FinOps – a fusion of financial management and cloud operations – provides cloud technology clarity while enabling organizations to align cloud spend with business objectives. It aids in avoiding common cloud spending pitfalls and supports making informed decisions about cloud cost allocation and management. The objective of FinOps is not merely cost saving, but rather to enhance revenue or business value through the cloud. Let’s dive in to how you can kick start your FinOps journey.
What is FinOps?
FinOps – also known as ‘cloud cost management’ or ‘cloud financial management’ – is derived from the combination of Finance and DevOps. Unlike these terms, FinOps distinguishes itself with a cultural impact that extends throughout the organization. While an individual or team can ‘manage cost’ or ‘optimize resources’, FinOps specifically refers to a set of values, principles, and practices that permeate all levels of an organization, helping to derive maximum business value from their cloud investment.
At its heart, FinOps is a collaborative effort, fostering cooperation between finance, technology, and business teams to establish and enforce policies and processes that allow teams to track, analyze, and optimize cloud costs. It aims to align cloud spending with business goals and strike a balance between cost optimization and performance – enabling organizations to achieve their objectives without cloud resource overspend.
How Can FinOps Help You?
FinOps provides the framework that underpins a continuously optimized cloud investment. It allows teams to work together to save costs, optimize processes, and maximize the efficacy of their cloud.
In a nutshell, adopting FinOps can help your organization to:
- Analyze and track cloud spending, giving back control of forecasting and cloud technology budgets.
- Identify and recyce cloud waste opportunities, optimizing costs and freeing up resources for reinvestment elsewhere.
- Allocating costs to specific teams, projects, or products, supporting organizational governance, accountability, and truthful reporting.
- Controlling cloud operations through governance policies, allowing for a confident reliance on cloud technology.
FinOps: The Core Principles
Refined over time, the FinOps Principles – as defined by the FinOps Foundation – serve as a guiding light for any organization adopting the FinOps approach to cloud management. Encompassing six key aspects, the principles cover multiple cloud environments and are completely adaptable to the dynamic nature of cloud services.
- Teams need to collaborate: It’s imperative that all business teams work together to maintain continuous efficiency and to enhance a culture of innovation. As the cloud is always changing in real time, all departments involved need to bring their A-game to the table.
- Decisions are driven by business value of the cloud: By thinking of the cloud as the main driver of innovation, well thought-out decisions around cost, quality and speed can be made.
- Everyone takes ownership of their cloud usage: Allowing every team or geography to take accountability for their cloud usage results in carefully reviewed budgets and proper cloud usage management across departments.
- Data should be accessible and timely: Timely sharing of data allows for real-time visibility, a drive towards optimized cloud utilization, and the fostering of more efficient business behaviors. Ensuring accessible cost data allows informed decision making throughout the whole business.
- A centralized team drives collaboration: A successful FinOps team is comprised of inter-departmental representatives, creating a centralized group whose members are all aligned to the organization’s priorities. This team will go on to play a crucial role in encouraging best FinOps practices at every level.
- Take advantage of the variable cost model of the cloud: The cloud’s variable cost model shouldn’t be viewed as a risk; it’s an opportunity to deliver greater technological value. Adopting an agile and proactive approach to cloud optimization with FinOps allows for better resource allocation and value delivery.
These six principles offer a comprehensive roadmap for you and your business, aligning operational efficiency with financial stability.
Framework Personas
FinOps necessitates a comprehensive and cross-functional approach involving various stakeholders (or ‘Personas’). They have distinct roles, responsibilities, and perspectives that influence how they use and optimize cloud resources and costs.
An effective FinOps program requires collaboration across all stakeholders:
- Finance and Procurement – Accurately budget, forecast, and report on cloud costs.
- Leadership – Apply the strengths of the cloud to maximize business value.
- Product owners – Launch new offerings at the right price.
- Engineering teams – Deliver high-quality, cost-effective services.
- FinOps practitioners – Educate, standardize, and promote FinOps best practices.
Meanwhile, employees who fit into one of the ‘Allied Personas’ are present within emerging or traditional areas, but still need to coordinate with practitioners.
These Allied Personas include:
- Sustainability – Optimize environmental impact and accelerate progress towards climate goals.
- ITAM – Ensure compliance, optimize costs, and balance objectives against costs in the wider IT space.
- Security – Ensure optimal cloud security spending and improve the organization’s security posture.
- ITFM/TBM – Prioritize investment, ensure measurable value is being delivered, and inform sound decision-making.
- ITSM/ITIL – Improve quality of service, streamline operations, and ensure service levels are being met.
The FinOps Lifecycle
FinOps is an open, collaborative, and iterative, hierarchical process – driven by a simple lifecycle with three distinct phases:
- Inform – Cloud clarity and shared accountability through allocation, benchmarking, budgeting, and forecasting.
- Optimize – Reduce and recycle cloud waste and improve cloud efficiency by implementing various optimization strategies.
- Operate – Control operations with governance policies that align cloud and business objectives.
This lifecycle has been designed to create a state of continuous optimization across the cloud, returning to the ‘Inform’ stage upon completing the introduction of new governance policies in ‘Operate’.
Domains and Capabilities
The FinOps Framework includes capabilities that cover everything from cost analysis and monitoring to optimization and organizational alignment, grouped into a set of related domains. Each capability defines a functional area of activity and a set of tasks to support your FinOps practice.
Understanding cloud usage and cost
- Cost allocation
- Data analysis and showback
- Managing shared cost
- Data ingestion and normalization
- Performance tracking and benchmarking
Measuring unit costs
- Forecasting
- Budget management
- Real-time decision making
Managing anomalies
- Establishing a cloud decision and accountability structure
- Cloud rate optimization
- Implement AI to spot cloud anomalies
Managing commitment-based discounts
- Cloud usage optimization
Onboarding workloads
- Resource utilization and efficiency
- Workload management and automation
- Organizational alignment
Establishing a FinOps culture
- Chargeback and finance integration
- FinOps education and enablement
- Cloud policy and governance
- FinOps and intersecting frameworks
Surveil and the FinOps Foundation
The FinOps Foundation is committed to promoting individuals who practice the discipline of cloud cost management and optimization through best practices, education, and standards. The FinOps Foundation oversees a global community of practitioners, including many of our valued partners and members of our team.
Surveil became members of the FinOps Foundation in April 2023. Since then, we’ve actively participated in the FOCUS initiative, contributed towards thought leadership, and attended FinOps X San Diego as a sponsor. We’re proud to be able to engage with organizations within the community, contributing towards best practices and guidance while integrating our own learnings back into Surveil’s products and services.
Conclusion
As teams progress through the FinOps lifecycle, they naturally learn and grow, developing more mature practices with each iteration. Like the lifecycle, each team is at distinct levels of maturity based on their experience and focus areas.
To implement a FinOps Framework into your organization, consider taking the simple approach of Crawl-Walk-Run. It’s important to identify and assess progress against your goals at each stage of your path to cloud maturity. Remember to:
- Identify the most critical capabilities for your business.
- Define how important it is that each team has knowledge, process, success metrics, organizational alignment, and automation for each of the identified capabilities.
- Evaluate each team’s current knowledge, process, success metrics, organizational alignment, and level of automation based on the defined targets.
- Identify steps that each team could take to improve maturity for each capability.
- Schedule regular check-ins to monitor progress and reevaluate the maturity assessment every 3-6 months.
If you’re interested in maximizing your business’ cloud potential, becoming a certified practitioner, or you simply want to learn more about FinOps, you can join the conversation over on the FinOps Foundation website.