The accelerating shift to the hybrid cloud has forever changed the management of data-centric applications, and it’s also turning the traditional IT spending model on its head.
For decades, IT spending largely centered around balancing ongoing costs for things like licensing, energy, and maintenance with significant, cyclical investments, or capital expenditures (capex), every few years in IT enhancements and hardware and software upgrades. IT managers, finance leaders, and procurement struggled with the complicated, frustrating process of analyzing spreadsheets and reports in order to lay their bets on which hardware and infrastructure investments would deliver the best value in the years ahead.
This model is starting to change. With the increasing move toward hybrid cloud and cloud-led serverless and storageless environments, many companies are now refocusing more of their IT dollars from capex to the ongoing operational expenditures (opex) associated with cloud. According to International Data Corporation (IDC), spending on public cloud IT infrastructure for the first time exceeded the level of spending on noncloud IT infrastructure in Q2 2020, increasing nearly 48% year over year, reaching $14.1 billion. During the same period, investments in noncloud IT infrastructure actually declined nearly 9%.
At NetApp, we believe that understanding our costs and their associated value helps us to strategically use our resources to fund digital transformation and ultimately to better serve our customers, partners, and investors. That’s why NetApp IT is exploring FinOps, or cloud financial management, particularly as it relates to CloudOne, our all-in-one hybrid cloud platform for our software development and operations.
What is FinOps?
FinOps is the relatively new practice of driving visibility and bringing financial accountability to the variable spending model of cloud, per the FinOps Foundation. Essentially, finance and IT develop a series of best practices to measure, quantify, and provide insight into the associated cost of cloud usage behaviors. Just as it’s important to measure hardware costs by total cost of ownership rather than raw purchase costs, these best practices center around three vectors: speed/performance, quality, and cost. The objective is to create a cloud allocation model to help application teams understand and right-size their cloud usage, with the potential to bill back to individual teams.
CloudOne, a cloud-led end-to-end solution as a service, seemed like the perfect place to begin our FinOps journey here at NetApp. In CloudOne, our developers build applications in containers, with automation, tools, and pipeline infrastructure all readily available in one central spot. It incorporates private cloud and public cloud technologies from companies like AWS with leading NetApp® technologies, like Spot by NetApp, which enables us to take AWS Spot Instance savings. We’re working hard to ensure that our developers have a consistent experience when working in CloudOne, regardless of what is supporting their back-end data. At the same time, we saw value in better understanding how specific applications and application development practices were impacting our bottom line. The aim is to empower our development teams to make informed decisions about their cloud usage.
Putting FinOps to work at NetApp IT
With our scope established, finance and our IT Platform, Cloud, and Infrastructure teams have worked together over the past year to develop a methodology and set of best practices to measure and quantify cloud usage value and cost. We delved into reports from public cloud partners, analytics from NetApp Cloud Insights, NetApp ONTAP® Cloud Manager, and other NetApp technologies, as well as partner resources including Splunk App for NetApp Data ONTAP. We looked for commonalities by which to compare “apples to apples.” The FinOps Foundation provided a wealth of guidance and resources to help us create best practices, but we also fine-tuned our process based on our own unique considerations.
In creating our practices, it was important to our team to continue to ensure that our developers had the capacity and performance necessary to deliver exceptional applications. However, we also understood that, just as you may not need race car speed to go to the grocery store, the highest level of performance may not be needed 24/7 for every scenario. Accordingly, we created our best practices and methodology for CloudOne centered around a few key factors, including cost by compute and storage capacity.
From there, governance was the key. Changes in raw costs, the implementation of new technologies, and other considerations can cause costs to fluctuate. We built a regular cadence of review and assessments to ensure that our FinOps measurement stayed accurate and timely.
Then we rolled out the first phase of our FinOps program with a robust education campaign for our stakeholders. Over the course of several months, our application teams were able to see the impact of their development processes and practices from a cost perspective, realizing how simple changes can improve efficiencies and optimize costs.
Although it’s still early days, empowering our developers to take a more active role in managing IT spending for the cloud has already had a meaningful impact. We are excited about the potential of FinOps and are working to further enhance the program. In the meantime, we’d like to hear from you. I invite you to share your thoughts and questions on FinOps.