FinOps: the Heart of Every Successful Cloud Cost Strategy
By Tidjani Belmansour
Director of the Azure Centre of Excellence and MVP (Most Valuable Professionnal) by Microsoft
“How can we regain control of our cloud costs?”
Across the many organizations we’ve advised, business and IT leaders are asking this question more than ever.
As a cloud architect, Microsoft Most Valuable Professional (MVP) and Director of the Azure Centre of Excellence at Cofomo, I’ve always held organizational efficiency and cost control as being top management priorities. These priorities drive all our teams. (The MVP designation is awarded to leaders who have actively shared their passion, Microsoft knowledge, and experience with diverse technology communities related to Microsoft.)
The short answer to managing and controlling cloud costs is a solid FinOps strategy.
Over many years of partnership with customers, we’ve seen firsthand how effective governance and thoughtful tactics can transform cloud spending from a burden into a well-managed asset that delivers valuable ROI.
In this article, we will explain why FinOps is at the heart of any successful cloud cost strategy. We’ll also share proven tactics that can help you optimize cloud costs, streamline operations, and ensure your cloud infrastructure delivers value while staying within budget.
You’ll notice that some of these tactics are not purely technical. That’s because establishing a FinOps team and mindset isn’t just an IT decision—it’s a strategic organizational move that forms the foundation of effective cost management.
Tactic #1: Recruit a FinOps team from your A-list employees
Even if your organization already has a Cloud Centre of Excellence (CCoE), you also need a FinOps team to drive your cost optimization strategies and governance practices.
A FinOps team is not an army of one. There are three key roles to fill:
FinOps Engineer: Ideally, select a cloud architect with strong expertise in FinOps. Their key mission is to identify optimization opportunities and work with the product teams to implement them.
FinOps Analyst: This financial analyst should have a recognized background in FinOps. To identify optimization opportunities, they’ll focus on tracking expenses and invoices, analyzing consumption trends, and designing and maintaining cost-forecast models.
FinOps Leader: This vice-president, manager or director would come ideally from the business side. They’re dedicated to promoting the FinOps team and acting as a point of contact with the rest of the organization. Your FinOps Leader should be part of your CCoE.
The three stages of FinOps adoption
When organizations look to Cofomo for support in FinOps adoption, they need to be guided through three phases:
- Stabilize: We apply immediate measures to stabilize costs.
- Structure: We guide them through the set-up of a FinOps practice.
- Control: We help them implement control and optimization strategies, tools, and techniques.
So, you’ve set up your FinOps team. But wait—you have a multi-cloud environment. Is the best strategy a single- or multi-team approach?
How many FinOps teams?
While it’s possible to start with a single FinOps team if your organization is small or if your cloud usage is limited, you’re better off having one FinOps team per cloud platform.
This approach ensures that each team can focus on the unique cost-optimization strategies and governance practices specific to the respective cloud provider. Additionally, it’s beneficial to have a single FinOps Leader who will oversee and promote the efforts of these teams.
Even if your organization has not yet deployed any workload to the cloud, you can build your FinOps team to start your journey in computing cost control. That’s how foundational FinOps practices are!
Tactic #2: Identify your cloud resources
Because a cloud solution or application is made up of many component resources, it’s easy to lose track of them. As a result, you may not be able to match a given resource to its solution or application. This matching failure leads to a failure in evaluating the business value that a given resource provides.
That’s where tagging comes to the rescue. Tags help you identify and match cloud resources according to diverse criteria, including resource cost.
While your tag-naming strategy is an organizational decision, you can use common tags, such as “Cost Centre,” “WorkloadName,” “Owner” and “Environment.” And while it’s possible to tag resources manually, it’s best to automate the process to avoid having tags with no assigned value. As our teams like to say, “A tagged resource is a governed resource.”
Tactic #3: Control your costs with guardrails
One of the major factors of cost drift is the inability to control what cloud services and service tiers your people use. As an organization, you must set guardrails to only allow services and service tiers that help your organization achieve its business goals.
So, ensure you restrict access only to the regions, service types, and tiers that your organization needs.
These restrictions can be applied at different scopes: organizational, department, project, environment (e.g., development vs. production), and so on.
Keep in mind that as your organization matures in its cloud usage, you’ll likely need to revisit and update these guardrails
Tactic #4: Optimize your code
Optimizing the code that runs in the cloud can be even more cost effective than improving the code that runs on-premise. That’s because in the cloud, you pay for what you use. So, more optimized code consumes less resources which, in turn, allows the selection of smaller SKUs and more efficient resources to execute it, without compromising the user experience or the expected SLA.
Even the slightest code optimization can generate major cost savings if this code is executed hundreds, thousands, or even millions of times per month.
However, a balance must be struck between the development cost of such optimization and the savings in cloud costs.
Tactic #5: Re-architect the solution
“The cloud is a moving target!” as we like to say at Cofomo: new services are created, existing services evolve, and on rare occasions, services disappear.
So, it’s important to re-evaluate your architectures and solutions periodically to validate whether they remain appropriate or require re-architecting.
Re-architecting does not necessarily mean moving from monolith to microservices. It can involve redesigning the solution to take advantage of new cloud services. Here again, a balance must be found between the development costs of re-architecture and the reduction in cloud costs.
Tactic #6: Beware of licensing costs
Licensing costs can account for up to 40% of your cloud costs. That’s definitely not a rounding error!
Thus, when estimating the cost of a virtual machine, for example, estimate your compute costs but don’t forget to add in licensing.
Fortunately, there are programs to help you reduce these costs, such as Azure Hybrid Benefits.
Tactic #7: Take advantage of dev/test subscriptions
Some cloud providers offer discounts through special accounts and subscriptions. For example, Microsoft offers a discount called the Azure Dev/Test subscription.
This special subscription allows cost reductions of up to 55% compared to standard pay-as-you-go pricing. Keep in mind that the subscription provides no SLA, which is usually fine for development and testing scenarios.
Tactic #8: Benefit from reserved instances and savings plans
Generally, cloud services follow pay-as-you-go pricing. So, the more you consume, the higher the costs will be. The challenge is to estimate this consumption with a high level of confidence in order to better forecast cloud costs.
To achieve a certain level of predictability in cloud costs, two approaches can help: “reserved instances” and “savings plans.”
While these two approaches are complementary, it’s important to note that they must be well understood to be well utilized. In a nutshell:
- A reserved instance entails selecting a given service tier in a given region for a given duration (usually one or three years).
- A savings plan is an hourly monetary commitment that you can apply to any eligible service.
Keep in mind that while reserved instances may offer higher cost savings than savings plans, they are less flexible.
Savings plans are more suitable for scenarios where workload demands are varying and unpredictable, whereas reserved instances are best suited for scenarios where demand is more stable and predictable.
Tactic #9: Use chargebacks and showbacks
To promote accountability and cost-conscious behaviour in cloud spending, you can allocate costs in two ways in a FinOps approach:
- A chargeback bills a specific department for its actual usage of cloud resources.
- A showback provides visibility into costs without using financial transactions.
Companies usually start with chargebacks and, as they mature in their cloud adoption, evolve toward showbacks.
That’s because some departments or teams may be allocated a bigger budget and so they’re less affected by the chargeback approach, which can reduce their motivation to optimize cloud costs.
On the other hand, showbacks (when correctly implemented) create a healthy competition between teams and departments, which can be gamified to ultimately result in cloud cost optimization.
Tactic #10: Leverage Infrastructure-as-Code (IaC)
A major contributor to the overconsumption of—often unnecessary—cloud resources is the so-called “ephemeral environment.” These short-lived, non-production environments don’t get deleted due to the fear of not being able to recreate them identically to their current state.
The root cause of this situation is almost always the fact that the organization does not leverage IaC. If these environments were scripted, we would be confident of being able to recreate them exactly as they exist currently, when the need arises. Thus, we could delete these environments as soon as they are no longer required, which would result in substantial savings in cloud costs.
When containing cloud costs is a priority
Cloud cost optimization begins with FinOps. Establishing a FinOps team and mindset isn’t just an IT decision—it’s a strategic organizational move that impacts the entire way you operate.
To successfully adopt FinOps, you’ll need more than just the right tools. It requires careful preparation, skill development, and support from an experienced partner. In fact, selecting the right partner to guide your cloud optimization journey should be the first step before the dive into core processes.
About the author
Tidjani Belmansour
Microsoft MVP and Director of the Azure Center of Excellence at Cofomo. A renowned cloud architect, he is passionate about designing elegant, high-performance solutions, driven by the belief that simplicity is the ultimate sophistication.
