Wondering how to measure success for Cloud Financial Operations(Cloud Finops) CoE ?
Key Metrics for FinOps CoE
Navigating the vast realm of cloud cost tracking can sometimes feel like exploring uncharted territories. However, fear not! Let's embark on this journey with a dash of humor and a sprinkle of mathematical formulas to shed some light on what companies can track in terms of cloud cost for their FinOps Center of Excellence (CoE) and overall company bottom line.
Remember, finding the right metrics to track cloud costs is like discovering a hidden treasure chest. It may require some exploration, experimentation, and a few laughs along the way. So, chart your course, embrace the formulas, and let the FinOps CoE be your trusty compass on this cost-saving adventure! And who knows, maybe you'll stumble upon the legendary "Pirate's Code of Cloud Cost Optimization" while you're at it.
There are a number of metrics that customers should track related to Cloud FinOps COE. These metrics can help customers to understand their cloud costs, identify areas for cost savings, and track their progress over time. Some of the most important metrics to track include:
1. Cost Optimization Ratio (COR)
The cost optimization ratio (COR) can be calculated using the following formula:
COR = (Optimized Cloud Costs / Actual Cloud Costs) * 100
In this formula:
·       Optimized Cloud Costs refers to the total cloud costs after implementing cost optimization practices or initiatives.
·       Actual Cloud Costs refers to the total cloud costs before any cost optimization efforts were applied.
To calculate the COR, divide the optimized cloud costs by the actual cloud costs and multiply the result by 100 to express it as a percentage. A higher COR indicates a higher level of cost optimization and better value achieved from cloud investments.
2. Cloud Cost per Application
The formula to calculate the cloud cost per application can be expressed as:
Average Cloud Cost per Application = Total Cloud Costs / Number of Applications
In this formula:
·       Total Cloud Costs refers to the overall cost incurred for running applications in the cloud within a specific period (e.g., monthly or annually).
·       Number of Applications refers to the total count of applications being hosted or deployed in the cloud environment.
By dividing the total cloud costs by the number of applications, you can determine the average cost per application. This metric provides insights into the cost efficiency of each application and helps identify more expensive applications that may require optimization efforts. Organizations can then focus on optimizing the resource usage of costly applications to reduce their cloud costs and improve overall cost effectiveness.
3. Cloud Cost per User
To calculate the cloud cost per user, you can use the following formula:
Cloud Cost per User = Total Cloud Costs / Number of Users
In this formula:
·       Total Cloud Costs refers to the overall cost incurred for providing cloud services within a specific period (e.g., monthly or annually).
·       Number of Users refers to the total count of users who are utilizing the cloud services.
By dividing the total cloud costs by the number of users, you can determine the average cost per user. This metric helps organizations understand the cost implications associated with each user and identify users who may be consuming a disproportionate amount of cloud resources. By analyzing the cloud cost per user, organizations can implement strategies to optimize resource usage, educate users on cost-conscious practices, and identify opportunities for rightsizing or adjusting resource allocations to ensure cost efficiency.
4. Budget Variance
Budget variance can be calculated using the following formula:
Budget Variance = Actual Cloud Costs - Budgeted Cloud Costs
In this formula:
·       Actual Cloud Costs refers to the total cost incurred for cloud services during a specific period.
·       Budgeted Cloud Costs refers to the planned or allocated budget for cloud services during the same period.
By subtracting the budgeted cloud costs from the actual cloud costs, you can determine the budget variance. A positive value indicates that the actual costs exceeded the budget, while a negative value indicates that the actual costs were lower than the budget.
Monitoring budget variance is essential for organizations to track their spending against the planned budget. A positive budget variance may indicate overspending, unexpected costs, or inefficient resource utilization. It signals the need to review and optimize cloud usage, identify cost-saving opportunities, and align spending with the allocated budget.
Conversely, a negative budget variance may suggest underutilization of resources or conservative budgeting. It could prompt organizations to reallocate funds, adjust resource allocations, or invest in additional cloud services to maximize the allocated budget effectively.
By regularly monitoring budget variance and analyzing the reasons behind it, organizations can improve their FinOps practices, optimize costs, and ensure better alignment between actual spending and budgeted amounts.
References
https://www2.deloitte.com/us/en/pages/consulting/articles/finops-a-new-path-to-cloud-cost-optimization-Deloitte-on-cloud-podcast-cloud-computing-devops-devsecops-cloud-optimization-cloud-financial-management.html
https://action.deloitte.com/insight/3061/how-finops-can-realize-mission-and-financial-value-from-cloud