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Financial Operations (FinOps)

Cloud adoption introduces significant changes to the way financial aspects of the IT service are managed.  The Cloud Centre of Excellence (CCoE) promotes a best practice approach and tools to optimise spending on cloud services via FinOps.

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Overview

In addition to transforming how technology is delivered, cloud adoption drives a fundamental shift in how to manage IT Costs.   Cloud services are billed on a pay-as-you-go consumption model, therefore cloud expenditure differs from that of traditional IT infrastructure in three aspect

  • cloud costs are treated as an operating expense – as opposed to traditional capital expense and asset depreciation
  • cloud costs are variable – therefore can be challenging to forecast
  • many purchasing decisions are made by the engineers who provision services a shift of responsibilities away from the traditional central procurement and approvals model. 

The CCOE has established proven working practices to support application service teams to understand the changes and optimise their spend on the cloud.

Staying in control

It is important to recognise what changes and ways of working to remain in control of what you spend on cloud services.

In theory, the cloud cost equation is simple

Spend = usage* rate

There are effectively 2 levers which can be applied to control costs

  • pay less for the service.  Negotiate a better rate by applying bulk discounts, reserved instances
  • reduce usage. Take advantage of the pay-as-you-go model by switching off services and instances when they are not actively used.   Optimise the technology design to use resources efficiently

In practice, cloud billing is complex and not easy to interpret.  Billing data is very granular, with multiple elements for each functional service,  each item is billed as small units of time. 

The CCoE provides a centalised platform (Cloudhealth) which automates the process of cost allocation and helps to visualise the usage and billing information.

Cost allocation relies on a combination of the cloud account structure and a set of metadata tags which are assigned to each item it is provisioned.   The tags also aid the interpretation and visualisation of the data, enabling the account holder to understand where costs are incurred and make informed decisions about what to use or not use.

Controlling cloud costs is a shared responsibility in NHSD

CCoE

FinOps manages corporate discounts to optimise Unit cost of cloud services.  
NHSD CCoE will proactively explore ways to reduce the purchase price of cloud services by negotiating bulk purchasing discounts and savings plans with the Cloud Service Providers.  Typically, discounts are applied at a corporate level, based on a certain level of committed usage over time.

Application teams

Manage usage under their cloud account.  This can be done by terminating idle instances, rightsizing oversized ones, scaling down resources running at off-peak times, even shutting things down completely over nights and weekends.  Engineers should consider cost as a key efficiency metric and plan for regular optimisation cycles.

CCoE services for application teams

The CCoE provide advice and guidance to support the application teams to understand their cloud spend and identify opportunities to optimise it.   The CCoE also performs a central function for billing and allocation of shared costs.

Cost optimisation review

The CCoE FinOps advisor works proactively with account holders to educate them and build confidence in the process. 

Financial limits management

The Cloud health cost management system can be configured to alert account owners of anomalies based on thresholds and consumption patterns.  Application owners can use these alerts to control how much capacity they use and stay within agreed budgets.

Central CCoE finance functions

Cloud service billing

The NHSD CCoE provides a centralised billing and invoicing service for each monitored account, based on the invoices it receives from the Cloud Service Providers.

When the CCoE receives the invoice, it is analysed according to the ownership details in the asset inventory – costs are apportioned according to agreed rules. The IT Finance team process the outputs as chargebacks.

The customer (business unit account owner) receives a PDF document with detailed description of costs and usage for the period.

Capacity use and billing reports

Provide periodic usage and cost reports to cloud account owners.  Further information is available in near-real time from the cloud cost management portal.

Cost reporting/visibility and allocation (cost structures)

Maintain a working model of cost allocation for cloud services based on account ownership and usage. Align with stakeholders and IT finance.

Tagging policy definition

Define and maintain a scheme of FinOps specific attributes (tags) which identify ownership, function, and status of cloud workloads and service.

The metadata tags are assigned to each cloud to enable cost allocation and service management processes.  A robust scheme of asset tags supports automation of key processes such as cloud service billing and chargebacks as well as IT Service management processes for incident, problem and change management.

Guidance and information

Contact us

Contact us by emailing [email protected]. 

Last edited: 7 March 2023 5:05 pm