There are three parts to a successful practice:
Real-time reporting + Just-in-time processes + Teams working together = FinOps
In this post, we’re going to dig into that first piece. You might be surprised by how effective it can be!
The feedback loop of real-time reporting changes human behavior automatically. If you’ve ever driven an electric car, you probably experienced this first hand. When you put your foot down heavily on the pedal, the car’s display shows energy flowing out of the battery into the engine. When you lift up your foot, energy flows back into the battery. The feedback loop is instant. You can see how the choice you’re making in the moment — one that in the past may have been an unconscious one — is impacting the amount of energy you’re using.
This real-time visual cue typically creates an immediate effect. You start to drive a bit more sensibly and step down a little less hard on the accelerator. You realize that you don’t need to accelerate quite so fast to get where you are going, or maybe you’re late and you do so you push the pedal down harder determining it’s worth the extra energy cost. No matter what, you can now make an informed decision to use the appropriate amount of energy to do the job based on the environment in which you’re operating.
Real-Time Data-Driven Decisions Are Essential to Cloud
If you hadn’t already guessed where this was going, that real-time data-driven decision enablement is what FinOps delivers. In the data center world, individual actions taken by an engineer couldn’t be easily traced to a financial impact on the company. Being in the cloud makes it possible, and once you set up that feedback loop, the results might surprise you.
We visited one of the world’s largest cloud spenders last year and learned that despite nine figures a year of annual cloud spend, they weren’t usually showing engineers the costs they were incurring. Even when they did show costs back, it was 30-60 days later and at an aggregate cost center level. They had the raw data available to them to enable a feedback loop, but they hadn’t implemented a culture of FinOps.
When they did, the results were pretty dramatic. One of the first teams with this visibility found they were spending over $200k per month on dev environments they really didn’t need to be running. With only three hours of engineering effort, they shut down the resources and saved enough money to hire an additional team of engineers.
What’s really interesting about this story is that no one specifically gave the team a recommendation to make the change. Once they were able to see the cost of their individual environments, an engineering manager made the decision that the team could do without them. He hadn’t previously taken action because he didn’t understand just how large the impact to the business was. Cost became another efficiency metric to consider. And engineers tend to dislike inefficiency.
Real-Time Decisions & FinOps Go Beyond Costs to Increase Velocity
Remember, FinOps isn’t all about cost savings — It’s about helping the business to make better decisions while moving faster. It does this by enabling frictionless conversations between teams to increase velocity.
Let’s look at an example of FinOps that’s about increasing spend. A SaaS company realized if they spent more, they could improve customer experience significantly and protect revenue in the process. A part of their system was having performance issues, and the result was load times that had customers threaten to leave. By increasing the footprint of the application’s infrastructure, they could dramatically increase the speed.
The engineering team doing the performance optimization also considered cost as part of the process. They’d diligently tagged their resources and were watching the costs associated with the deployment closely. The day after the test, they were able to calculate the expected monthly cost for the change and have a conversation with the product owner about whether the additional $10k per month was worth the added expense.
They determined it was, and the change was put into production with full approval from leadership. The product owner was able to go to her finance counterpart to let him know about the budget variance before it even happened. There were no surprises and trust was built between the tech, business and finance teams that each had made the right choice for the business. Building trust between these teams helps accelerate the cultural change.
This is FinOps in action. It creates frictionless relationships between teams that typically spoke different languages and kept each other at arm’s length. By setting best practices and defining a common lexicon for their organization on cloud spending, they enable productive trade-off conversations to happen — even when they are not a part of them.
Keep breaking down the silos…
Not sure how to create a culture of real-time reporting to your team? Get the insights you need and join the discussion defining the FinOps movement by becoming a member of the FinOps Foundation.