How FinOps and AI Curb Escalating Cloud Costs

This syndicated post originally appeared at Zeus Kerravala, Author at eWEEK.

Discover how FinOps and AI can help curb escalating cloud costs. Learn how to optimize cloud spend and maximize the value of cloud services.

A new report from Tangoe sheds light on FinOps implementations, artificial intelligence, and how to improve cloud costs and financial predictability.

Cloud has taken every industry by storm. But the report shows that, despite the apparent benefits, “a variety of challenges still get in their way, mostly around cost control, security expertise, and a skills gap.” Furthermore, the ongoing “cloud sprawl” has not helped these issues. In fact, they’ve gotten worse. There’s a lack of visibility, accountability, and governance of the costs of SaaS and IaaS.

The report, based on a survey by Foundry of 200 enterprise IT decision-makers in a number of industries, looked at the benefits of FinOps, which is a framework that maximizes the business value of cloud computing.

Overcoming Cloud Challenges with FinOps

FinOps can be a path to overcoming cloud cost challenges, with respondents reporting these are the main drivers for using FinOps:

  • 70% say they’re interested in increasing cloud resource performance.
  • 60% say they want to make budget cuts.
  • 58% say they want to manage rising costs and macroeconomic pressures.

When it comes to the benefits, the survey showed increased productivity (44%), cost savings (43%), and reduced security risk (43%) at the top of the list.

Implementations vary widely, but there are three factors, according to Foundry, that increase the likelihood of success: implementation approach, the use of artificial intelligence, and wide-reaching optimization programs spanning both IaaS and SaaS.

In-House vs. Outsourced

When it comes to in-house vs. outsourced implementations, outsourced is the clear winner, with in-house FinOps solutions fetching less than 10% in savings and outsourced solutions bringing in 20% savings.

Tangoe’s chief product officer, Chris Ortbals, quoted in the report, says that although DIY is the way most companies go, they’re not best suited to optimize those implementations. “Strategic partners are essential because they look at usage and expenses from a different perspective,” he said. This diverse vantage point provides them with “the context of understanding how hundreds of companies optimize millions of dollars in IT spending.”

AI in FinOps

With AI top-of-mind for everyone these days, this report doesn’t disappoint. The survey shows that 71% of respondents use or plan to use AI in their programs.

That makes sense when you see that companies that use AI in FinOps are 53% more likely to save more than 20%. On the other side of the ledger, companies that don’t use AI will get savings of only 6% to 10%.

Ortbals adds that every FinOps practitioner should include AI in their bag of tricks. “Without AI it’s simply impossible to evaluate massive amounts of data against all possible configuration options, playing out what-if scenarios to quickly determine which action will yield the highest savings,” he said.

“AI can do this at enterprise scale. Plus, it can help IT engineers implement cost-saving recommendations once approved. This results in faster time-to-savings and programs that can achieve higher returns.”

The report says 63% of respondents think analytics is the top use case for AI in FinOps, with 50% saying it eases the FinOps management burden and 48% saying they have seen productivity gains from AI automation.

SaaS and IaaS

When it comes to SaaS and IaaS, the report shows SaaS users can save 20% or more while IaaS users save less than 10%.

Ortbals said that savings add up with one high-volume application or a few smaller applications that can break a budget.

“But CIOs and CFOs should drive broader cloud ROI,” he said. “FinOps is designed to maximize the benefits of SaaS and IaaS. Start with applications, expand into cloud infrastructure, and consider how you can apply FinOps principles to other areas of IT spending like mobile and telecom.”

Choosing a FinOps Solution

So, what should you consider when selecting a solution? The report says that these are the top five criteria:

  • 70%: Industry expertise. Customers want a partner who is versed in the complexities of cloud optimization but also understands the specific insights of each vertical, as mapping them to FinOps is mandatory for success.
  • 69%: AI and automation capabilities. There is no bigger transformative technology today than AI, which will have a massive impact on FinOps. Basic use cases include automation of basic tasks, but long-term, generative AI will enable users to access information via natural language.
  • 68%: Fully managed services. Not all businesses have the desire to operate FinOps themselves, particularly with AI accelerating the pace of change. Managed services are an excellent option for companies that want to take advantage of FinOps but do not want to go through the deployment and management process.
  • 63%: Flexibility of solution. Businesses want choices, and vendors that offer optimization for only one or two cloud service providers or a limited number of applications are quickly outgrown as customers look to cut costs across their rapidly changing multicloud estates.
  • 62%: Certifications, licenses, awards. These validate that the vendor solutions work as advertised and have the leading features to give customers a competitive advantage.

Bottom Line: The Value of FinOps

This report provides some fascinating insights for cloud users. FinOps is a great use case for AI, and managing cloud resource utilization could be one of the more intriguing implementations of the technology, with significant savings for enterprises possible in the near term.

Author: Zeus Kerravala

Zeus Kerravala is the founder and principal analyst with ZK Research. Kerravala provides a mix of tactical advice to help his clients in the current business climate and long term strategic advice.