From the FinOps Foundation: "Engineers and ops team members, such as Lead Software Engineer, Principal Systems Engineer, Cloud Architect, Service Delivery Manager, Engineering Manager, or Director of Platform Engineering, focus on building and supporting services for the organization. Cost is introduced as a metric in the same way other performance metrics are tracked and monitored. Teams consider the efficient design and use of resources via such activities as rightsizing (the process of resizing cloud resources to better match the workload requirements), allocating container costs, finding unused storage and compute, and identifying whether spending anomalies are expected."
My colleagues and peers are taking this to heart and are asking their teams 2 key questions to build their FinOps engineering plan:
- What metric will we use to understand cost efficiency?
- Where will we manage the cloud cost optimization process?
What metric will we use to understand cost efficiency?
I'm reminded of the story about Northwest Industries, a Chicago company that was a very early adopter of technology for strategic advantage – they built the first executive dashboards and their staff literally 'wrote the book' on making business data useful. One of their early insights was to do transaction cost analysis (TCA). This simple approach takes the amount you're spending on something and divides it by the volume of business transactions over a period. This metric is great for showing changes in productivity using time series analysis. It's also an input to 'unit economics' and profitability analysis.
A few examples from teams I've talked with recently divide their cloud spend and labor by their transaction metric:
To make this work at any kind of scale, you need API-first FinOps tooling like Ternary provides. The ability to group applicable spend and to import transaction metrics, makes time series transaction cost analysis visible to all stakeholders.
Using TCA allows engineering teams to understand the cost efficiency of their cloud architecture and maintenance costs at delivering customer transactions.
Where will we manage the cloud cost optimization process?
In much the same way that Google is teaching engineering organizations about its Site Reliability Engineering (SRE) best practices, Google is now also helping us all understand how to do FinOps Engineering. The Google Cloud Platform (GCP) console has many suggestions and recommendations to reduce costs. The challenge is that making those changes is not a 'one-click task'. It requires collaboration across finance (who generally will be paying attention to those recs), and engineering to say whether it's feasible and an effort to implement, make change requests and approvals, deploy scheduling, and close it out. This is a mini-project to make a single right-sized server change.
Ternary was designed and built by engineers and finance teams who have lived this management challenge and built collaboration and management at the core of their system to solve this problem.Originally published on May 06, 2021