Lionel Sujay Vailshery
Research expert covering the consumer electronics industry
Get in touch with us nowCloud costs vs. traditional IT
Before moving to the cloud, servers, networking hardware, and other necessary IT equipment were typically hosted in the company’s on-site data center and managed by a dedicated in-house department. In the traditional scenario, organizations would purchase their IT systems and infrastructure, and replace or upgrade hardware and software components after a certain amount of time. In the cloud model, IT is no longer owned by the company, with resources made available via the cloud providers. The cloud computing payment model creates the notion of IT being a service, as it is based on resource usage. In other words, the rise of the cloud led to a shift from capital expenditure (CapEx) to operational expenditure (OpEx) in IT.Cloud costs are not necessarily easy to estimate. They vary based on the kind of workload or service used, the geographical region in which it is deployed, and what specific pricing model the customer chose in the first place. To alleviate this complexity, the major cloud providers Amazon Web Services (AWS), Microsoft Azure, and Google Cloud all offer pricing calculators to help customers estimate the cost of their architecture solution.
Financial management: FinOps
FinOps—short for financial operations— is a relatively recent practice that emphasizes the importance of updating traditional methods of managing infrastructure spend to avoid heavy bills from cloud usage. Advocating for and establishing this practice in organizations is a timely endeavor as 61 percent of cloud users affirm that cost optimization is a priority. Specifically, FinOps is the process of managing cloud expenditure by performing analyses of costs based on business logic and working to optimize cloud environments on a technical level.The future of cloud cost management
The overarching challenge of cloud cost optimization is to bridge the gap between business needs and budget. In the future, FinOps practitioners seek to close this gap by bringing about cultural change in organizations that prioritize multidisciplinary collaboration between engineers and finance teams to minimize costs while maximizing results. To realize the potential of these teams, employees with diverse skill sets are required that reflect the complexity of the task at hand. This includes the production of predictable costs and forecasts, as well as adherence to the notion that people involved with cloud deployment take ownership of usage, next to taking advantage of the variable cost models of the cloud.
