15 Sept 2023
Thanks to FinOps - Implement cloud cost management successfully
According to a Gartner report on the "Future of Cloud Computing", cloud solutions will become one of the most important drivers for innovative business models by 2027, for example in the areas of Artificial Intelligence, Internet of Things, Next-Generation User Interfaces, Quantum Computing or Real-Time Situational Awareness. In short: no successful company can survive without a cloud strategy.
The number of cloud or SaaS providers with their diverse services has long since taken on unmanageable dimensions. Software is available to everyone at any time. One of the consequences: The costs for cloud applications have been rising dynamically for many companies for years, because the providers have their services paid for accordingly through licence agreements. Due to a lack of transparency, many managers are usually not aware of these runtime-related costs, including the associated follow-up costs in the form of maintenance and service contracts or included price increases. Another cause often lies in non-transparent and uncoordinated ordering processes within the companies. It is not uncommon for companies to pay continuously for licensed services that are hardly used or in many cases not used at all.
FinOps offers companies the opportunity to address this topic methodically and comprehensively. In this way, those responsible get a detailed overview, continuously keep an eye on the development of their cloud costs, identify internal and external savings potential and can actively take countermeasures, for example through alternative and significantly more affordable forms of licensing.
What is FinOps?
FinOps, short for Financial Operations or Cloud Financial Management, is a methodical approach that helps companies actively manage their cloud costs in order to counteract or effectively prevent rampant and inefficient development. Particularly in the area of widely used standard software, such as Windows or MS Office from Microsoft, dynamic cost increases can quickly lead to a financial burden, the reversal of which is usually associated with numerous hurdles and can usually only be completed gradually. This is especially true when the dependence on a single provider, as in the case of vendor lock-in, is particularly high.
The FinOps method is based on the standards of the FinOps Foundation. The independent non-profit foundation, which is part of the Linux Foundation, serves as a platform to gather experiences and best practices from a community of over 1,500 companies, from which standards and synergies for effective financial and cost management around cloud providers and their offerings and services are then derived and defined.
FinOps - the 3 most important factors for a successful implementation
In order to successfully implement the FinOps principle to effectively control cloud cost development in an organisation, the following three factors are crucial:
1. Culture change and collaboration.
To begin with, it is particularly important to foster a culture of cost awareness and collaboration between the finance, IT and business teams. Our experience shows that most companies still view cloud costs as a purely technical matter. FinOps broadens this perspective and shifts it towards an enterprise-wide approach. All stakeholders need to learn that cloud resources cost money and that optimal utilisation is a shared goal. Closer collaboration between finance and IT teams enables better budgeting, clear cost centre allocation and therefore a comprehensive analysis of existing cloud spend.
2. Transparency and cost analysis
A solid FinOps implementation requires clear transparency about current cloud costs. This includes a detailed breakdown of expenses by resource, department or project. With the help of financial management tools for cloud environments, companies can collect and evaluate this information. By identifying the sources of costs and disclosing their development, spending can be optimised in a targeted manner and potential savings, such as the integration of used on-premise licences, can be identified and exploited. Regular analyses and reports on the development of costs in the individual business areas help to evaluate the progress and success of the FinOps strategy.
3. Automation and optimisation
To consistently increase efficiency and reduce unnecessary costs, automation is another important aspect. By scaling up automatically, shutting down on a scheduled basis or using demand-based alternatives, such as licensing used software licences for proven standard software, companies can ensure that they only use the resources they actually need. Financial management tools support the monitoring of the cloud infrastructure and help to create automated rules to optimise cloud costs permanently and sustainably.
FinOps - effective cloud cost management and the consequences
Systematic and efficient cloud cost management not only helps to identify overcapacities and adapt them to actual business needs. It inevitably raises the question of possible more cost-effective and yet needs-based alternatives to existing cloud strategies and solutions. These include, for example, hybrid cloud models that combine cloud services and on-premise solutions within the IT infrastructure, but also the business realisation that the current cloud licensing is often oversized, especially for widespread standard software, and does not meet the needs of the workplace. Here, especially in stationary work environments with uniform or similar IT requirements, the legally unobjectionable and audit-proof licensing of used software offers a cost-effective alternative. Especially since additional, indirect costs are saved, for example through a reduction in internal support requests or less training effort.
The following use case of the European market leader in the field of document presentation shows why it can be worthwhile to do without cloud solutions, at least partially and sometimes even completely.
Back from the cloud - why Swedex relies on used software from PREO
The fact that a total cloud solution can result in a cost spiral that is difficult to calculate was also experienced by Swedex, a medium-sized company in Essen with around 300 employees. The consequence: the medium-sized company was no longer willing to accept both the dynamic cost increase and the dependence on one provider and, after three years, opted out of the Microsoft cloud model. Instead, the Essen-based company relied on used on-premises software from PREO and was thus able to save licence costs of around 100,000 euros in the following three years.
Used software from PREO pays off several times over
We are one of the pioneers in the European trade with used software licences and market leader in Germany and offer companies, organisations and public administrations a large selection of used volume licences at any time, with which they can sustainably optimise their licence costs and benefit several times over:
- High savings in ongoing licence costs of up to 70 percent compared to the respective new version.
- 100 percent legally and audit-proof licence acquisition with maximum transparency in all processing steps including complete documentation in the PREO licence portal "Easy Compliance".
- Many years of expertise in the integration of used software licences in classic network structures or hybrid licence models.
- Detailed market knowledge and extensive experience through the audit-proof transfer of over one million used software licences.
- Existing capacities for software licence management in large IT infrastructure projects with thousands of workstations and transnational locations.
- Convincing reference projects for numerous medium-sized and large companies from a wide range of industries.