FinOps Success Case – FARFETCH

Managing Cloud costs is like a collective game. But a game that you play against yourself. The goal is always to do better. Not against someone from outside. But against who you were in a similar period in the past. 2023 was a great year from a FinOps standpoint for FARFETCH. Achievements in many areas not only crowded the team effort of the entire team, but also showed that we are maturing on FinOps principles while the FinOps culture spread to all corners of the organization.

Compared to 2022, FTECH (the IT arm of FARFETCH) spent €3.4M less in 2023 while the business main metrics were pretty stable. It is the same as saying that we were able to do more per Euro spent than in the previous year.

The idea of this article is to share how FARFETCH reached this great achievement by using FinOps framework, principles, tools and mindset.

I have presented the plan on how it would be implemented at conference NDC Porto 2022: How Farfetch is managing the cloud cost challenge

Disclaimer

Due to NDA, I’m not allowed to disclosure the savings amounts on each initiative. But here goes some public facts so that you can create an idea of the size of this accomplishment.

• Farfetch is a cloud native company.
• Revenue in 2022 of $2.3 billion.
• GVM in 2022 of $4.1 billion.
• Technology Spent in 2022 of $120 million.
• Technology expense primarily relates to maintenance and operations of platform features and services, as well as software, hosting and infrastructure expenses, which include three globally distributed data centers, including one in Shanghai, which support the processing of our growing base of transactions.

Source: Farfetch Fourth Quarter and Full Year 2022 Results

The idea of this article is to share how FARFETCH reached this great achievement by using FinOps framework, principles, tools and mindset.

Cultural Practices

Even before the FinOps adoption as it is known today, FTECH always had a culture of keeping costs under control. This culture was observed from engineers all the way through senior management. FinOps served as a framework to drive this culture towards a collective effort. Here are some examples of initiatives that resulted successfully in spreading cost management culture.

FinOps Community

An internal channel in Slack was created so that everybody interested in FinOps could come, share their ideas, ask questions and get support. This community channel is actively monitored to ensure that all questions were answered. More importantly, it was a channel for the FinOps team to get feedback from the community to serve as input for product and service improvement.

FinOps Training

In partnership with People Team, the FinOps team created the FinOps Framework Training Program. It is divided into 5 modules that can be taken independently and on demand. Designed specifically for FTECH needs and tailored to the internal environment, the training modules were created in a way that terms used are consistent to the ones used internally while relating FinOps framework to good practices already in place in the organization.

FinOps Character of the Month

Also known internally as ICON of the Month, the idea is to recognize persons or teams that have contributed significantly to the growth of FinOps mindset. The total amount of savings was not as important in this case, but the example the team has provided while implementing an action that was in accordance with FinOps Principles. The recognition was a simple article written by the FinOps team about the ICON of the month, published on the internal FinOps portal and communicated internally so that everybody could be aware of. Every winner is figuring in a virtual Gallery on FinOps Portal. Soon it became something desirable as people see that their efforts are appreciated and, somewhat, inspirational for other areas

Culture is something that lays the foundation for good collaboration. Then comes the collaboration per se, translated into tangible actions. Here are some examples of initiatives that also worked very well on the organization.

Cost Saving Initiatives

This program emerged as an initiative 3 years ago, even before the FinOps adoption. But the results of 2023 were really beyond previous years. The Cost Saving Initiative comprises of a live catalog of actions (backlog) recorded by the teams, that can lead to either one of the following: waste removal, rightsizing and optimizations. This live backlog is mainly used as a single source for all cost saving initiatives and an instrument to provide visibility to the rest of the organization.

In 2023, there were 3800 actions related to decommission or optimization that resulted in a few million dollars of savings.

Spot Instances

Spot Virtual Machines provide access to spare capacity in the Cloud Service Provider (CSP) at significantly reduced prices compared to regular pay-as-you-go instances. With Spot Virtual Machines, it is possible to provision unused CSP’s (cloud service provider) compute capacity at deep discounts compared to pay-as-you-go prices.

In 2023, Spot Instance adoption was endorsed by the Architecture team for wide usage, including on some production workloads. The results were really impressive. 3 times more VM/hours used in 2023 compared to 2022, 76% cheaper average price compared to On Demand one, resulting in thousands of Euros on savings based on the workload moved to spot.

Reserved Instance Exposure

Before 2023, our exposure to Commitment Discounts were limited to 49% of our total cost on Virtual Machine. This scenario was set mainly due to the lack of knowledge and resources to manage commitment discounts at a higher level. In January 2023, within a FinOps approach, we took the initiative to increase this exposure to the maximum possible. In the first month, Reserved Instances were purchased, getting to a level of 90%.

Starting at this level was fairly easy. What is complicated is to maintain this level throughout the months. Mainly due to the fact of variable workloads, diverse usage of Virtual Machine families and sizes, splitted in two datacenters. That required the development of new reports, constant monitoring of reservation usage and frequent relocation of unused reservations.

This effort paid dividends. Commitment Based discount strategy was responsible for the majority of the savings in 2023, contributing decisively to the milestone of spending less in compute than on previous year.

Disciplined Stewardship

In 2023, our reporting strategy had evolved. FinOps team in collaboration with the Data team worked to improve our home-grown cost management tool to enable a more granular cloud cost reporting. Early 2023 it was possible to have a report in such granularity that allowed the proper grouping of cost, allowing middle management to know their actuals against planned cost. The already existing sense of accountability was now represented on solid numbers, allowing them to exercise proper management taking cost as an additional data point to their decisions.

FinOps team was also enabled to generate a summary multi-cloud report to feed Senior Leaders with the proper high level information, aways with the possibility of drilling down when necessary. An interesting feature of this report was a calculated Forecast, based on Earned Value Management technique. A good example of the value of this technique: By mid Q2 2023, forecast  indicated an underrun compared to the budgeted cost. After some consideration, FTECH reduced the budget for 2023 by hundreds of dollars, strengthening the company’s cash position. By the end of 2023, actuals almost matched forecasting, that was also indicating additional underruns that were really welcome.

What’s next

2023 was a great year. Great results crowded the team effort to leverage FinOps principles and practices like optimization, rightsizing, spot adoption and reservations. The increase in other areas was successfully off-set by those practices.

For 2024 it is important to invest on the new-acquireded practices in culture, spot and reserved instance management while strengthening our discipline around stewardship, cost control and governance.

It is not an easy task. It will require effort to maintain past victories while savings opportunities will become less abundant. The good news is that, while working on optimization, it is always possible to backlog initiatives that can leverage even further FinOps practices in our organization.

In this game that we are playing against ourselves, we expect that we will be victorious again next year.