You made a decision and a plan. You selected a migration partner. And you exited your traditional datacenter successfully by migrating thousands of virtual machines to the public cloud. You breathed a huge sigh of relief because it wasn’t easy, but you and your team pulled through.
While you and your teams were preparing to return to focusing on business value-driven tasks and features, the newly minted cloud estate was ticking away like a taxi meter 24 hours a day, seven days a week. The first invoice came, and it seemed a little higher than your forecast. The second monthly invoice was even higher than the first! Your business units (BUs) are now all-in on the cloud, just like you asked, and deploying resources and new environments at will like kids in a candy store. The invoices keep coming, and eventually, Finance takes notice. “What happened here? I thought moving to the cloud would reduce costs?” If this sounds familiar, you’re not alone.
As with many new technologies and strategies, moving to the public cloud comes with risks and rewards. The cloud value proposition is multi-faceted and, according to AWS, includes:
- Total Cost of Ownership (TCO) Reduction
- Staff Productivity
- Operational Resilience
- Business Agility
For many enterprises, the last three pillars of productivity, resilience, and agility have gotten overshadowed by the promise of a lower TCO. It’s not hard to understand why. Measuring cloud usage costs is easy. The cloud service provider (CSP) does this for you every month. The idea that migrating to the cloud is a cost-driven exercise excludes three-fourths of the potential business value – especially when migrating with a lift-and-shift approach.
The Lift-and-Shift Approach
When you consider workloads like black boxes, you start your journey without complete visibility into the public cloud’s opportunities. Maybe you had an expiring datacenter contract and had to evacuate under time pressure. That’s understandable. But were you educated and prepared for the tradeoffs of that approach? Or were you shocked by the first invoice and the speed at which the invoices are growing? Did you prepare the CFO in advance and share the next steps? So, what did you miss?
When you took a black-box lift-and-shift (BBLAS) approach, the focus was on moving virtual machines in groups based on dependency mapping. Your teams or your cloud partner, usually with the help of automation, defined the groups and then worked with you to plan the movement of those groups – typically referred to as “wave planning.” What you ended up with is a mirror image of your datacenter in the public cloud.
You have now migrated to someone else’s datacenter.
The old datacenter was predictable where fixed hardware investments dictated capacity, and efforts towards efficiency only occurred when available resources started to dwindle from new and existing services and applications being deployed or scaled. This new datacenter charges by the millisecond, has unlimited capacity, and the investment in additional capacity bypasses procurement and is in the hands of the engineers. Controlling costs in this new datacenter is a whole new world for most enterprises. Enter the FinOps movement.
“FinOps is an evolving cloud financial management discipline and cultural practice that enables organizations to get maximum business value by helping engineering, finance, technology and business teams to collaborate on data-driven spending decisions.” – finops.org
Related: How to Choose the Best Cloud Service Provider for Your Application Modernization Strategy
What is FinOps?
FinOps is to finance and engineering, as DevOps is to development and operations. The FinOps philosophy and approach is how you regain cost control in a BBLAS environment. Before diving into how FinOps can help, let’s look at the Cloud Cost Optimization Cycle (CCOC). The CCOC is a precursor to the FinOps framework and another black-box approach to cost efficiency in the cloud.
A black-box approach is when virtual machines are viewed as a fixed infrastructure without regard to the applications and services running on them. Seasoned professionals have lived through this traditional IT view for years, and it is what separates operations and development concerns. DevOps philosophy is making inroads, of course, but many enterprises have only begun to introduce this philosophy at scale.
The Cloud Cost Optimization Cycle goes like this. Every month your CSP makes cost and usage data available. An in-house resource or a consultant analyzes the massive amount of data and prepares recommendations for potential savings. The consultant presents these recommendations to the operations team, which then reconfigures the deployed infrastructure to achieve cloud savings.
This cycle can produce significant savings at scale and is the traditional starting point for gaining visibility and control over runaway cloud costs. The process follows the FinOps recommended progression of crawl, walk run toward a mature practice. This approach has both benefits and limitations:
|Infrastructure-focused cost savings||Cost savings are limited to infrastructure and cloud configuration changes|
|Brings financial accountability and cloud spend awareness to the enterprise||Application architecture remains unchanged|
|Sets a trajectory towards FinOps best practices (crawl, walk, run)||Can create friction between Operations and AppDev teams|
|Accomplished primarily by the Operations team||App refactoring focused on patching instead of business value or modernization|
The Black-Box Dilemma
In an ideal state, operations teams can iteratively reconfigure public cloud infrastructure based on cost and usage data until the fleet of virtual machines and associated storage are fully optimized. In this ideal state, interactions with the application teams are minimal and driven by the operation team’s needs. The approach ignores the side effects that right-sizing infrastructure can have on somewhat brittle monolithic legacy applications. What usually happens in a BBLAS environment is that the lift-and-shift migration and the subsequent CCOC reveal unforeseen shortcomings in the application architecture, and runtime defects surface.
A lack of necessary cloud skills and experience on the operations side can exacerbate the issues. For example, if the operations team chooses the incorrect cloud instance type for the workload, applications can become bound by resource constraints. When cloud skill and experience are missing from the application development side, this can cause long delays where defects are difficult for the team to triage and patch. So now, instead of cost optimization efforts gloriously precipitating savings, they are producing a mixture of saving money and addressing issues.
This combination creates an environment where engineering and operations teams begin to collide. The applications were stable in the old datacenter due to factors like:
- Extremely low network latency between services
- Applications and databases tuned for the hardware they were running on
- Debugging and quality processes tuned over the years for efficiency
Now application teams have a new stream of issues entering their backlogs driven by fundamental changes in infrastructure introduced by the noble pursuit of tuning for cost savings. Business value, architectural improvements, and elimination of technical debt are slowed to the point that Application Development leaders start to push back on the CCOC. Operations teams don’t understand why the application is falling apart because the metrics and the cloud cost data they collect support the reduction or reconfiguration of cloud resources. Additional factors are now in play from an application development perspective with a black-box cloud cost optimization strategy:
- Users are constantly communicating new feature requests to the business
- Enterprise and Application Architects are pushing teams for modernization
- Software Team leads are insisting on dedicating capacity to technical debt reduction
Enterprises are struggling to retain developers and are more resource-constrained than ever, causing a general slowdown in time to market for features and architectural improvements when flaws in legacy applications need patching.
Going Beyond the Lift-and-Shift
You need a different strategy to overcome these challenges. You must look inside the black boxes to move forward. The CCOC, at its best, will produce a finely tuned version of a legacy application running in the public cloud. You can address the cost pillar of the cloud value framework from an operations perspective, but additional opportunities abound in the form of Application Modernization.
Enterprises in situations like the one described here need to do two things to move forward on their cloud journeys.
- Mature cloud cost optimization towards FinOps
- Invest in Application Modernization
These two strategies are complementary and, combined, what 2nd Watch has dubbed “FinOps Driven Modernization.”
The amount of cost and usage data available to enterprises operating in the cloud reveals an opportunity to use that data to drive application modernization strategy at scale across all business units. The biggest challenges in approaching application modernization at scale are:
- Resource constraints
- Cloud skills and experience
- Analysis paralysis – where do we start
- Calculating Return on Investment
Modernization efforts will be slow and costly without the resource capacity having the necessary cloud architecture and operations skills. They will not produce further buy-in through the socialization of success stories. Getting started seems impossible when an enterprise consists of multiple business units and thousands of virtual machines across hundreds of accounts and development teams. Modernization costs rise dramatically when cloud cost optimization requires changes to the software running on the virtual machines. It can add a significantly higher risk than changing instance families and reconfiguring storage tiers.
How Can FinOps Help Drive Modernization?
A potentially significant percentage of the savings realized from this approach will be diverted to triaging and patching application issues.
- Do the additional development efforts overshadow the infrastructure savings?
- Is the time to market for new features slowed to the point that the enterprise’s competitive advantage suffers?
Most enterprises don’t have the processes in place to answer these questions. FinOps Driven Modernization is the answer. With the data from the CSP, the FinOps team can work with the operations and development teams to determine if an optimization recommendation is feasible and valuable to the business.
How does this work at scale among all business units? When you combine cost and usage data with information like:
- Process information from inside each virtual machine
- SLA metrics
- Service ticket and bug metrics
- Nature of the cloud service
- IaaS, PaaS, FaaS
- More on this in the next installment of this series
- Revenue – unit economics
You begin to see a more holistic view of the cloud estate and can derive insights that include cost and much deeper business intelligence.
Sample FinOps Output from 2nd Watch
Consider being able to visualize where to focus cost optimization and modernization efforts across multiple business units, thousands of virtual machines, and hundreds of applications in a single pane of glass dashboard. The least innovative, noisiest, and most costly areas in your enterprise will begin glowing like hot coals. You can then focus the expenditure of resources, time, and money on high-impact optimization and modernization investments. This reallocation of spending is the power of FinOps Driven Modernization. Finance, operations, engineering, product, and executives are all working together to ensure that the enterprise realizes the actual value of the cloud.
Related: How FinOps Can Optimize Cloud Costs and Drive Innovation
A Business Case for FinOps
Let’s dig into a hypothetical business unit struggling with cloud costs. The FinOps team has identified that their per-unit costs exceed the recommended range for their cloud cost-to-revenue ratio. The power of FinOps-Driven Modernization has revealed that the BBLAS approach has resulted in a fleet of virtual machines running commonly modernized workloads like web servers, database servers, file, or image servers, etc. In addition to this IaaS-heavy approach, the BU heavily leverages licensed software and operating systems. This revelation triggers a series of interviews with the BU leadership and application owners to investigate the potential and level of effort to introduce application modernization approaches. The teams within the BU know there is room for improvement but lack the skills and available resources to act.
They learn through the interview process that they can move licensed databases from virtual machines to a managed cloud platform. Additionally, they discover they could migrate most of the databases to open-source alternatives. Further, they can decommission the cluster of file servers and migrate the data to cloud-native storage with minimal application refactoring. By leveraging the CSP and operational data, a business case for investing in helping the BU make improvements writes itself.
Without leveraging the FinOps philosophy and extending it with a focus on application modernization, this business unit would have operated for years in a BBLAS state, costing the enterprise orders of magnitude more in cloud spend than the investment in modernization. Extending this approach across the enterprise takes cloud cost management to the next level, resulting in purpose-driven, high-impact progress towards realizing the value of the public cloud.
FinOps is the practice that every enterprise should be adopting to help drive financial awareness throughout the organization. FinOps enables an inclusive and virtuous cycle of continuously improving when leveraged as a driver for application modernization.
Schedule a whiteboard session with our FinOps and Application Modernization experts to discover how 2nd Watch’s approach can help you and your team meet your transformation objectives.
Jesse Samm, Application Modernization Practice Director at 2nd Watch