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Episode 550: J.R. Storment and Mike Fuller on Cloud FinOps (Financial Operations)
J.R. Storment and Mike Fuller discuss cloud financial operations (FinOps) with host Akshay Manchale. They consider the importance of a financial operations strategy for cloud-based infrastructure. J.R. and Mike discuss the differences between operating your own data center and running in the cloud, as well as the problems that doing so creates in understanding and forecasting cloud spend. Mike details the Cloud FinOps lifecycle by first attributing organizational cloud spend through showbacks and chargebacks to individual teams and products. JR describes the two levers available for optimization once an organization understands where they're spending their cloud budget. They discuss complexities that arise from virtualized infrastructure and techniques to attribute cloud usage to the correct owners, and close with some recommendations for engineering leaders who are getting started on cloud FinOps strategy.
J.R. Storment and Mike Fuller discuss cloud financial operations (FinOps) with host Akshay Manchale. They consider the importance of a financial operations strategy for cloud-based infrastructure. J.R. and Mike discuss the differences between operating your own data center and running in the cloud, as well as the problems that doing so creates in understanding and forecasting cloud spend. Mike details the Cloud FinOps lifecycle by first attributing organizational cloud spend through showbacks and chargebacks to individual teams and products. JR describes the two levers available for optimization once an organization understands where they’re spending their cloud budget. They discuss complexities that arise from virtualized infrastructure and techniques to attribute cloud usage to the correct owners, and close with some recommendations for engineering leaders who are getting started on cloud FinOps strategy.
Show Notes
Transcript
Transcript brought to you by IEEE Software magazine.
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Akshay Manchale 00:00:18 Welcome to Software Engineering Radio. I’m your host. Akshay Manchale. Today’s topic is Cloud FinOps, and I have two guests with me, J.R. Stormant and Mike Fuller. J.R. is the executive director of the FinOps Foundation. He was formerly the co-founder of Cloudability, which was later acquired by Apptio. He continued to work as VP of product and engineering for a year post acquisition and decided to pursue his passion of advancing the FinOps field as a full-time employee of the non-profit FinOps Foundation. He has worked closely with the largest cloud consumers in the world, helping them design strategies to optimize and analyze their cloud spend through technology, culture, and process. Mike is a principal engineer and has been working on cloud and FinOps at Atlassian for over 10 years. Mike’s team of data engineers, analysts, and FinOps practitioners help Atlassian get the most value out of the money it spends on cloud. He holds nine AWS certifications and has presented at multiple AWS Reinvent and AWS Summit events on topics that include security and Cloud FinOps. Mike has served as a member of the FinOps Foundation Technical Advisory Council and is currently a member of its governing board. J.R. and Mike are both co-authors of the O’Reilly book, Cloud FinOps. J.R., Mike, welcome to the show.
Mike Fuller 00:01:38 Thanks for having us.
J.R. Storment 00:01:38 Thank you. Great to be here.
Akshay Manchale 00:01:39 J.R., maybe we’ll start with you to set the context for our episode. Can you describe what is Cloud FinOps, why it’s important?
J.R. Storment 00:01:48 Yeah, definitely. So FinOps is the practice of managing cloud spends, and specifically we’re talking about public cloud spend — big cloud providers, commonly AWS, Azure, Google Cloud — and because of their very, very variable nature, the highly variable nature of Cloud spend, which is that it comes up, it comes down based on usage, right? You pay for what you use, and the fact that distributed decisions are now happening about Cloud spend, where engineering teams can procure the resources they need instantly, they can scale up new resources, they can choose different services. Those things coming together really created a need for FinOps as a discipline, which is the practice of really understanding, allocating, and maximizing cloud spends for companies using it. And when we started talking about this a few years ago, FinOps was really limited to just a few set of smaller tech companies who were practicing it using Cloud at scale, but now FinOps is practiced kind of by every major organization in the world as Cloud spend as a thing has become really ubiquitous and grown in the last few years.
Akshay Manchale 00:02:52 Great. In terms of differences with respect to companies that own their infrastructure, what’s different in terms of running your business on the cloud? How does your mental or business models for finance change because of the cloud versus traditional company that has its own infrastructure, maybe Mike?
Mike Fuller 00:03:13 Yeah, so I guess within the traditional infrastructure space, you’re kind of doing these large upfront purchases that you’re depreciating over sort of a three or a five-year period, and the variation of the spend in the data center, you’re not paying a different amount for your equipment each time that you run.
Akshay Manchale 00:03:30 So what’s different?
Mike Fuller 00:03:32 So yeah, with your traditional data center, you’re buying equipment upfront with a sort of a large upfront expenditure, and then you’re not paying different amounts for your infrastructure month by month. You’re sort of depreciating that equipment over a sort of a three or a five-year period, usually as sort of a fixed depreciation schedule. Within cloud, though, you’re buying servers at a per-second or even per-millisecond basis, which means that the amount that you’re paying for your infrastructure varies all the time. And so, the amount of compute that you’re using this second versus the next second really does mean that the variation of spend is what drives a lot of the complexity. And so, trying to apply a traditional financial model to cloud spend means that you’re sort of waiting these long periods between looking at the dollars, and a lot of variation happens in between those cycles. And so, what FinOps is trying to do is really move you into that more real-time attention to how spend is happening within your organization and getting you away from those sort of slow cadence, consistent spend financial models that have traditionally been used in the data center.
J.R. Storment 00:04:35 And what Mike hit on there in terms of real-time, I should have introduced a bit in the first part, which is: the really key thing and differentiator with cloud and FinOps as compared to other previous disciplines of managing technology is that maybe not technically real-time, but very, very hopefully close to it, a near real-time approach of getting consistent data in terms of cloud spend back to those who are responsible for using the cloud spend so that they can use that near real-time feedback to change their behavior. And that’s really a key difference is that in cloud, when you start using something you start paying for it. When you stop using something, you stop paying for it. And that, as a fundamental model, is very different than traditional approaches.
Akshay Manchale 00:05:17 I think the elasticity is really nice with the cloud where you can get things on-demand. And as an engineer, what that enables me is to experiment more than I could previously with fixed infrastructure. So, sometimes when I hear FinOps, maybe the discipline around financial spending seems like maybe there is more red tape that you have to navigate as an engineer to try something out. So, can you talk about how it can enable or how it sustains innovation while not completely running loose with respect to spending and having some sort of a framework for that? Is that possible? Can you still innovate while also having a disciplined financial operating plan for the cloud?
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