Managed service providers (MSPs) are continuously seeking ways to optimize costs and increase profitability. Implementing Azure FinOps best practices can be a game-changer in this regard. By adopting these strategies, MSPs can guide their customers through cost optimization processes, ultimately improving profit margins and fostering long-term loyalty. This article explores key Azure FinOps best practices that MSPs should consider, focusing on organizational processes, planning for savings, and optimizing both non-production and production workloads.
Building a Successful FinOps Team
The foundation of any successful Azure FinOps initiative lies in forming a dedicated and collaborative team. This team should consist of representatives from various departments, including finance, product management, DevOps, and research and development (R&D). By bringing together individuals with diverse skill sets and perspectives, the FinOps team can effectively identify cost optimization opportunities and propose viable solutions to reduce expenses.
Key Roles in the FinOps Team
Finance Representative: Plays a crucial role by providing insights into the financial impact of optimization efforts, ensuring alignment with the organization's overall financial goals.
DevOps Team Member: Contributes hands-on experience in configuring cloud costs and understanding the technical aspects of the infrastructure.
Product Management: Responsible for prioritizing optimization efforts, ensuring that cost-saving measures do not compromise the quality or functionality of products or services offered.
Tech Leader: Offers guidance on selecting the most cost-effective solutions while meeting performance and scalability standards.
To ensure success, it is vital to establish a regular schedule of meetings and collaboration sessions. The team should review monthly cloud bills, identify significant changes, and investigate any instances of underutilized resources. By continuously monitoring and optimizing costs, the FinOps team can demonstrate its value and maintain support from the organization’s leadership.
Planning Ahead for Cost Savings
While identifying cost optimization opportunities as they arise is essential, planning ahead is crucial for long-term success in Azure FinOps. The FinOps team should be involved in project planning to ensure cost-effective decisions from the start.
Choosing the Right Cloud Services
One of the FinOps team's key responsibilities is guiding development and engineering teams in selecting appropriate cloud services. Technologists may gravitate towards the latest tools, which can be overqualified and more expensive than necessary. The FinOps team should challenge these decisions and recommend cost-effective alternatives that still meet functionality and performance standards.
For example, a high-performance NoSQL database like Cosmos DB might be attractive, but if the application doesn't require NoSQL capabilities, the FinOps team can suggest using Azure SQL service, which may provide necessary performance at a lower cost.
Estimating Growth and Scaling Costs
Once appropriate cloud services are selected, the FinOps team should work with development teams to estimate scaling costs. By creating a growth estimation table, the team can project expenses at different milestones, such as user count or transaction volume. This exercise helps identify which service costs improve with scale and which grow linearly, allowing for more accurate budgeting and planning.
The growth estimation table should include a breakdown of services required for the application infrastructure, along with their estimated costs at each milestone. By comparing the total monthly bill to the projected number of users, the team can calculate the cost per user, ensuring it decreases as the application scales.
Leveraging Tiered Services
Another effective strategy for cost optimization is taking advantage of different pricing tiers offered by Azure services. These tiers reflect the criticality of the service for the business and allow MSPs to configure lower service level agreements (SLAs) for non-mission-critical workloads. By selecting appropriate tiers for each use case, MSPs can significantly reduce costs without compromising essential functionality.
For example, Azure Cache for Redis offers a discounted tier for development and testing workloads, providing savings of up to 50% for non-replicated caches. Similarly, Azure storage services offer various tiers based on data volume, access frequency, and read/write speed. By moving historical or infrequently accessed data to lower storage tiers, MSPs can optimize spending while maintaining necessary data retention and accessibility.
Driving Savings as a Managed Service Provider
MSPs are uniquely positioned to drive cost savings for clients by leveraging their aggregated spending power and expertise in Azure FinOps. By onboarding customers to a Microsoft Customer Agreement and purchasing an Azure Plan, MSPs can manage their clients' resources through the Partner Center, allowing them to implement various cost-saving strategies.
Committing to Reserved Resources
One of the most effective ways for MSPs to save money on Azure services is by committing to reserved resources. By purchasing reservations for one or three years, MSPs can secure significant discounts compared to pay-as-you-go pricing. A three-year reservation with a 66% discount can pay for itself in less than two years. Tools like the CloudBolt Reserved Instance Report can help track and manage these reservations effectively.
Negotiating Volume Discounts
As large consumers of Azure services, MSPs can leverage their substantial deployments to negotiate volume discounts with Microsoft. By demonstrating the revenue generated for Azure, MSPs can secure reduced rates compared to standard list prices, which can then be passed on to clients. Successful negotiations require a strong understanding of Azure usage patterns and a good relationship with Microsoft's sales representatives.
Consolidating Billing Across Cloud Providers
Many organizations utilize multiple cloud providers, each with unique pricing models. MSPs can add significant value by consolidating billing information across platforms such as Azure, AWS, and Google Cloud. By presenting a unified view of cloud costs, MSPs help customers make informed decisions and optimize their overall cloud spending. Tools like CloudBolt's Cost Report can simplify this process by integrating multiple providers into a consistent format.
Automating FinOps Tasks with APIs
To streamline Azure FinOps efforts, MSPs can utilize Azure Cost Management APIs to automate various tasks. These APIs enable programmatic access to cost data, making it easier to identify savings opportunities and generate custom reports. For example, CloudBolt's Cost Report for Azure leverages these APIs to consolidate reports, analyze unit costs, apply discounts, and calculate margins. Automating repetitive tasks provides actionable insights, helping MSPs optimize clients' Azure spending efficiently.
Conclusion
Implementing Azure FinOps best practices is essential for managed service providers looking to optimize costs, improve profit margins, and deliver greater value to their customers. By building a dedicated and collaborative FinOps team, MSPs can effectively identify cost-saving opportunities and develop strategies to reduce expenses without compromising performance.
Planning ahead is crucial for long-term success in Azure FinOps. MSPs should be actively involved in project planning, guiding clients in selecting cost-effective cloud services and estimating scaling costs. Leveraging tiered services and reserved resources can further optimize spending.
As large consumers of Azure services, MSPs are well-positioned to negotiate volume discounts and consolidate billing across multiple cloud providers. By automating FinOps tasks using APIs, MSPs can help clients make informed decisions and optimize overall cloud spending.
Ultimately, the success of an MSP's Azure FinOps initiative depends on strategic planning, cross-functional collaboration, and continuous optimization. By embracing these best practices and leveraging the right tools, MSPs can drive significant cost savings for their clients while maintaining healthy profit margins and delivering exceptional value in an increasingly competitive market.
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