This is the second in a two-part series around controlling cloud cost challenges in FinOps. Part 1 can be found here.
FinOps provides organizations with a strategic framework for optimizing cloud costs while fueling growth initiatives. By adopting FinOps principles and practices, private equity firms can align cloud spending with growth and margin objectives, set tangible spend goals and maximize ROI and drive operational efficiency. Here are some key highlights where FinOps helps private equity firms navigate the intersection of growth and cloud costs:
Observability: FinOps gives companies crucial visibility into their operational finances by integrating cloud cost management tools and results from cost reviews to generate precise data on cloud expenditures. This information is made ready for use through tagging, account mapping and reporting. By tracking costs accurately at an application or team level, FinOps ensures accountability and allows real-time financial data monitoring for swift error detection and correction. In more complex scenarios, customized software solutions offer rapid insights into environments guiding efficient resource allocation for better value creation. The FinOps lifecycle framework applies DevOps principles to manage cloud costs systematically, offering continuous visibility into operational finances.
Cost-aware decision making: FinOps empowers private equity firms to incorporate cloud cost considerations into their decision-making processes from the outset. By conducting cost-benefit analyses, evaluating different cloud pricing models, and forecasting costs for growth initiatives, firms can make informed decisions that balance growth aspirations with cost optimization. FinOps methodology begins with alignment across the organization through the FinOps COE to foster collaboration and establish sources of truth for cost metrics, reporting, and operational IT activities to enhance visibility and support cost-effective decision making.
Dynamic resource allocation: FinOps enables portfolio companies to allocate cloud resources dynamically based on changing business requirements and growth trajectories. By leveraging automation, scaling policies and predictive analytics, firms can optimize resource utilization, minimize idle capacity and align cloud spending with growth patterns. A key component of the methodology is monitoring and refinement, which will help organizations develop processes to continuously monitor cloud cost metrics to ensure alignment with business needs using dashboards, reports and forecasts.
Optimization strategies: FinOps equips the portfolio companies with optimization strategies to right-size instances, leverage reserved capacity, and optimize workloads for cost efficiency leading to value creation and EBITDA growth. By continuously monitoring performance metrics, analyzing cost trends, and implementing optimization measures, firms can maximize ROI from their cloud investments while supporting growth initiatives. Protiviti can assist in bringing optimization strategies and opportunities to life through development and implementation of a continuous optimization plan for FinOps at both macro (FinOps COE team) and micro (App team) levels.
A case study of FinOps success
A highly acquisitive financial services firm determined that a common finding through each acquisition was a lack of comprehensive and succinct FinOps across the enterprise. As a result, the firm decided to invest time, energy and money to derive an updated and more comprehensive due diligence phase aligned to the core components of FinOps; financial management principles, cloud technology, and leading practices to optimize cloud spending. Protiviti partnered with the firm to bring this end state to life by leveraging FinOps methodologies, principles and processes to define explicit FinOps roles and responsibilities, enhance due diligence practices, and effectively restructure business-as-usual activities to meet the firm’s needs. Ultimately, this effort led to the CFO surpassing their initial cloud cost reduction goal of $5M in savings to nearly $12M.
Effective cloud cost management is essential for driving operational efficiency, optimizing investments and delivering superior returns to investors. Enhancing visibility, removing complexities and unpredictability, and defining optimization strategies for the cloud environments will prepare firms to not only reduce cost but minimize technology waste. FinOps is a journey and cultural shift that requires patience, time and dedication, but as the industry continues to evolve and moves additional workloads to the cloud, FinOps will play a central role in shaping private equity operations and investment strategies.
To learn more about our cloud consulting services, contact us.
