Although, for many, the rallying cry for the move to cloud computing is cost savings, yet unless actual cloud costs are understood and managed, is entirely possible to lose money in a cloud environment. Cloud Financial Management, FinOps for short, is the inclusion of financial accountability in operational practices. Understanding the variability and source of cloud costs allows teams to make appropriate business trade-offs between speed, cost, and quality. Doing this correctly actually changes the focus from reducing to making money.

Because enterprises need infrastructure that is both stable and produces a profit, the drive to adopt FinOps is rapidly becoming an essential part of cloud spend optimization. This is because FinOps produces a system where enterprises can examine their cloud workflow and assess cloud costs. Much like the DevOps approach that blends concerns across teams with some separation of concerns, FinOps provides the necessary knowledge to and motivation to collaborate across IT, finance, and business administration departments to solve financial and accountability issues with cloud spending.

Also, similar to DevOps, adopting FinOps brings an organizational and cultural expectation of interdisciplinary collaboration is a cultural as well as structural business transformation.  The outcome is a cross-functional team (workload, service, product owner) that effectively works together to deliver faster while gaining control over costs and operations. The journey towards FinOps maturity entails three iterative phases: Inform, Optimize, and Operate.

The Inform Phase 

The Inform Phase of the FinOps journey is about understanding the current state of your system. Due to the on-demand and elastic nature of access to cloud resources, along with variable pricing structures, it is critical to have access to timely and accurate system metrics to make appropriate, informed decisions. In this phase there are five primary goals:

  • Visibility
  • Allocation
  • Benchmarking
  • Budgeting
  • Forecasting

To learn more about how to achieve these goals read Inform: Phase One of Your FinOps Transformation.

The Optimize Phase 

The Optimize Phase of the FinOps cycle gives teams the opportunity to analyze and implement optimal optimization infrastructure configuration and purchase practices. Costs for the exact same server type can vary greatly when targeting spot, on-demand, or reserved instances. Using the data from the Inform stage enables FinOps teams to balance operational requirements with the best financial options to improve their overall cloud operations.

Optimization actions can include:

  • defining clear service level objectives (SLOs)
  • improving reserved instance coverage
  • right resources to match requirements
  • eliminate wasteful processes 
  • automate scaling processes

To learn more about the Optimize Stage check out Optimize: Phase Two of Your FinOps Transformation.

The Operate Phase  

The Operate Phase focuses on achieving objectives set in place during the Optimize Phase. Business objectives are compared against trends in the metrics set to evaluate speed, quality, and cost parameters. This phase also includes a consistent evaluation of business strategies and operations that leads the team to iterate through the FinOps phases to refine the system and ensure continued alignment to relevant goals. 

In the Operate Phase, the IT, finance, and business departments rely on timely and relevant data to: 

  • create customized FinOps frameworks and processes
  • establish informed goals that align speed, quality, and cost considerations
  • evaluate FinOps team practices in the context of meeting business objectives
  • iterate through the FinOps phases to improve operations and reduce spend

To get a deeper understanding of the Operate Phase check out Operate: Phase Three of your FinOps Transformation.

Conclusion

Though FinOps can be a complex and disruptive process for enterprises, the increasing adoption of FinOps is a testament to the real-world benefits of its application. The ability to measure operational costs against actual needs is an opportunity to save millions on cloud resource spending. Though the shift to FinOps can be difficult, especially for companies also going through the “digital transformation” to cloud computing, becoming familiar with the best practices, knowledgeable people, and relevant tools can greatly ease and accelerate the transition. Completing your FinOps journey will build teams that can deliver business value faster while gaining financial and operational control. Shifting to FinOps enables team members across your business to help increase efficiency, optimize resource utilization, and reduce spending.