Cloud FinOps. Losing or saving money?

In most companies, the finance and engineering teams are like distant cousins at a family reunion—aware of each other but not exactly besties. Managing app deployments doesn't exactly rhyme with crunching numbers for COGs. But hey, both are vital for keeping the business running. Enter FinOps, the middleman between tech geeks and number crunchers. This emerging discipline acts as a bridge, ensuring that everyone is guided by the same north star, especially when it comes to the nuanced world of cloud spending.

Speaking of cloud spending, it's not your typical budgeting dance. Instead of setting a fixed budget, it's more like paying as you go. So, if there's a sudden uptick in usage or your setup isn't optimized, ka-ching! More expenses. Sure, there are ways to estimate costs on the tech side, but they often require a ton of effort or can mess with your app performance.

And let's be real, most engineers just want to build cool stuff, not play accountant.

So, here's where FinOps come in, analyzing historical and current usage to make savvy reservations. Think Reserved Instances or Savings Plans, offering sweet discounts for committing to the long haul (usually 1 or 3 years). You can then strut back to management and say, "Hey, we're cutting costs here!"

But, there's a catch. These reservations are like opening a seemingly simple gift, wrapped in layers of tape and tricky knots — every attempt to unwrap it reveals another layer of complexity. On top of that if your engineering team wants to switch their cloud architecture around, and you're either stuck with unused reservations or coughing up money until they expire.

While reservations sound great in theory, reality bites. Cloud environments are unpredictable.

So, how do you know if your reservations are actually saving you cash? Cue the Effective Saving Rate (ESR). It's a simple calculation:

ESR = 1 - ( amortized cost / on-demand equivalent costs )

In other words, the cost of your services usage at reservation rate plus the reservation fee divided by the cost if they were to be purchased on demand.

The ESR gives you the lowdown on your reservations’s ROI.

Let's break it down into two simple scenario to find our if you’re saving money or losing money.

• 🤑 Saving money: ESR above 1% means you're winning. We're talking savings of over 20%, maybe even 50% if you're lucky- putting you in an elite bracket of FinOps practitioners.
• 🚩Losing money: ESR at 0 or below? Ouch. Either you're breaking even or, worst-case scenario, you're losing money because your usage was lower than you forecasted based on reservations. This is why most companies undercommit and do not benefit from all the potential savings.

But fear not! At North, we've got your back. We keep tabs on your reservations, sniffing out the duds and maximizing your savings. Our crystal ball? AI backed cost projections for all your services, ensuring you're making the smartest reservations possible. And hey, if things change, no sweat. Our subscription-based model lets you tweak your reservations as needed.

Whether you're scaling up or down, we're here to make you look like a cost-cutting rockstar without any compromise. Find out how to save today.