Cloud computing is essential for startups. It makes it possible for them to quickly develop products, scale, and compete. But as they achieve that success, it’s common for cloud costs to increase suddenly, significantly, and (from their perspective) unpredictably.
The key to gaining visibility and control of cloud costs is FinOps – a data-driven approach to getting the cloud compute power necessary to make products run effectively, without overpaying. In fact, McKinsey has estimated that following FinOps best practices can reduce cloud spending by up to 20-30 percent.
The sooner a startup can start following those best practices, the better. That’s not just because acting sooner helps companies stop overpaying sooner, but also because making changes gets more difficult as a product continues to develop and become increasingly complex.
Spotting the missteps
In this blog, we take a look at three common mistakes that can be avoided using FinOps.
For more in-depth insights – and two other expensive missteps that can be solved with FinOps – download our eBook; 5 Expensive Mistakes Startups Can Avoid With FinOps: How to Get the Cloud Compute Power You Need – Without Overpaying.
1. Confusing Reports with Insights
Many startups take steps to present data on their cloud spending in impressive ways, but don’t contextualize this information in ways that help them actually make smarter decisions. They might have dashboards, graphs, and reports showing how cloud costs change over time. But they don’t put enough emphasis on looking for correlations between that spending and changes that could affect it.
The solution is to examine cloud spending numbers together with other data that could explain spending increases or decreases, as well as provide information on business outcomes that reveal how cloud spending is helping a startup reach its goals. The idea here is to understand both why your cloud spending changes (in either direction) and how much that spending contributes to your startup’s success. This way, your data can help you make well-informed decisions.
2. Treating “Free” as “Free Forever”
It’s common for startups to rely on free-tier services, and it’s not hard to see why. For companies just starting out, these services can save a lot of money, making it easier to build a product and get it to market. But if your startup is successful, sooner or later you’ll exceed the limits of those free tiers. If that catches your company by surprise, it can cause serious budgeting problems and hurt confidence.
The problem isn’t (just) that your startup will have to start paying for services that were previously free – it’s that you might not anticipate this will happen. The way to avoid being surprised is by tracking the use of free services, just like you would for paid services. This way, you can get the visibility you need to plan ahead for the transition away from free-tier services.
3. Not Prioritizing Tagging From Day One
Many early-stage startups skip tagging, seeing it as something that can wait until they scale. But tags play a critical role in providing visibility into the breakdown of cloud costs. Without them, a startup may struggle to understand where its cloud costs are coming from. And while tagging is a relatively simple task when best practices are followed from the beginning, when delayed it can become a major project that disrupts growth.
Startups that skip tagging to save time and money often (eventually) find that this actually costs them both. The way to avoid that is by treating tagging as a requirement from the beginning, with at least basic tags used consistently. Automated enforcement of tagging practices can help.
Download your free eBook to Make the Most of FinOps
Startups need cloud computing power they can count on – but every dollar matters to them. The more your startup wastes on cloud costs, the less you should expect to have available for hiring, product development, marketing, and other needs. By using FinOps to avoid making common mistakes, you can help your startup get its product to market and scale without letting excessive cloud spending inhibit its growth.
For a deeper understanding of how to meet your cloud computing needs while keeping costs in check, download our latest eBook, 5 Expensive Mistakes Startups Can Avoid With FinOps: How to Get the Cloud Compute Power You Need – Without Overpaying.