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Mastering FinOps KPIs: Sanka’s Guide to Data-Driven Financial Success

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Last Update: Feb. 1, 2024

Introduction

In the vast online world, making sure you spend wisely on cloud services is crucial for your business to thrive.

Welcome to the world of FinOps—a powerful approach that not only brings financial control to your cloud management but also uncovers significant savings and efficiency.

In this article, we'll explore the definition and benefits of tracking and implementing FinOps Key Performance Indicators (KPIs).

The Definition of FinOps KPIs

Key Performance Indicators (KPIs) are pivotal in the world of FinOps, which represents the strategic convergence of finance, operations, and technology.

In the context of cloud computing, FinOps KPIs are the vital metrics that provide quantifiable measures of an organization's performance, especially in terms of managing and optimizing cloud costs.

The rigor of FinOps KPIs stems from their ability to offer a clear and actionable snapshot of financial health as it relates to cloud spending.

These benchmarks are tailored to track the efficiency, optimization, and effectiveness of cloud investments, considering the unique, elastic nature of cloud services.

Illustrating FinOps KPIs Through Examples

Imagine a company, 'Creathink', leverages cloud services extensively in its day-to-day operations. Here's how it could employ FinOps KPIs:

  • Cloud Spend Efficiency: Creathink sets up KPIs to track the ratio of cloud spend against the output. If they have a project that costs $100,000 in cloud services, leading to revenue of $500,000, the KPI would denote a positive indicator of efficiency.
  • Cost Per Transaction: This KPI would help Creathink identify the cost incurred on cloud services for each transaction completed on their platform. For instance, if they discover they’re spending $1 per transaction for a service priced at $5, they have a substantial margin, but they could investigate if there's a potential for further cost reduction.
  • Rate of Unallocated Resources: Tracking idle or underused resources, Creathink might discover 15% of their provisioned cloud storage isn't utilized. This KPI would help them slash unnecessary costs and optimize resource allocation.

FinOps KPIs translate complex cloud billing data into insights, encouraging accountable and collaborative cost management.

When various teams within an organization, from developers to finance professionals, understand these KPIs, they can work in tandem to ensure cloud expenses are always justified by their output, aligning closely with the company's financial goals.

The Benefits of Tracking and Implementing FinOps KPIs

#1 Financial Clarity: See Where Your Money Goes

FinOps unveils a clear view of your cloud costs, ensuring you can understand and control every dollar spent.

According to the "State of FinOps 2022" report by the FinOps Foundation, businesses embracing FinOps often experience a 30% reduction in their cloud-related costs.

Imagine the impact on your bottom line when you know exactly where your money is going!

#2 Operational Efficiency: Optimize Your Cloud Resources

Track your FinOps KPIs to optimize the utilization of cloud resources.

This doesn't just stop you from using too much or too little but also saves you a lot of money.

Industry experts report that businesses focusing on FinOps see operational efficiency gains of up to 40%, making your cloud operations leaner and more cost-effective.

#3 Strategic Decision-Making: Empower Your Business with Data

Without timely and pertinent data, forecasting is just guesswork.

FinOps enables you to make informed decisions by following key performance indicators.

The tracking and measurement of FinOps KPIs like cloud expenditure versus total revenue, accuracy of cloud spend forecasting, and cloud cost per customer can tremendously improve the accuracy of future budgeting and forecasts.

They serve as a feedback loop to refine predictions, leading to more robust economic planning and reducing the gap between expected and actual spending.

According to the "FinOps for Dummies" guide, companies utilizing FinOps practices report a 20% reduction in the time spent on cloud-related decision-making processes.

Imagine the competitive edge your business gains with swift and strategic choices backed by real-time insights.

#4 Fostering Accountability and Collaboration

FinOps KPIs aren't just the concern of finance or IT departments – they are everybody's business.

These metrics create a common language that enables cross-functional teams to collaborate and make informed decisions about cloud usage and spending.

Developers, for instance, might make architectural or coding decisions keeping in mind their impact on cloud costs, while product managers could prioritize features based on their cost-effectiveness.

#5 Aligning Cloud Spending with Business Outcomes

Tracking FinOps KPIs enables the alignment of cloud spending with business objectives.

By measuring the proportion of cloud costs per product or service, or per customer, businesses can understand the ROI on their cloud investments.

This alignment ensures that spending is always proportional to business value, leading to higher profitability and customer satisfaction.

#6 Driving Organizational Agility

In the fast-paced world of cloud, agility is a crucial competitive advantage. With a solid understanding of FinOps KPIs, businesses can respond rapidly to changing needs - whether it's scaling up to manage increased demand or implementing cost-control measures during a downturn.

The agility afforded by understanding and implementing FinOps KPIs can be the difference between thriving or just surviving in this dynamic digital landscape.

The Top 7 FinOps KPIs for Your Business

1. Cost Efficiency Ratio: Maximize Value from Spending

Measure how efficiently your business converts cloud spending into tangible value. A well-optimized cost-efficiency ratio ensures you're getting the most out of every dollar spent.

2. Resource Utilization Rate: Avoid Wastage and Inefficiency

Evaluate how effectively your cloud resources are utilized. This KPI helps you avoid wastage and ensures your resources are aligned with your business needs.

3. Downtime Percentage: Ensure Reliability and Uptime

Track the reliability of your cloud services to maintain uninterrupted operations. A lower downtime percentage indicates a more reliable and available cloud infrastructure.

4. Storage Utilization: Optimize Your Data Management

Assess the effectiveness of your cloud storage usage, avoiding unnecessary costs and ensuring optimal data management.

5. Instance Right Sizing: Tailor Virtual Machines for Efficiency

Evaluate and adjust the size and performance of virtual machines for optimal efficiency, preventing both underutilization and overprovisioning.

6. Data Transfer Costs: Manage Inter-Cloud Communication Expenses

Keep a close eye on data transfer costs between different cloud services. Efficient management here can lead to substantial savings in inter-cloud communication.

7. Environment Tagging: Organize Spending by Project or Department

Implement a tagging system to categorize expenses based on projects or departments. This aids in tracking and controlling costs more effectively.

Implementing these FinOps KPIs can lead to substantial savings—often around 30% or more—while also cutting the time spent managing cloud-related decisions by nearly half.

How Sanka Can Supercharge Your FinOps Journey

Now, imagine streamlining this FinOps journey with the assistance of Sanka.

With a suite of tools and automated solutions, Sanka simplifies the implementation of FinOps strategies, promoting business efficiency and productivity.

This dynamic duo not only aids in effective budget management but also allows you to focus on the core elements of your business without the stress of budget constraints.

Don't miss out on this opportunity to revolutionize your business. Start your free trial now and see how Sanka can boost your FinOps strategy: Sign Up for a Free Trial!

Conclusion

The adoption of FinOps and, more imperatively, the tracking and implementation of FinOps KPIs provide an organization with an essential toolkit to navigate the complex waters of cloud economics.

With FinOps, your business sees things clearer, works better and makes smarter decisions. Think of FinOps KPIs as your helpful guide.

Add Sanka to the mix, and suddenly efficiency and productivity become more than just ideas—they become real for your business.

Ready to make your cloud management great? Will you use FinOps and Sanka to make your business run better, save money, and succeed?

Your FinOps journey is calling—what's your next move?

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