Service providers have long relied on the Service Provider License Agreement (SPLA) model to manage their cloud costs. But in a world where hybrid and multi-cloud are becoming the default amongst their customers, the task of managing costs has become more complex. For service provides to effectively control cloud spend, it’s time to look beyond SPLA.
The future is FinOps
The solution is FinOps – an operational framework that helps businesses manage their cloud costs. It's an approach that brings together finance, operations, and technology teams in a collaborative way that increases visibility across an organization and distributes responsibility for cloud spending more effectively. The adoption of FinOps can create major advantages, including improved profitability, reduced financial risk, watertight compliance, and stronger security.
Service providers should be looking closely at FinOps because of its powerful ability to generate long-term control over cloud costs. Unlike the SPLA model, which can be unpredictable and difficult to budget for, FinOps can provide service providers with a clear understanding of their cloud spending by revealing important information from across an entire ecosystem. It allows data to be collected from every cloud environment, each piece of software used, and even directly from users themselves, granting complete visibility into cloud spending.
This information can be vital in identifying areas where service providers can improve efficiency and reduce waste amongst their customers. For example, they may discover that a particular application is using more resources than necessary, or that they're paying for unused storage. With this information, they can make informed decisions about where to allocate their resources and optimize their cloud costs to make significant savings over time.
Harnessing the power of the cloud
Another advantage of the FinOps approach is that it allows service providers to utilise the inherent scalability of the cloud. Not only can they use cloud tools that automate analysis, forecasting and recommendations, but they can also monitor cloud usage in real-time to adjust capacity as needed. This means service providers can quickly scale up or down to meet their customers' demands without overspending on resources they don't need.
FinOps represents a powerful differentiator for service providers wanting to prove themselves against their competition. With cost control overtaking security as the top cloud challenge for businesses (Flexera 2023 State of the Cloud Report), customers are increasingly looking for service providers that can help them manage their spending effectively. Those that offer a FinOps approach can demonstrate their expertise in cost management and win new business.
While the SPLA model has served service providers well in the past, it is no longer looking fit for purpose for the current cloud ecosystem. By adopting a FinOps approach, service providers can gain long-term control over their cloud costs, take advantage of the cloud's scalability, gain greater visibility into their cloud spending, and differentiate themselves from their competitors.