May 16, 2024 - Blog

Improving Cost Efficiency Using FinOps and Oracle Cloud Infrastructure

Johnny Cree, Oracle SAM Licencing Consultant, Version 1

What is FinOps?

I am sure that a lot of people in the IT world have heard the term FinOps – but what does it really mean? ‘Fin’ short for finance and ‘ops’ short for operations; its combination is an IT governance framework that combines financial management, contract and software license management, sustainability and operational excellence with a focus on cloud technology to optimise spending. FinOps aims to bring together group finance, purchasing, budget holders, IT teams and operational and infrastructure teams to manage cloud costs that meet business objectives. 

Finance and operations affect each other.  Without a budget you cannot complete your operational objectives and conversely, a lack of operational efficiency impacts financial performance. 

In the context of Oracle cloud computing, FinOps efficiency can be measured by the following categories: 

  1. Visibility: Understanding your cloud spend. Using Oracle’s Cloud Infrastructure dashboards, built in customisable reports and analytics, you can track usage, monitor costs, and allocate spend to specific teams, projects, and business owners. 
  2. Control: Employing Oracle’s policy tools to control and optimise spending. This includes setting budgets, defining policies, and establishing mechanisms for cost optimisations.  
  3. Optimisation: Continuously maximise value and minimising costs by rightsizing instances, leveraging discounts, implementing agreements, reharnessing licenses, and using contractual conditions more appropriately. 
  4. Collaboration: Fostering collaborative working between IT, Finance, Technology, and business teams to get the best value out of cloud computing. Sharing responsibility on cloud spending. 
  5. Automation: Implementing automation tools and scheduling tasks to optimise cloud spending. Oracle provides APIs, SDKs, and automation tools to generate budget alerts, policy enforcement and approval controls. 

There are some specific tools that Oracle provide to support your FinOps ambitions – here are some examples: 

 Cloud Cost Planning:  

  • OCI Cost Estimator – With a cost estimator, organisations can easily evaluate compute costs.  

 Billing and Reporting 

  • Cost Analysis – Cost reports by service, tag, compartment, monthly costs and more. 
  • Cost and Usage Reports – Usage reports available to show cost and usage, the usage reports indicate quantity of what is consumed, while cost reports indicate the cost of consumption. With these you can optimise your OCI spending and make more informed spending decisions. 
  • Forecasting – This can be used to estimate future usage, based on past usage data – forecast where there may be spikes or lean periods to predict cloud spending. These reports are obtainable in differing chart types, all available to be downloaded for further reporting. 
  • Invoicing and Payments – All Oracle Universal credit invoices are available to review, to monitor payments, pay invoices, view usage etc.

Controls: 

  • Tagging – Tagging is a great way to monitor OCI usage to track costs to a specific area. This way you can see at a compartment or compute instance level which area is consuming what costs and why. By using tagging, you can easily identify which business area is responsible for a particular resource and by using a controlled metadata format can, at a granular detail, see who is consuming what and where. 
  • Budget Alerts – By using this inbuilt tool on OCI, you can create email alerts to specific users, roles and/or groups. These alerts can be set based on percentage of consumption, budget, exact amounts, and forecasted spending. Quite a useful tool for FinOps – this creates a good way of tracking budget by automated monitoring.  
  • Quotas – In Oracle Cloud Infrastructure, resource consumption can be controlled in compartments which allows administrators to monitor budgets and spending in a contained environment.  

How to pay for OCI? 

There are two ways: either Pay As You Go (PAYG) or Annual Flex (Universal Credits) which is a fixed amount paid up front. 

In terms of licensing, you can choose between License Included or Bring Your Own License. These are quite different in approach: license included, means just that. You do not need a license and it is included in your billing, either PAYG or Annual Flex. However, the costs derived by License Included either by PAYG or Annual Flex are usually 3-4 times the amount of BYOL.  

If you read my BYOL blog, you will see that Bring Your Own License means that you can use your previously bought on-premises licenses in the Oracle Cloud. There are specific licensing requirements and implications so sometimes it may be better to implement License Included or BYOL – consider the requirements on a case-by-case basis.  

But in terms of FinOps, whether you have utilised BYOL or License Included, you should still employ a FinOps strategy and financial management policy employing a collaborative approach to optimise cost spending.  

In Summary 

I believe that FinOps should be a process/framework that every business should employ and likely does in some way or another, possibly under another acronym.  

Since IT and Finance are normally separate entities, we generally see them cost independent of each other – buying applications and services based on functionality.  

Given that software vendors are now offering more applications on cloud platforms, it is more and more important for IT and Finance teams to collaborate to drive down IT costs. For example, in a customer environment, the IT department could be using compute instances on AWS and the Finance teams are considering using reporting applications on Oracle EPM Cloud – these are competing cloud platforms which makes little financial sense.  A better discount could be achieved if the departments buy together, as well as embarking on an easier implementation, integration and adoption process. It makes sense to collaborate and share resource budgets in a collective responsibility rather than in silos, as you may be able to save money by sharing cloud resource consumption, instead of using disparate cloud platforms.  

By using the FinOps methodology on Oracle OCI, users should be able to work within their budget and be able to accurately forecast resource spend. With Oracle Cloud Infrastructure there is a wealth of information to support controlling budgets, resource allocation and identifying consumption, as well as automation that reduces monitoring tasks.  

Remember FinOps is not vendor specific – it should be employed as an agnostic methodology where spend and costs are identified and reported on – and accordingly optimisations should be put in place resulting from your FinOps processes. 

If you have any questions on how to implement a FinOps process or require advice and guidance around your existing cost optimisation methodologies, go to our website or contact us to start optimising.