Weekly API Evangelist Governance (Guidance)
I have been diving deep into the world of FinOps, and how the technology industry is standardizing what we spend on our SaaS, Cloud, and now AI services. I really enjoy coming up against this consumption based view of managing how we spend money across these services after fifteen years of crafting API management monetization services. It is literally the other side of the coin—pun intended. Rather than crafting the tiers, pricing, and limits for what we’ll charge for our APIs, it is about providing more structure to what our tiers, pricing, and limits need to be for the APIs we are consuming.
On the heels of this week’s research into FinOps, I wanted to explore the FinOps framework by walking through the FinOps domains that the FinOps Foundation have formulated to align your Saas, Cloud, and AI spend with business operations. The FinOps Foundation, provides fourteen separate areas within three distinct groups for getting a handle on your spend.
Understand Usage & Costs
It makes sense that understanding usage and costs across SaaS, Cloud, and Ai are the place to start. Pulling all the data available to you across the services you use, and then understanding the allocation of the resources across those services is a good place to start. Focusing on getting your data and usage in order, but then understanding how you are going to report and analyze on top of it will set the tone for your overall FinOps strategy.
Data Ingestion - Collect, transfer, store, and normalize data from various sources, with a goal of creating a complete, contextual dataset of cloud usage and cost data available for analysis.
Allocation - Define strategies to assign and share cloud costs using accounts, tags, labels, and other metadata, creating accountability among teams and projects within an organization.
Reporting & Analytics - Analyze cloud data and create reporting to gain insights into usage patterns and spend patterns, identify opportunities for improvement, and support informed decision-making about cloud resources.
Anomaly Management - Detect, identify, alert and manage unexpected or unforecasted cloud cost and usage irregularities in a timely manner to lower risk in cost-effective cloud operations.
I like that they include anomaly management in there. Now that we have an understanding of the patterns of usage, what are the known unknowns or unknown unknowns across that. API management practices from the consumer side didn’t address data ingestion at all in my opinion—they want data in their platform. API management did collectively work to understand allocation, errors and some other anomalies, while also providing reporting and analytics, but clearly API management never has gone far enough.
Quantify Business Value
Quantifying of the business value that exists at the intersection of producing and consuming APIs has been one of the ongoing aspects of storytelling on API Evangelists since 2010. Incentivizing the planning, estimating, budgeting, forecasting, benchmarking, and what the units of value driving the API economy has long been something I’ve invested in as part of my storytelling, but I can see now that I lacked the required API consumer voice to drive the vision forward.
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.
Budgeting - Strategic and ongoing process for setting limits, monitoring, and managing cloud spending, aligned with business objectives, to ensure accountability and predictable financial outcomes for cloud-based systems.
Unit Economics - Develop and track metrics that provide an understanding of how an organization’s cloud use and cloud management practices impact the value of the organization’s products, services, or activities.
Forecasting - Creating a model of the anticipated future cost and value of cloud systems leveraging statistical methods, historical spend patterns, planned changes, and related metrics.
Benchmarking - Using efficiency metrics to evaluate cloud optimization and value between parts of the organization or against industry peers to inform decision-making and align FinOps with business objectives.
I see now that API management providers investment in these areas only went as far as their imagination and the desire of API producers would take them. I think second generation API monetization service provers who jumped out of the API management petri dish were able to go further in this domain, but there just isn’t enough demand and awareness from API producers to move the segment forward—we need more groundswell of API consumers demanding standardization to get where we need.
Optimize Usage & Costs
This domain is where the awareness and value achieved in the previous two domains begins to pay off through meaningful optimization, ensuring organizations only use the resources when they provide value to the organization; and that resources used are purchased at the lowest acceptable cost and impact to meet the organization’s goals. These are the areas you begin to slow the hemorrhaging of value produced within our business operations into the cloud platforms of all the technology companies we depend upon.
Architecting for Cloud - Designing and modernizing solutions with cost-awareness and efficiency to maximize business value while achieving performance, scalability, and operational objectives.
Licensing & SaaS - Understanding and optimizing the impact of software licenses and SaaS investments on an organization’s cloud cost structure and value by understanding vendor-specific licensing terms, use rights, and pricing options, planning for appropriate use aimed to minimize over-deployment (a compliance risk) or under-deployment (shelfware/waste), and collaborating with finance, procurement, and legal teams.
Workload Optimization - Analyze and optimize cloud resources to match specific usage patterns while ensuring that workloads operate efficiently, sustainably and generate sufficient business value for their cost.
Rate Optimization - Driving cloud rate efficiency through a combination of negotiated discounts, commitment discounts (RIs, Savings Plans, Committed Use Discounts), and other pricing mechanisms to meet the organization’s operational and budgetary objectives.
Cloud Sustainability - Incorporating sustainability criteria and metrics into cloud optimization, to ensure environmental efficiency is balanced with financial value, and cloud optimization decisions are aligned with organizational goals.
Looking at SaaS, cloud, and AI spend as infrastructure and understanding the licensing being applied are foundational shifts in how we do business on the open web. Then looking for ways to optimize our workflows as well as the rate we pay for our resources represents the front line of this economy. While I agree with the cloud sustainability aspect of this domain, I’d make sure and add AI as bullet within this domain—which it appears the FInOps Foundation is working on.
Manage the FinOps Practice
There is a fourth domain for managing the FinOps practice. I agree with this, but will save this for its own future stories. I want to properly flip the coin of monetization from API producer (API Management) to API consumer (FinOps Management), and consider the spread across SaaS, Cloud, and AI before I think about the overall process at scale. I do like that they treat it like it’s own domain, which is something I want to consider when it comes to the more technical aspects of what we do. I think the business people are properly thinking about process alongside, where some of us more technical folks approach separately as new disciplines.
API Monetization Acquisitions
I don’t think this evaluation of FinOps in the context of API management wouldn’t be complete if I didn’t give a nod towards the recent acquisitions of API monetization platforms Moesif by WSO2 and OpenMeter by Kong. These services jumped out of the API management realm as that universe sputtered and stalled (it was all make believe to begin with). But then the investment into this sector has seemed to run its course. I suspect the problem lies in that like API management service providers, these API monetization service providers were selling to API producers, leaving the other side of this coin out of their strategy.
API Consumption Gateways
It feels like API consumption gateways like Lunar.Dev have emerged to cater to the API consumption side of the coin that API monetization service providers were missing. API monetization providers assumed that API producers would care enough about making money to dial everything in, and now API consumption gateways have been chasing the API consumers within an enterprise in similar ways. Which leaves me wondering when the investment into API consumption gateways will run out, defining this sector as investment shaped API management and API monetization, continuing to reveal how investment is shaping things rather than need.
SaaS Management
FinOps is more aligned with recent trends in SaaS management than it is aligned with API management, API monetization, or API consumption. FinOps is a business driven mandate along with SaaS Management. It is business people trying to manage spend. Which gives me more hope than many of the engineering led visions around APIs as products and the API economy we’ve been championing for over a decade now. However, I think the devil in the details of FinOps will be API-defined, providing the technical underpinnings of user, usage, model, and token based pricing that represent the real value being produced.
Business & Product Traceability
Ultimately this week’s research lands me on the need for business and product traceability. We need more automated ways of quantifying the domains we are doing business within. We need the boundaries between our domains better define, and we need equal measurement of value created and extracted by both producer and consumer. The API consumer perspective via desktop, web, mobile, and AI applications must be elevated alongside the desires of API producers. And from my perspective, we could use with a little imbalance towards the API consumer for a while to help balance things out for a decade or more. With more awareness of where the sovereign business lines exist which requires more traceability, observability, and analytics on pure business value—in which both producers and consumers will ultimately benefit.
"Every man is a consumer, and ought to be a producer.” - Ralph Waldo Emerson