In a world of constant transformation, forecasting cloud costs remains a struggle for most businesses. Luckily, Cloud Financial Management (FinOps) enables organizations to maximize their investments with ease. Due to the use of outdated, manual processes, many organizations lack complete visibility into their current spending, leading them to underestimate costs and limiting their ability to oversee use.
Automation offers a fresh new way to gain visibility, monitor use, and forecast cloud costs more precisely. Let’s dive into why organizations struggle with forecasting cloud costs, where automation comes in, and how FinOps can help.
Why Organizations Struggle with Forecasting Cloud Costs
The main reason organizations migrate to the cloud is the same reason they struggle to manage the costs: variability. When forecasting costs, organizations need to overcome the following nine challenges:
Tagging and cost allocation
Setting a forecast frequency
Defining a forecasting model
Ensuring accurate forecasting
Estimating cloud costs
Holding appropriate parties accountable
Training and improving maturity
In order to stay within budget, organizations need to mature their forecasting practices. A cost overrun can undermine a company’s cloud migration strategy. Meanwhile, overbudgeting limits the project’s speed and efficiency. Let’s break down four steps to enable better cost forecasting in your organization.
Reducing Manual Processes
The first FinOps maturity level is usually a manual process. The organization collects invoices from vendor-supplied tools, adding them to spreadsheets.
In fact, slightly over 30% of organizations still use spreadsheets to manage their FinOps forecasting. They collect all the data in a spreadsheet, then send that to IT for verification. These processes often lead to increased cloud spend because they lack the ability to provide visibility into various cloud costs.
The takeaway? Moving away from manual processes is the starting point for most organizations looking to enhance their FinOps forecasting processes.
As the organization looks to mature its FinOps forecasting, it needs more visibility into real-time costs. The move to infrastructure-as-code changes the types of cloud services organizations use. For example, instead of relying on reserved instances (RIs), organizations are more likely to use on-demand and spot instances. However, to manage costs, organizations need better visibility into these types of services because they are often the least cost-effective way of managing cloud spend.
Exporting data from traditional tools to a spreadsheet only provides visibility into a portion of the cloud. Opportunities to leverage, even conservatively, reserved instance or reserved capacity pricing, tend to be limited. However, as an organization’s FinOps strategy matures, it increases its use of RIs, savings plans, and committed use discounts (CUDs).
Ultimately, without the right tool in place to forecast costs, the chances of going off budget are exponential.
Closing the Precision Gap
The more mature an organization’s FinOps strategy is, the more accurate the forecasting. Mature organizations will be able to enhance cost allocation and tagging to ensure more accurate budget forecasting.
An organization might attempt to reduce costs by moving workloads from one cloud service provider to another. Without monitoring the costs, the company lacks visibility into how the move impacts the original cloud provider’s costs. This can lead to hidden cost increases rather than the desired decreases.
For example, if an organization forecasts that the migration will cost $100,000, a 20% overspend is $20,000. With a more mature FinOps strategy in place, the organization can stay within 10-15% of the budget. With more precise forecasting, organizations save money and have a better understanding of how to allocate spend appropriately.
Problematically, cloud spend continues to be a moving target. Manual processes often mean organizations need to wait until the end of the month for the invoice to arrive then investigate the reasons for the overspend. However, by that point, they have already gone over the budget. This reactive approach undermines their FinOps goals.
Enhanced Forecasting through Automation
Often, the reason for overspend lies in a lack of human intervention or oversight. Currently, many organizations lack visibility into spend because they do not automate processes. As organizations increasingly adopt CI/CD strategies, specifically container usage, they often do not have the ability to control container sprawl.
Some key activities that automation enables include:
Sending recommendations to team
Managing savings plans/CUDs/RIs
In other words, leveraging automation as a way to enhance accountability matures an organization’s cloud spending practices.
Automate FinOps with SoftwareONE
To appropriately forecast cloud costs, organizations need visibility into and control over how they use the cloud. The rise of infrastructure-as-code enables development teams but makes managing spend even more challenging.
With SoftwareONE, organizations gain the visibility they need to allocate cloud spend appropriately. This enables them to build governance directly into their cloud strategies, ultimately driving more effective cloud cost forecasting and cloud use management. When you have the ability to forecast, you have the power to drive your organization towards success.
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