FinOps and Cloud Spending – Roi Rav-Hon, Finout

This is Textron TV. Hey guys. Thanks for the throw.

We're here with Roy Rob hum. Who's the CEO for finna? We're gonna talk in about the cloud and the cost there of and how to maybe get those Cloud costs under control.

Well, you welcome the show. Thank you, Michael for helping me. What is it that makes controlling Cloud spending so difficult and one of the challenges because people get these monthly bills and you would think that they would just sort through that but apparently those bills tend to fluctuate wildly.

So what is the root cause the problem? I think the Earth causes the complexity of this entire industry, right? So AWS is charging you by the second by you know, thousands of different line items and just taking the bottom line, you know, you pay the million dollar a month for everybody.

Yes this you know, but like what that was that million dollar comprised of you have so many different Services. I think edible. This is already on 200 minutes services in each one is priced by you know, multiple factors and everything is a such a low-granularity.

So when Engineers, you know finish the month let alone Finance departments that they look at that, you know, huge millions of millions of flying invoice and they were like, Devil, like everything can change developers can do essentially whatever they want and it's going to be reflected in the inability and of the month and like just no one understands what's happening. Is that going to change you think because honestly developers have been somewhat like drunken Sellers and no one's been checking how much they've been spending on what for a long time then it's kind of ingrained in their culture. So how does it Finance team kind of come along and say hey we want to actually put some controls on this and to what degree are they going to be able to do that?

I think it's all a matter of quantity. Right? So when we started to migrate to the cloud as an industry, we did not think about the implications of you know, how much money this is gonna cost.

So we were running servers and everything was okay, you know for a year two three four and then the CFO wakes up in the middle of the night and figures out that you know Cloud cost is a second biggest expense that he have, you know in the organization after after salaries and it also comes with the realization that the better understands the coffee budget more than the cloud one and you know, so it's okay to start, you know and run fast and just you know have did change the entire sense of mind to run as fast as you can you know, and and just spend this much as you want, but at some point you need to start to be accountable for what you're doing and if it's just gonna cost too much money. So the company is not gonna be profitable and especially, you know in more difficult times in the market like we're experiencing right now we start to optimize Profitability we start to make sure that you know, we're selling something and our service is something that can be profitable that at some point and the economy of scale should kick in and if you know just Engineers kept on doing whatever they want. This is a actual real threat on a company business.

Or organizations trying to reduce the total spend or they just trying to make it more predictable and understand exactly what their monthly that's gonna look like in a way that they can manage that. So I don't think that you will find an organization that says that he's okay with its Cloud spent. Everyone wants to wants to decrease it do at this time point but you need to do both right?

So you need to First decrease what you're having and you need to make sure that you're growing at the rate that match your business. Right? So if you Cloud costs is growing in higher rate than your Revenue then you're not going to a good place right you Gore's margins just going to decrease and decrease and decrease and you don't have a viable business and you always need to make sure that you can be predictable that you can you know understand or even predict how much money do you gonna spend to get, you know specific amount of Revenue in and when you understand that formula and you understand, you know that you're growing it the healthy rate that way finance and engineering and you know live in harmony because they're speaking on the same language and they you know tie to the same goal.

how do I do that in a way that I can affect change in a meaningful way and I'm asking the question because The pace at which these workloads are spun up and down it's pretty fast. So how do I get in the middle of that workflow and say hey, we're gonna not run this and optimize this or ship this over a different tier. How does that work?

So we always want to balance between you know Engineers that should run as fast as they can and just you know, innovate and operate that their environment without thinking of cost and still maintain a connection to to reality, you know, so their business is is matching what they're what they're spending and for that case exactly. There's the concept of unit economics that was was created. So we went to see how much money do we spend on verse to the amount of you know metrics that we were able to operate in our environment and when we do that we see, you know, we can predict that our Cloud cost is increasing and that's okay.

So Cloud costs can increase by 50% month over month and it's perfectly okay because we were managing, you know to bring more money into the company to generate, you know, produce more units and when we have a Unity economic line, that is flat and this means just that we're spending the same amount of money, you know resource. What we're used to that way we can see that we're scaling at the healthy rate and we can maintain you know to run and put servers and do whatever you want. It's fun on kubernetes clusters and change pods into whatever, you know, a technical mumbo jumbo that I want to do in order to operate the environment, but we still maintaining correlation to the business.

Do you think there's more sense? It's really these costs now that we're in something of a global economic downturn. But do you think the finance people are not going on the door a little more aggressively than they might have in the past?

So 100% I mean you just can't live Cloud Costa alone in normal days. So when the market is in downturn and you know, the next funding is is not around the corner and it we might need to extend the runway and do lots of things so we can cut down in headcount and that's you know, an immediate the immediate response. But for the long run we have to make sure that we're scaling down on, you know, the second biggest expense after sellers, which is usually cloud cloud cost and If you look at it in a holistic Manner and look at the entire operation that we have as a business and really understand like what does each dollar, you know comprised of and now where should we allocate it and we spend dollars to do what to do to operate faster on the R&D to host the customer to support something right?

So we need to understand that. Genes and when companies starts to you know fear of their of the runway and want to optimize their margin and everyone speaks about the path to profitability. It's all comes down to you know, how much it's cost us to run that operation as a business.

how smart can all of this get I mean ultimately do you think we'll be throwing algorithms at all this stuff to kind of control the cost and the algorithms themselves would do the heavy lifting or is there some other way to think about So it's a very complicated problem. Right? So we need to think about it in multiple dimensions and multiple phases.

So we first need to have a complete visibility into everything that we operate and we need to measure. All right. So without measuring we can do nothing and measuring itself is a very difficult problem on its own and then we need to tie that to to our business and make sure that we're measuring the right Matrix because again, it's okay to pay a lot more money for AWS as long as our business maintain steady, and then we need to find ways on how to optimize that environment and then we need to repeat that cycle over and over again until forever because it's not that just the one time job that they can optimize my AWS spend and walk away.

It's a change of mind that an organization is going through that cold phenox, which essentially wants to get everyone accountable for for the cost and Engineers the same as they were comfortable, you know a few years ago. I started to to operate Devops right to push their code into production into monitor while it's there. So no one even thought that developers will ever want to do that.

And now we started to see the same Trend running with with financial the financial aspect as well. So Cloud financial management is is very big thing of the day-to-day operation and devops needs to be accountable for what you're doing in developers need to be accountable for for what they're doing and only when achieving that this is where you can really stay in control of your Cloud cost. So it's complete mindset that the company needs to go through in order to to achieve that that control and visibility.

Who's in charge of this conversation in these organizations? Is that the finance team where they just modern the total cost? And then they're saying to the devops team that will shall not exceed this number and you know you go figure it out or again.

Just how actively involved are the finance teams. So it's one of the things that the you know, we trying to figure out this in the industry. So the synapse Foundation have a server yearly survey that that the running and that they're constantly asking the question like where who do you report to in which organizational Factor because Finance really once you know and care about that information, but they have no technical ability to understand anything from that deal because it's so Chinese to that but devops don't really care about operating the cloud financial management because they want the measured on SLA.

They measured on different things and those things might contradict. So synops sits someone under the city of someone under the CIO someone the CFO. It's really depends on how the companies gets to get to solve this problem.

We still don't see a unified standard in the industry. It's relatively new. It's like when devops started no one really know if it's you know under engineering under operation like where where exactly those those departments it's and it's it's an evolution that we experienced now in in the market and we can see that phenox themes are growing rapidly.

So Enterprises have fin of steam that exceeding 10 people from a different time to time and even and entire Cloud cost center of excellence Department. That is a synops is one thing that you're doing. So it's a trend that that is going on in the world and like changes our entire Philosophy for class management.

So what's your best advice to folks about how to get started with this? Do I just throw everybody in a room and lock the door and hope for the best or is there something you know, but don't weigh in going about this. It's really depends on the organization of structure and the culture that they have so some organization.

When do anything without an executive that you know force them to do that some organization phenops is growing from the bottom up because devops feel you know, that they're operating in non-fiction Manner and you really care about it and the same that they want to have their software to run, you know the fastest and to be the most reliable ever the also want to be you know, the most Financial viable. So it really really depends on the company and the culture and how how well this is structure but we see organization that starts to adopt, you know in really it's it depends on the way but there's still starts to have it. It's really kind of forgive me vacation efforts, right?

So Engineers starts to look at their metrics and they suddenly see that every line of code is a meaning and now they're deploying something and look at every rates and also look at the cost and they're working on optimizing that's insert to be a competition between everyone. Can optimize the cost better and who can be you know, the organizational hero that took the company out of out of their troubles because they found something that can just cut the cost by 20% and it's not something that automatically can happen. It's usually an architectural decision that that happened and while doing that there there everyone looks up to them and everyone wants to do the same.

So gamification is a huge thing when operating synops. All right, folks. I heard it here Financial discipline is coming to the cloud one way or another and it's probably long overdue where we thanks for being on the show.

Thank you so much Michael for having me. All right back to you guys in the studio.