Inform, Optimize, Operate: The FinOps Lifecycle & ITAM

Ron Brill:

All right. Hi everyone. I’m Ron Brill, president, chairman of Anglepoint. For those of you who don’t know Anglepoint, we’re a global software asset and in cloud asset management firm. And for the last three years we’ve been leading the Gartner Magic Quadrant for our industry.

Outside of Anglepoint. I am chairing the ISO Committee for ITAM Standards. That’s the committee that owns the ISO 19770 family of standards has participants from 25 countries working on the ISO standards. I’m also the project editor for the next edition, the fourth edition of 19770-1 for ITAM system.

As part of that I also participate in the ITAM forum on the board of trustees and vice chair. And I also co-lead the ITAM and FinOps special interest group as part of the FinOps Foundation. Again, we’re very exciting to be speaking with you all.

One of the things we were hoping to do today is really focus on where we’re seeing the ITAM industry heading in the next five plus years. And this is based on our daily work and conversations with hundreds of enterprise clients around the world. That’s the primary source. Most of those are within the Fortune Global 1000 and so on. So getting really good perspective from that as well as what we’re hearing from the analyst firms uh, industry events, conversations within ISO outside our specific committee as well. And so we’ve kind of consolidated all those different inputs and put this together.

 I will say the focus here is really a long term perspective.

And I’m going to give a very brief overview. Touch on some of the key points so let’s get started. The first one, as you can see is FinOps. We’ve been talking a lot about FinOps. It’s probably kind of the most significant shift or impact on IT asset management that we’ve seen the last decade or two for a number of different reasons.

 So let’s touch on that very high level. As by way of background we’re looking. The IT infrastructure nowadays we, it’s really hybrid in almost every organization, certainly in the larger organizations, but even small organizations have a hybrid infrastructure.

And these are some of the three main components of the, that infrastructure is on-prem. There’s cloud infrastructure and platform services, and there are SaaS and probably other components as well. Mobile device and others and if we just look at it from a, the perspective of cost of IT assets.

Which is what we are interested in primarily. There are a number of other aspects as well, but just from that perspective, right? There’s the cost of the SaaS subscriptions, there’s the cost of the physical infrastructure and the software that runs on that physical infrastructure. And then for cloud infrastructure platform services, there’s the cost of the virtual infrastructure and the software that runs on that virtual infrastructure that can come from one of three main sources is its proprietary to the cloud service provider.

It’s third-party software. Think Oracle, IBM. Or it’s homegrown software, third party software, you can acquire it through two different channels, either through a marketplace that’s run by your cloud service provider or bring your own license. Use your own traditional licenses that you have as part of enterprise agreements and so on.

The interesting thing here is that Gartner mentioned that for an increasing number of organizations, the cost of the virtual infrastructure is greater than the cost of all the software components combined on-prem as well as SaaS combined. And it’s the trend is definitely for this to get even larger.

With this being the larger piece here if we are ignoring this as ITAM we are really risking not remaining relevant to the business in the long term. So this one is the largest box for many organizations. It’s becoming even larger. It’s a very clear trend. We have to look at this box if you want to remain relevant.

And there’s a lot of reasons why it’s hard to do that. We’re not going to touch on all of them, but it’s very complex. Hundreds of features and pricing options every year coming out from every one of the. Cloud service providers and most of our clients, for example, are multi-cloud, right?

So it just gets compounded very difficult to analyze, right? The, a monthly bill for a w s could be hundreds of millions of lines for just one month. And number of other challenges as well. And all the youth lead to the need to have cloud financial manage.

The most dominant methodology out there is FinOps and by the FinOps Foundation really encourage you to check them out. If you’re interested in FinOps, lots of great resources. Participation is free for end user organizations. This the book that kind of started it all and have certifications and other things.

So really great resource for anything FinOps. The FinOps methodology is based on three main phases inform, optimize, and operate. During Inform, we are really looking to get transparency into what the data is. During optimize, we’re looking to reduce costs and during operate we’re looking to automate a lot of the procedures that are happening.

This structure is actually similar to the structure, the tier structure that’s currently in 19770-1 for ITAM. So if you’re think in form, it’s really the first tier in ITAM is trustworthy data. So it’s equivalent. The third tier in the ITAM standard is optimization, which is equivalent to the optimized phase. And the life cycle integration, which is a second tier in it, a m is equivalent to the operate phase. So it’s a similar three phase methodology overall. There’s work that’s been done to, to see how it aligns at a much more granular level that we’re not going to touch on today.

But just keep in mind that the two are kind of. The informed phase, it’s really all about agreeing on it, the taxonomy within the organization tagging, which is kind of metadata you can attach to. Cloud instances identify things like workloads, applications, business units, and so forth.

Once you have tagging deployed, you can create dashboards that report on cloud usage and cloud costs to different things and provide that information near real time to all the relevant stakeholders who need that information, be it engineering or others. And then, showing that information back, so more optimized decision could be made.

So that’s inform if you don’t have that, you can’t do anything else. You’re essentially blind. Next, there’s a optimization. We’re not going to go a whole lot of details here, but there are two types of optimizations that happen within FinOps. You can optimize how much of the cloud you consume, the quantity.

So assume let’s assume that the rates, the pricing is fixed for a moment. How can we reduce our consumption to really what we need, right? So this activity, which has to be decentralized and done by the engineering. Is really things like looking at unneeded instances ,smart scheduling turn it off when you don’t need it right sizing, making sure it’s not over provisioned for the workloads that, that are actually running on it. So these are some of the activities there. And then the other type of optimization is pricing or rate optimization. So assume from kind of the opposite, assume the consumption is fixed and you’ve already optimized it.

Now how can we get the best rates on that optimized consumption? This includes things like contract negotiations, savings plan, reserve instances, part instances choosing the right provider for the right workload and a number of other activities. This is typically done in a centralized fashion.

But again, FinOps and ITAM facilitate both. As far as the tooling and the reporting and the capabilities. And the guidance. And one activity is more centralized. The other one is more decentralized and a lot of really great knowledge that’s evolving around this and best practices. And it’s amazing what some organization will be able to do from a cost saving perspective.

Organizations that don’t do this typically would have waste within the cloud that’s, 30 or more percent of their spend. And considering that this is the largest box within, as we saw on the previous slide you can imagine how critical doing this is in the last phase in the FinOps methodology is really about.

A lot of it I thought about automation metrics driven, cost optimization and other activities because of the kind of ephemeral nature of cloud instances where an asset can live for days and hours and minutes or seconds. Trying to do any kind of manual optimization is really not ideal.

You’re living a lot of money on the table, right? So what we’re trying to do is create automation to ensure that optimized decisions are made from the first moment. And it’s really the only way to have any measure of control within the cloud, on, on courses is to do that through automat.

It’s kind of a paradigm shift as well. If you think about the ITAM equivalent of this, we’re used to doing, annual license reconciliations for a software vendor or quarterly reconciliations. Or maybe for a very critical vendor, it’ll be a monthly reconciliation. That, that doesn’t really cut it anymore in the cloud, right?

It has to be done near real time. The only way to do that is through automation.

There are a lot of reasons why IAM and FinOps need to be collaborating, whether they’re both part of the same function or they’re two separate functions, but working very closely together. They really have shared objectives, shared principles, shared domains. They really address each other’s mutual blind spots. Item looks at things, but FinOps doesn’t and vice versa. Uh, Together they really get that one infrastructure view that’s really critical.

You can’t separate the infrastructure. It’s one hybrid infrastructure. You can separate sometimes the vendor relationships, right? The same Microsoft agreement can have On-prem license provisions as well as things like Azure commit, Azure, higher use benefits and so forth. So you really have to look at those agreements holistically from a vendor management perspective as well.

BYOL is another example. Item can’t do its job without looking at. Consumption of licenses in the cloud, which fops typically would not look at. They’ll have visibility of the cloud instances, but not too much of the third-party software that runs on them in many cases.

As we mentioned, multiple procurement channels for the same products. Sometimes you can buy it off of your enterprise agreement that’s already been centrally negotiated by procurement, or you can buy the same product by going to the AWS marketplace and paying for it. It’s part of your monthly cloud bill on a subscription basis.

Right? And so it’s really all those different sources of procurement channels and all the other things really necessitate those two functions working closely together. If you’re interested in this space, really encourage you to join the special interest group as part of the finance foundation that’s talking about this.

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