamental concepts required to understand cloud billing concepts, you’ll learn how to enable an efficient and effective FinOps machine.

  • Learn how the cloud works when it comes to financial management
  • Set up a FinOps team and build a framework for making spend efficiency a priority
  • Examine the anatomy of a cloud bill and learn how to manage it
  • Get operational recipes for maximizing cloud efficiency
  • Understand how to motivate engineering teams to take cost-saving actions
  • Explore the FinOps lifecycle: Inform, Optimize, and Operate
  • Learn the DNA of a highly functional cloud FinOps culture

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Table of Contents

  1. Preface
    1. Who Should Read This Book
    2. About This Book
    3. What You Need to Know Before Reading On
    4. FinOps Is Evolving
    5. Conventions Used in This Book
    6. O’Reilly Online Learning
    7. How to Contact Us
    8. Acknowledgments
  2. I. Introducing FinOps
  3. 1. What Is FinOps?
    1. The FinOps Hero’s Journey
    2. Where Did FinOps Come From?
    3. The Definition
    4. Real-Time Reporting (The “Prius Effect”)
    5. Core Principles of FinOps
    6. When Should You Start FinOps?
    7. Starting with the End in Mind: Unit Economics
    8. Conclusion
  4. 2. Why FinOps?
    1. Use Cloud for the Right Reasons
    2. The Problem
    3. The Impact of Not Adopting FinOps
    4. Conclusion
  5. 3. Cultural Shift and the FinOps Team
    1. Who Does FinOps?
      1. Why a Centralized Team?
      2. The Role of Each Team in FinOps
    2. A New Way of Working Together
    3. Where Does Your FinOps Team Sit?
    4. Understanding Motivations
      1. Engineers
      2. Finance People
      3. Executives
      4. Procurement and Sourcing People
    5. FinOps Throughout Your Organization
    6. Hiring for FinOps
    7. FinOps Culture in Action
    8. Conclusion
  6. 4. The Language of FinOps and Cloud
    1. Defining a Common Lexicon
    2. Defining the Basic Terms
      1. Defining Finance Terms for Cloud Professionals
    3. Abstraction Assists Understanding
    4. Cloud Language Versus Business Language
    5. Creating a Babel Fish Between Your DevOps and Finance Teams
    6. The Need to Educate Both Sides of the House
    7. Benchmarking and Gamification
    8. Conclusion
  7. 5. Anatomy of the Cloud Bill
    1. Cloud Billing Complexity
    2. The Basic Format of the Billing Data
    3. Time, Why Do You Punish Me?
      1. Sum of the Tiny Parts
      2. A Brief History of Cloud Billing Data
    4. The Importance of Hourly Data
    5. A Month Is Not a Month
    6. A Dollar Is Not a Dollar
    7. A Simple Formula for Spending
      1. Two Levers to Affect Your Bill
      2. Who Should Avoid Costs and Who Should Reduce Rates?
      3. Why You Should Decentralize Usage Reduction
    8. Conclusion
  8. II. Inform Phase
  9. 6. The FinOps Lifecycle
    1. 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 Cloud
    2. The FinOps Lifecycle
    3. Inform
    4. Optimize
    5. Operate
    6. Considerations
    7. Where Do You Start?
    8. Why to Start at the Beginning
    9. Conclusion
  10. 7. Where Are You?
    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. Forecast and Budgeting
    7. The Importance of Managing Teams to Budgets
    8. What Great Looks Like: Crawl, Walk, Run
    9. Conclusion
  11. 8. Allocation: No Dollar Left Behind
    1. Why Allocation Matters
    2. Chargeback Versus Showback
      1. A Combination of Models Fit for Purpose
    3. The Showback Model in Action
    4. Chargeback and Showback Considerations
    5. Spreading Out Shared Costs
    6. Amortization: It’s Accrual World
    7. Creating Goodwill and Auditability with Accounting
    8. Going Beyond Cloud with the TBM Taxonomy
    9. The “Spend Panic” Tipping Point
    10. Conclusion
  12. 9. Tags, Labels, and Accounts, Oh My!
    1. Cost Allocation Using Tag- and Hierarchy-Based Approaches
      1. Getting Started with Your Strategy
      2. Comparing the Allocation Options of the Big Three
      3. Comparing Accounts and Folders Versus Tags and Labels
      4. Organizing Projects Using Folders in Google Cloud Platform
    2. 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
    3. Getting Teams to Implement Tags
    4. Conclusion
  13. III. Optimize Phase
  14. 10. Adjusting to Hit Goals
    1. Why Do You Set Goals?
    2. The First Goal Is Good Cost Allocation
    3. Is Savings the Goal?
      1. The Iron Triangle: Good, Fast, Cheap
    4. Hitting Goals with OKRs
      1. OKR Focus Area #1: Credibility
      2. OKR Focus Area #2: Sustainability
      3. OKR Focus Area #3: Control
    5. Goals as Target Lines
    6. Detecting Anomalies
    7. Reducing Spend to Meet Forecast
      1. Using Less Versus Paying Less
    8. Conclusion
  15. 11. 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)
      1. Common Rightsizing Mistakes
      2. Going Beyond EC2: Tips to Control Block Storage Costs
    5. Usage Reduction by Redesigning
      1. Scaling
      2. Scheduled Operations
    6. Effects on Reserved Instances
    7. Benefit Versus Effort
    8. Serverless Computing
    9. Not All Waste Is Waste
    10. Crawl, Walk, Run
    11. Advanced Workflow: Automated Opt-Out Rightsizing
    12. Tracking Savings
    13. Conclusion
  16. 12. Paying Less: Rate Optimization
    1. Compute Pricing
      1. On-Demand
      2. Spot/Preemptible/Low-Priority Resource Usage
      3. Reservations
    2. Storage Pricing
    3. Volume Discounts
      1. Usage-Based
      2. Time-Based
    4. Negotiated Rates
      1. Custom Pricing Agreements
      2. Seller Private Offers
    5. BYOL Considerations
    6. Conclusion
  17. 13. Paying Less with Reserved Instances and Committed Use Discounts
    1. Introduction to Reservations
    2. Reserved/Committed Usage
      1. Instance Size Flexibility
      2. Conversions and Cancellations
    3. Overview of Usage Commitments Offered by the Big Three
    4. Amazon Web Services
      1. What Does a Reserved Instance Provide?
      2. Parameters of an AWS Reserved Instance
      3. Linked Account Affinity
      4. Standard Versus Convertible Reserved Instances
      5. Instance Size Flexibility
      6. Savings Plans
    5. Google Cloud Platform
      1. Not Paying for VM Instance Hours
      2. Billing and Sharing CUDs
      3. Relationships Between Organizations and Billing Accounts
      4. Applying CUDs Within a Project
    6. Microsoft Azure
      1. Instance Size Flexibility
    7. Conclusion
  18. 14. RI and CUD Strategies
    1. Common Mistakes
    2. Steps to Building an RI Strategy
      1. Learn the Fundamentals
      2. Build a Repeatable RI Process
      3. Purchase Regularly and Often
      4. Measure and Iterate
      5. Allocate RI Costs Appropriately
    3. The Centralized Reservation Model
    4. Timing Your Reservations
    5. When to Rightsize Versus Reserve
    6. Building Your Strategy
      1. Level of Commitment to Your Cloud
      2. The Cost of Capital
      3. The Red Zone/Green Zone Approach
      4. Purchase Approvals
      5. Who Pays for Reservations?
      6. Strategy Tips
    7. Conclusion
  19. IV. Operate Phase
  20. 15. Aligning Teams to Business Goals
    1. Achieving Goals
    2. Processes
      1. Onboarding
      2. Responsibility
      3. Visibility
      4. Action
    3. How Do Responsibilities Help Culture?
      1. Carrot Versus Stick Approach
      2. Working with Bad Citizens
    4. Putting Operate into Action
    5. Conclusion
  21. 16. 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. Conclusion
  22. 17. Automating Cost Management
    1. What’s the Goal of Automation?
      1. What Is the Outcome You Want to Achieve?
      2. Automated Versus Manual Tasks
    2. Automation Tools
      1. Costs
      2. Other Considerations
      3. Tooling Deployment Options
    3. Automation Working Together
      1. Integration
      2. Automation Conflict
    4. Safety and Security
    5. How to Start
    6. What to Automate
      1. Tag Governance
      2. Scheduled Resource Start/Stop
      3. Usage Reduction
    7. Conclusion
  23. 18. 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
  24. 19. Managing to Unit Economics: FinOps Nirvana
    1. Metrics as the Foundation of Unit Economics
    2. Coming Back to the Iron Triangle
    3. Activity-Based Costing
    4. What’s Missing from the Equation?
    5. Conclusion
    6. What’s Next?
  25. Afterword on What to Prioritize (from J.R.)
  26. Index

Product Information

  • Title: Cloud FinOps
  • Author(s): J.R. Storment, Mike Fuller
  • Release date: December 2019
  • Publisher(s): O'Reilly Media, Inc.
  • ISBN: 9781492054627