Framework / Domains / Quantify Business Value / Planning & Estimating
Estimation and exploration of potential cost and value, alongside opportunities for automation, sustainability and optimization, for workloads if implemented in an organization’s cloud environment in a particular model or models.
Explore scenario(s) in the cloud
Estimate business value for defined scenario(s)
Implementation plan
Because of the variety of services available in the cloud, frequent updates, new services, managed services, and the variety of models in which applications can be built in or migrated to the cloud, a robust set of practices is required to be able to estimate the future costs of a workload or system. Organizations also need to estimate and plan their resource consumption in the context of their sustainability targets. Estimation can be done for any scope from a single service change to an entire application migrating to cloud from the data center. Oftentimes, multiple estimates will be made to compare potential future value to the business under a variety of scenarios.
Estimating is primarily supported by Engineering personas, supported by FinOps teams. Input from Product, Finance or Leadership may be required when estimates are particularly important, impactful or complex; or when trial budget might be required to estimate.
Planning & Estimating is closely related to Forecasting. Estimating is done to understand what potential future costs might be under various scenarios or use cases, in order to create a plan for migration, implementation, or modernization. Estimates will be an input to Forecasting, where a more detailed forecast model for the planned changes will be created and maintained. Forecasting represents anticipated spending and value creation an engineering or product team will be responsible to deliver.
By contrast, Planning & Estimating is exploratory ideation. It will produce inputs to cloud cost forecasts, but also for other reasons. Estimating is performed frequently in support of Optimize Cloud Usage & Cost domain activities, like Architecting for Cloud, Workload Optimization, or even Onboarding Workloads.
When estimating future cloud costs, organizations should define the scenarios which are appropriate to estimate for. This includes understanding the service(s), architectures or other changes that should be estimated, the technology deployment patterns used by the organization, and the parameters of the estimate that will be important to communicate to others. A variety of scenarios might be created for a specific change. For example, an engineering team might estimate the impact of moving a workload from a virtual machine to a managed service, or to a Kubernetes environment, or to a serverless compute model, looking at the cost, effort, and impact of each for comparison.
A variety of techniques are available to estimate costs in cloud, including:
In all these cases Engineering personas should work with FinOps teams to ensure that estimates adhere to policies (where resources should be created, what types of resources are used, appropriate architectural models, etc.), that pricing estimates are appropriate (on-demand pricing, discounted rates, expected types of commitment levels, etc.), and that scenarios include estimates of shared costs, platform adjustments, or other support costs and impacts. These impacts may need to include both financial cost and other elements such as sustainability impact or operational impacts of making the considered change.
Estimating scenarios can then be used to provide input back to the Forecasting process, or to the Optimization process that triggered the estimating work. If Proof of Concept budget is needed to estimate, or get more specific cost information, Finance may be involved to provide that.
Unfortunately, there is no one estimating method that fits all situations. Cloud spend is variable which is inherently difficult to predict, and Engineers can create environments and workloads at any time, typically without having to go through a procurement process. This is why it is important to have an established Estimating capability with well-understood parameters, scenario planning, tooling, and documentation expectations.
As someone in the FinOps team role, I will…
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