Understanding Cloud Rate Optimization: Introducing the North FinOps Score

As cloud spending grows, teams often face the challenge of balancing cost and rate optimization to maximize efficiency. It’s not just about cutting costs—it’s about ensuring that every dollar spent on cloud infrastructure yields the best possible return. At North, we tackle both fronts with our Reshaping feature, offering dynamic suggestions for infrastructure improvements and clear metrics to guide rate optimization.

You might already be familiar with the concepts of cost vs. rate optimization, or you might be thinking they sound like the same thing. Here's the distinction:

Cost Optimization in FinOps refers to improving infrastructure efficiency. This could mean automating workloads to only use resources when needed, right-sizing instances, or engineering systems to use fewer resources without compromising workflows. Think of it like this: if you’re driving a large truck to transport a single small suitcase, you’re wasting fuel. Instead, a smaller car would be more efficient. But if you have too many suitcases, downsizing to a small car wouldn’t make sense either. That’s cost optimization in simple terms—ensuring the right balance between resources and efficiency.

Rate Optimization, on the other hand, focuses on lowering the rates you're charged by leveraging discount programs like AWS Savings Plans, Reserved Instances, or Spot Instances. This doesn’t involve changing your infrastructure—just the rates at which you're billed. At North, we go a step further by using machine learning (ML) to project and apply the best possible discounts, tailored to your environment, without the long-term commitments that traditional reservations require. This is the equivalent of using cheaper gas for your car ride we talked about earlier without getting roped into getting a gas station credit card.

This flexibility is North’s key advantage. As your usage increases or decreases, we adjust your discounts accordingly, ensuring you always get the best rates.

But how can you tell if you’re optimizing effectively? That’s where the North FinOps Score comes in.

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Introducing the North FinOps Score

The North FinOps Score measures how effectively discounts are applied to each service in your cloud infrastructure, using the Effective Savings Rate (ESR) —a calculation of how much you’re saving compared to what you would have spent without discounts. Each service has a unique maximum ESR based on factors like available discount types, region, and service-specific usage patterns. This means that some services have greater potential for savings than others due to the types of discounts they support. For example, AWS Savings Plans or Reserved Instances may offer deeper discounts for Compute than for services like OpenSearch or ElastiCache.

We’ve developed a simple scoring system to represent how optimized your rates are across services:

• 0: No cost optimization activated
• 1: Poor
• 2: Fair
• 3: Good
• 4: Great
• 5: Elite

The corresponding ESR for each service is mapped to this scale, allowing us to quickly assess the efficiency of your rate optimization for each type of infrastructure. Here's how we translate ESR into a FinOps score for various services:

At North, we designed this FinOps score to provide an easy-to-understand, actionable metric for rate optimization. However, we recognize that this is just one approach, and we’re always eager to hear from the FinOps community about other perspectives or improvements.

A Holistic FinOps Score for Your Account

Our app automatically assigns scores to each service when you sign up, and we calculate a weighted average based on your spending. This provides a comprehensive FinOps score for your entire account, giving you a clear snapshot of how well your cost optimization strategies are performing.

All this data is accessible in our Reservation Ledger—a tool that tracks every reservation (Savings Plans and Reserved Instances) managed by us or internally.

The Results Speak for Themselves

Many of our customers are achieving FinOps scores in the top 1% of AWS accounts, thanks to our proactive approach to savings. And we’re not stopping there. New optimization features for CloudFront, SageMaker, and DynamoDB are on the way.

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