Organizations adopt FinOps to optimize cloud costs, to align cloud spending with business functions and to establish better governance over cloud expenditures. But what is the impact?
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Published: 08 May 2023
The increasing use of cloud computing, the need to show business value for Opex in IT budgets and the increasing pressure to rationalize costs across the organization makes FinOps more important than ever. The impact on cloud service providers and on-premises infrastructure vendors will be profound and long-lasting.
In a 2022 study carried out by TechTarget's Enterprise Strategy Group (ESG), we found that 62% of firms always use third-party cloud cost estimation tools or software to compare potential costs of different public cloud providers. Digital firms -- those with 10% or more of their annual revenue derived from in-house written applications -- were found to be even more likely to leverage cost modeling before deciding where to deploy a workload.
The impact on cloud providers
The impact of using these third-party tools is clear. Just under half -- 49% -- report that FinOps tools have motivated their organizations to reconsider their first choice for cloud for at least one workload and to select a different cloud vendor for workload deployment. The era of choosing a single cloud provider is over.
With the help of third-party FinOps tools, multi-cloud deployment is a money-saving strategy for businesses. For cloud providers, the increasing scrutiny on pricing and pricing models by customers will give valuable feedback on the relative value of their offerings when compared to hyperscale competitors or other deployment targets.
The impact on hardware suppliers
Hardware suppliers such as Dell, Cisco, HPE and IBM, along with many storage vendors, all have Opex pay-as-you-go purchase models for the physical systems they sell. They’re also affected by the data these tools present. In that same ESG study, almost half of the organizations in the sample -- 43% -- elected to modernize their on-premises infrastructure to keep a workload on premises rather than sending it to the cloud. Yes, in some cases, cloud cost modeling tools indicate that a workload is more suitable for on premises. This should be good news for HPE GreenLake, which actively positions itself as an on-premises cloud platform, and Dell’s Apex offerings that offer cloudlike purchase options.
The long-term impact
For organizations that switched cloud-resident software between cloud providers, 65% admitted that they harbored negative feelings about the ex-provider because of that experience. The most common outcome was a slight change in attitude toward the former cloud provider, as 42% admitted, "We’re less likely to work with that cloud provider for that type of application in the future."
Less common, but more damning: One in five -- 22% -- admitted that once they’ve switched from a cloud provider for one reason or another, they’re less likely to work with that cloud provider for any type of application in the future.
What it all means
Organizations are making more informed decisions about where to deploy workloads, and FinOps is at the forefront of the movement. Firms with advanced FinOps practices enjoy the competitive advantage of lower and more rationalized infrastructure costs. FinOps puts pressure on cloud providers to maintain competitive pricing and, in some cases, offers justification for maintaining an application in-house and investing in on-premises infrastructure.
Firms with advanced FinOps practices enjoy the competitive advantage of lower and more rationalized infrastructure costs.
We want to hear from you
With the growth in importance of FinOps, ESG is conducting research on the scope, reach and impact of FinOps. Specifically, we’re going to measure the following:
Positive outcomes related to the adoption of FinOps.
Top organizational and cultural challenges.
Current and planned investments to support FinOps.
Native tools versus third-party tools: When are third-party tools necessary?
Vendor landscape -- i.e., perception of FinOps tools providers.
FinOps KPIs -- i.e., how organizations measure the success of FinOps.
Impact of sustainability on FinOps.
FinOps adoption maturity.
FinOps tool selection process and buying team composition.
What else would you like to understand about FinOps adoption and usage? Contact me at [email protected].
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