Cloud computing = "Pandora"?

author

Wang Xiaowei: FinOps certified practitioner, keen to spread FinOps theory and practical knowledge, and help cloud companies reduce costs and increase efficiency.

The era of cloud computing has arrived

Has the cloud computing era really arrived?

Cloud Computing, since AWS first launched its elastic computing cloud service in 2006, it has gone through fifteen years of ups and downs. The early hype that was accused of being "old wine in a new bottle" later aroused people's concerns about data privacy on the cloud, and then to the ridicule of incidents in the public cloud. The growth of cloud computing has always been infamous, but what is the current status of the cloud computing market? how?

From the perspective of mainstream software in the Chinese market

You may have noticed that on the startup page of some national software, you will see a logo at the bottom: "XX Cloud provides computing services." Cloud computing has gradually integrated into life. For example, if you want to chat and open communication software, if you are bored, want to listen to music and watch videos, when you are hungry, you want to order takeaway, you can't find directions and want to look at a map, there may be a line below the startup page of these software: "Some cloud provides computing services", cloud computing has brought infinite convenience to life.

Judging from the scale of the global cloud computing market

Public cloud 100 billion US$ . In 2020, the global total cloud market share has exceeded US$125 billion, and cloud computing is turning into a butterfly.

Figure 1: Enterprise spending in public clouds and data centers
Source: Synergy Research Group

Why did the cloud computing market "explode"?

Cloud computing abstracts all computing, storage, network and other resources into resource pools, as shown in Figure 2 below. When you need to use these resources, you only need to point your fingers on the public cloud platform website, and the resources are within reach. It's like the home you live in is connected to water, electricity, and the Internet. You only need to turn on the switch to enjoy the convenience of modern life. Cloud computing greatly facilitates the consumption of resources in the development process of enterprises. There is no need to purchase resources in advance, form teams, and specialize operations. If resources are needed, only one account is registered on the public cloud platform, and you can directly use diversified resources. Serve.

Figure 2: Cloud computing abstracts the resources needed by enterprises into readily available hydropower

Pandora's Box has been opened

Cloud computing = "silver bullet"?

As shown in Figure 3, what a modern family needs to manage is generally the switch of a small range of resources. For example, a family generally has only a few faucets, dozens of switches and plugs, and a network entrance. Water and electricity are generally available at any time. Open, pay-as-you-go, and the network is a yearly and monthly subscription. The faucet will generally remember to turn off, but many switches will be forgotten from time to time, such as air conditioners, TVs, etc., every time the electricity bill is more "heartache". Similarly, if you use personal computers or resources on the cloud to do a small project (such as school software homework), you can control the start and stop of the project yourself. If you forget to close the project, because the project itself consumes resources, the personal computer will become stuck, and if the project runs in the cloud, it will continue to incur costs.

If you move from the modern family to the urban dimension, city management needs to manage thousands of "switches", "plugs" and "networks." Similarly, if the running project rises from a traditional personal small project to a national application such as WeChat, the resources that need to be consumed will also increase exponentially. Such a huge amount of resource management may not be able to cope with the resource management methods of modern households (small projects), and improper management will result in greater waste.

Figure 3: Resource management problems in modern cities

From the perspective of enterprise resource management, in the past, they generally had their own IT centers. Enterprises saw their own equipment, a clear and clear equipment purchase process, a depreciation calculation method, strict resource review logic, and a complete IT center management. system. Cloud computing virtualizes the IT center and becomes a purely online virtual platform, allowing resources to be used anytime and anywhere. Once this variable expenditure model is not used well, or if you forget to turn off the "switch", it will be wasted The phenomenon is remarkable. In today's public cloud, each vendor provides hundreds of products, and there are several different types under each product. The customer's management of cloud resources has created new challenges. The transformation of this process, if the existing management methods are changed?

Before changing the management methods, you can analyze the changes in the enterprise resource consumption model. The main change here is: the company’s investment in IT assets has changed from traditional capital investment (Capital Expenses) to operating expenses (Operating Expenses). The main changes are as follows:

	Traditional IT consumption model	Variable consumption model on the cloud
Equipment purchase process	When hardware equipment is required for a new project of the project team, it is necessary to prove to the Finance Department and Purchasing Department whether the project has sufficient commercial value, and only after passing it can apply for funding and order equipment	Any authorized project team member can purchase cloud resources anytime and anywhere, and the finance department and purchasing department lose their management role
Role relationship	The engineer is the applicant; the finance department/purchasing department is the reviewer and approver	Engineers can purchase cloud resources spend money with code anytime and anywhere; the finance department/purchasing department does not have clear visibility of spending, and it loses its supervisory role; and there is a lack of communication between different roles
Consumption	Predictable (purchase equipment in advance according to forecast); static (will not change until the next purchase)	Unpredictable (buy equipment anytime); dynamic (may change anytime, anywhere)
Buying cycle	Longer	immediate
Cost of failure	Big	Small but may cause waste
Project Agile	Low	high
Expenditure model	Capital Expenses, buying equipment in bulk in advance like an investment	Operating Expenses (Operating Expenses), purchase equipment on demand at any time like operations

Table 1: Changes in the company's consumption model of IT assets

Therefore, if the management method does not evolve, "going to the cloud" may become a burden instead. The "2021 Cloud Computing Market Development Report" released by Flexera pointed out that after enterprises went to the cloud, an average of 30% of the cloud expenditure of . Cloud cost optimization is the most important thing enterprises want to do in 2021.

Figure 4: What Flexera surveyed companies most want to do about the cloud in 2021

Pandora's box (pandora's box) is a classic ancient Greek myth. The gods gave Pandora a magic box containing all the evils in the world-greed, hypocrisy, slander, jealousy and so on. Although cloud computing allows enterprises to live a "modern life" where resources can be used anytime and anywhere, because other supporting systems (management methods, personnel training, and operation methods) have not followed up in time, cloud computing is like a Pandora's box. It also brings many problems to the enterprise. This article mainly discusses the biggest problem after enterprises go to the cloud: how to effectively optimize the cost of using the cloud?

Cover Pandora's Box

How to close the magic box?

The new enterprise IT consumption model requires new management methods. The solution should be able to cover the management of personnel, processes and technologies. It is a governance solution specifically for the variable consumption model on the cloud to ensure that every dollar spent by the customer on the cloud is maximized value.

If the solution can also combine the customer’s own commercialization indicators to give decision-making recommendations, (for example: the company has ten projects on the cloud, and it is found that the cloud resource consumption of 2 projects is much less than the project’s revenue, you can consider whether it should be These two projects invest more resources? I found that the input-output ratio of 3 projects has been expanding. Consider whether these three projects should be adjusted?). This can help companies how to use cloud computing to make money, rather than blindly pursuing to save money, give full play to the value of cloud computing, and close the Pandora's Box.

Therefore, based on the analysis of the enterprise's demand for cost management on the cloud, the summary is as follows:

1. Visible: Let companies understand their own usage and cost

   • Project dimension: specific to the cost of each project/service
   • Personnel dimension: specific to the cost of each organizational structure/team/person
   • Custom dimension: the cost of each custom dimension (for example: the amount of a specific cloud resource; the cost aggregation of multiple teams; the cost comparison at different time periods; the cost trend chart, etc.)

2. Use less: provide suggestions to optimize costs

   • Means: Payment type and model recommendation of resources on the cloud, identifying and clearing idle resources, defining budget alarms, etc.
   • Strategy: Simplify configuration optimization actions and strategies (for example: prompt the user to manually replace the recommended model when the model is not suitable)
   • Evaluation: optimization benefits & risks of different methods (for example: comparing the price difference between new and old models; the risk that the peak traffic may not be able to be carried when clearing idle resources)
   • Automation: Automated execution of optimization strategies and warnings

3. Continuous operation: continue to optimize costs based on business strategies

   • Forecast: predict the future cost, and predict the cost change after optimization by means
   • Measurement: How to combine the cost with the project’s KPIs to measure the project’s input-output ratio
   • Structure: How to match the cost to the organization structure of the company at different levels
   • Decision-making: How to use the insightful indicators to help the project/company make better decisions

The problem of enterprise cloud cost management has been raised. Is there an effective method that can completely solve all the above problems?

FinOps (Financial Operations) is such a best practice to help customers on the cloud effectively gain insight into cloud expenditures, provide means to optimize user costs, and continue to operate and optimize for a long time. The areas covered by FinOps:

• Understand cloud expenditures and costs (corresponding to the "visible" problem of corporate cost management, helping companies understand the cost structure)

  • Answer the question: What does the enterprise spend on the cloud?
  • Collect all necessary information about cloud usage and cost, and assign it to everyone, understand the usage of cloud resources by every project/person in the team

• Performance tracking and benchmark testing (corresponding to the "continuous operation" of the company's cost management issues, to help companies understand whether their own costs are used correctly)

  • Answer the question: Do the cloud resources being used/expended enable the company to achieve its strategic and organizational goals?
  • Set its usage and cost and map it to the budget, use historical information to make predictions, and establish and measure key performance indicators and other performance indicators.

• Real-time decision-making (corresponding to the "continuous operation" of the company's cost management issues, helping companies make decisions)

  • Answer the question: What actions should be taken to better achieve the goals of the enterprise?
  • When companies understand expenditures and understand their performance relative to expectations and standards, companies can use this information to make real-time decisions when they receive new cloud expenditure information.

• Optimization of cloud expenditures (corresponding to the "saving use" of enterprise cost management issues, helping companies choose more appropriate cloud resources)

  • To answer a question like this: how to change the fee model paid by the enterprise (annual subscription/monthly subscription/pay-as-you-go/competitive instance), and how to buy things for use in the cloud (what model should be selected) to achieve a better price target?
  • Use historical data to adjust pricing models to help companies choose more appropriate cost models and model instances.

• Optimization of cloud use (corresponding to the "saving use" of enterprise cost management problems, helping enterprises to manage their own business more effectively)

  • To answer this question: How to change the way the enterprise uses cloud resources to optimize costs?
  • Manage business workloads and the number of cloud resource instances, and shut down resources when not in use.

• Unite the company organization (corresponding to the "continuous operation" of corporate cost management issues, and help adjust the corporate organizational structure to achieve a culture of cost reduction and efficiency enhancement)

  • Answer the question: What changes can be made within the enterprise's organization to use the cloud more effectively?
  • Integrate FinOps with existing organizational processes, organizational units, and technologies.

Why is FinOps?

FinOps proposes very detailed cost management methods on the cloud, including the concepts, principles, division of labor involved, cost optimization stages, and related fields in Figure 5 below.

FinOps philosophy

FinOps is committed to helping companies understand cloud costs through a set of systems, best practices, and culture to achieve better decisions.

FinOps principles

1. The team needs to cooperate (the team mainly includes: financial team, technical team, business team)
2. The value of the cloud drives decision-making (help executives gain insight into the value of consumption on the cloud and assist them in making decisions)
3. Everyone is responsible for the cloud costs they consume (share the cloud costs to everyone)
4. FinOps reports should be accessible and real-time (reports should be timely and accessible to everyone)
5. A centralized team drives the FinOps concept of cost management on the cloud (there must be a holistic team to unite different people and use the FinOps concept to optimize cloud expenditures)
6. Utilize the variable consumption model of the cloud (the consumption model of the cloud has its own special usage methods, make good use of it to make full use of it)

Figure 5: What is FinOps ?

The influence of FinOps

The FinOps Foundation conducted a questionnaire survey and received a total of 804 responses. The total annual cloud expenditures of the participating companies exceeded 30 billion U.S. dollars. More than 78% of returning visitors pointed out: FinOps Foundation is the best source of cost optimization management information on the cloud.

Figure 6: cost optimization management channel on the cloud

FinOps panorama

The FinOps Foundation is a project of the Linux Foundation, dedicated to advancing cloud financial management through best practices, training, and standards development. The FinOps Foundation was established in February 2019, and he joined the Linux Foundation in June 2020. At present, the FinOps Foundation includes 3,500+ individual members from 1,500+ companies, including 10+ service and platform providers.

Figure 7: FinOps panorama

Write at the end

The era of cloud computing has arrived, and cost management on the cloud is imminent. The FinOps Chinese community will continue to operate and disseminate FinOps-related concepts and knowledge. We look forward to your participation, so that the value of enterprises going to the cloud will reach the original intention-reducing costs and increasing efficiency.

refer to:

The Cost of Cloud, a Trillion Dollar Paradox

https://www.atlassian.com/blog/platform/what-is-finops

https://www.finops.org/introduction/what-is-finops/

https://saasoptics.com/blog/what-is-finops/

https://data.finops.org

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