Cloud FinOps: Collaborative, Real-Time Cloud Financial Management

Copyright
Table of Contents
Preface
Who Should Read This Book
About This Book
What You Need to Know Before Reading On
FinOps Is Evolving
Conventions Used in This Book
O’Reilly Online Learning
How to Contact Us
Acknowledgments
Part I. Introducing FinOps
Chapter 1. What Is FinOps?
The FinOps Hero’s Journey
Where Did FinOps Come From?
The Definition
Real-Time Reporting (The “Prius Effect”)
Core Principles of FinOps
When Should You Start FinOps?
Starting with the End in Mind: Unit Economics
Conclusion
Chapter 2. Why FinOps?
Use Cloud for the Right Reasons
The Problem
The Impact of Not Adopting FinOps
Conclusion
Chapter 3. Cultural Shift and the FinOps Team
Who Does FinOps?
Why a Centralized Team?
The Role of Each Team in FinOps
A New Way of Working Together
Where Does Your FinOps Team Sit?
Understanding Motivations
Engineers
Finance People
Executives
Procurement and Sourcing People
FinOps Throughout Your Organization
Hiring for FinOps
FinOps Culture in Action
Conclusion
Chapter 4. The Language of FinOps and Cloud
Defining a Common Lexicon
Defining the Basic Terms
Defining Finance Terms for Cloud Professionals
Abstraction Assists Understanding
Cloud Language Versus Business Language
Creating a Babel Fish Between Your DevOps and Finance Teams
The Need to Educate Both Sides of the House
Benchmarking and Gamification
Conclusion
Chapter 5. Anatomy of the Cloud Bill
Cloud Billing Complexity
The Basic Format of the Billing Data
Time, Why Do You Punish Me?
Sum of the Tiny Parts
A Brief History of Cloud Billing Data
The Importance of Hourly Data
A Month Is Not a Month
A Dollar Is Not a Dollar
A Simple Formula for Spending
Two Levers to Affect Your Bill
Who Should Avoid Costs and Who Should Reduce Rates?
Why You Should Decentralize Usage Reduction
Conclusion
Part II. Inform Phase
Chapter 6. The FinOps Lifecycle
The Six Principles of FinOps
Teams Need to Collaborate
Decisions Are Driven by the Business Value of Cloud
Everyone Takes Ownership of Their Cloud Usage
FinOps Reports Should Be Accessible and Timely
A Centralized Team Drives FinOps
Take Advantage of the Variable Cost Model of the Cloud
The FinOps Lifecycle
Inform
Optimize
Operate
Considerations
Where Do You Start?
Why to Start at the Beginning
Conclusion
Chapter 7. Where Are You?
Data Is Meaningless Without Context
Seek First to Understand
Organizational Work During This Phase
Transparency and the Feedback Loop
Benchmarking Team Performance
Forecast and Budgeting
The Importance of Managing Teams to Budgets
What Great Looks Like: Crawl, Walk, Run
Conclusion
Chapter 8. Allocation: No Dollar Left Behind
Why Allocation Matters
Chargeback Versus Showback
A Combination of Models Fit for Purpose
The Showback Model in Action
Chargeback and Showback Considerations
Spreading Out Shared Costs
Amortization: It’s Accrual World
Creating Goodwill and Auditability with Accounting
Going Beyond Cloud with the TBM Taxonomy
The “Spend Panic” Tipping Point
Conclusion
Chapter 9. Tags, Labels, and Accounts, Oh My!
Cost Allocation Using Tag- and Hierarchy-Based Approaches
Getting Started with Your Strategy
Comparing the Allocation Options of the Big Three
Comparing Accounts and Folders Versus Tags and Labels
Organizing Projects Using Folders in Google Cloud Platform
Tags and Labels: The Most Flexible Allocation Option
Using Tags for Billing
Getting Started Early with Tagging
Deciding When to Set Your Tagging Standard
Picking the Right Number of Tags
Working Within Tag/Label Restrictions
Maintaining Tag Hygiene
Reporting on Tag Performance
Getting Teams to Implement Tags
Conclusion
Part III. Optimize Phase
Chapter 10. Adjusting to Hit Goals
Why Do You Set Goals?
The First Goal Is Good Cost Allocation
Is Savings the Goal?
The Iron Triangle: Good, Fast, Cheap
Hitting Goals with OKRs
OKR Focus Area #1: Credibility
OKR Focus Area #2: Sustainability
OKR Focus Area #3: Control
Goals as Target Lines
Detecting Anomalies
Reducing Spend to Meet Forecast
Using Less Versus Paying Less
Conclusion
Chapter 11. Using Less: Usage Optimization
The Cold Reality of Cloud Consumption
Where Does Waste Come From?
Usage Reduction by Removing/Moving
Usage Reduction by Resizing (Rightsizing)
Common Rightsizing Mistakes
Going Beyond EC2: Tips to Control Block Storage Costs
Usage Reduction by Redesigning
Scaling
Scheduled Operations
Effects on Reserved Instances
Benefit Versus Effort
Serverless Computing
Not All Waste Is Waste
Crawl, Walk, Run
Advanced Workflow: Automated Opt-Out Rightsizing
Tracking Savings
Conclusion
Chapter 12. Paying Less: Rate Optimization
Compute Pricing
On-Demand
Spot/Preemptible/Low-Priority Resource Usage
Reservations
Storage Pricing
Volume Discounts
Usage-Based
Time-Based
Negotiated Rates
Custom Pricing Agreements
Seller Private Offers
BYOL Considerations
Conclusion
Chapter 13. Paying Less with Reserved Instances and Committed Use Discounts
Introduction to Reservations
Reserved/Committed Usage
Instance Size Flexibility
Conversions and Cancellations
Overview of Usage Commitments Offered by the Big Three
Amazon Web Services
What Does a Reserved Instance Provide?
Parameters of an AWS Reserved Instance
Linked Account Affinity
Standard Versus Convertible Reserved Instances
Instance Size Flexibility
Savings Plans
Google Cloud Platform
Not Paying for VM Instance Hours
Billing and Sharing CUDs
Relationships Between Organizations and Billing Accounts
Applying CUDs Within a Project
Microsoft Azure
Instance Size Flexibility
Conclusion
Chapter 14. RI and CUD Strategies
Common Mistakes
Steps to Building an RI Strategy
Learn the Fundamentals
Build a Repeatable RI Process
Purchase Regularly and Often
Measure and Iterate
Allocate RI Costs Appropriately
The Centralized Reservation Model
Timing Your Reservations
When to Rightsize Versus Reserve
Building Your Strategy
Level of Commitment to Your Cloud
The Cost of Capital
The Red Zone/Green Zone Approach
Purchase Approvals
Who Pays for Reservations?
Strategy Tips
Conclusion
Part IV. Operate Phase
Chapter 15. Aligning Teams to Business Goals
Achieving Goals
Processes
Onboarding
Responsibility
Visibility
Action
How Do Responsibilities Help Culture?
Carrot Versus Stick Approach
Working with Bad Citizens
Putting Operate into Action
Conclusion
Chapter 16. Metric-Driven Cost Optimization
Core Principles
Automated Measurement
Targets
Achievable Goals
Data Driven
Metric-Driven Versus Cadence-Driven Processes
Setting Targets
Taking Action
Conclusion
Chapter 17. Automating Cost Management
What’s the Goal of Automation?
What Is the Outcome You Want to Achieve?
Automated Versus Manual Tasks
Automation Tools
Costs
Other Considerations
Tooling Deployment Options
Automation Working Together
Integration
Automation Conflict
Safety and Security
How to Start
What to Automate
Tag Governance
Scheduled Resource Start/Stop
Usage Reduction
Conclusion
Chapter 18. FinOps for the Container World
Containers 101
The Move to Container Orchestration
The Container FinOps Lifecycle
Container Inform Phase
Cost Allocation
Container Proportions
Tags, Labels, and Namespaces
Container Optimize Phase
Cluster Placement
Container Usage Optimization
Server Instance Rate Optimization
Container Operate Phase
Serverless Containers
Conclusion
Chapter 19. Managing to Unit Economics: FinOps Nirvana
Metrics as the Foundation of Unit Economics
Coming Back to the Iron Triangle
Activity-Based Costing
What’s Missing from the Equation?
Conclusion
What’s Next?
Afterword on What to Prioritize (from J.R.)
Index
About the Authors
Colophon