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FinOps Phases

FinOps is performed by working iteratively on the Framework Capabilities through three phases: Inform, Optimize and Operate.

Teams within an organization may be working at different FinOps Phases at any time and FinOps practitioners should always be looking at the organization’s cloud use, identifying ways it could be improved, and creating documentation to empower the individuals responsible for enacting changes that will drive the most value.

Quick action on a regular cadence can help teams avoid analysis paralysis, and can reinforce the good practice of starting small and growing the size and scope of the team’s actions as it matures through experience and momentum.

The goal is to continuously develop strategies and refine workflows that involve the activities encompassed by the Framework Capabilities, measuring the results, making incremental improvements, and maturing the process to reduce the time required to cycle through these phases.

Inform

Visibility & Allocation

In the Inform phase, FinOps activities involve identifying data sources for cloud cost, usage and efficiency data. Using this data for allocation, analysis and reporting empowers teams to develop capabilities in budgeting, forecasting trends, building KPIs for benchmarking, and developing metrics that will reveal the business value of an organization’s cloud spend.

Accurate allocation of cloud spend based on tags, accounts, or business rules enable accurate reporting. Business and financial teams must ensure they are driving ROI while staying within budget, accurately forecasting spend and carbon costs, and avoiding surprises. Benchmarking against others or between teams provides organizations with metrics to understand how effectively they are operating. By combining all of the cloud cost data with other data about sustainability, efficiency, utilization, and the performance benchmarks for the organization, teams should be able to see the key performance indicators and unit metrics related to the organization’s cloud use.

The on-demand and elastic nature of cloud, coupled with complex pricing discounts, requires organizations continuously revisit activities that inform their business objectives through data-driven decisions using accurate and timely visibility of their cloud usage.

Optimize

Rates & Usage

In the Optimize phase, FinOps activities involve identifying opportunities to improve cloud efficiency using the data and capabilities developed in the Inform Phase.

Cloud providers offer multiple options to optimize cloud resources. This involves building capabilities to rightsize underutilized cloud resources, take advantage of modern architectures, manage workloads and automate the elimination of waste from unused resources.

Additionally, Cloud providers offer options to optimize cloud rates. This involves visibility, analysis and reporting capabilities to empower the purchase and management of commitment discount and committed use discount pricing models such as Reserved Instances (RIs), Savings Plans (SPs) and Committed Use Discounts (CUDs).

This phase is also about collaboration across teams to optimize visibility, reporting, and management processes for areas where unit metrics indicate cloud performance is not aligned to the organization’s cloud value goals.

Optimization options may result in competing paths but the underlying goal is to develop a good set of opportunities that will help the organization achieve more value from its cloud investment.

Operate

Continuous Improvement & Usage

In the Operate phase, FinOps activities involve implementing organizational changes to operationalize FinOps using the data and capabilities developed in the Inform and Optimize phase. This includes establishing cloud governance policies, compliance monitoring, and empowering individuals through the development of training programs, team guidelines, and automation policies that are aligned with organizational objectives.

FinOps success requires organizations to build a culture of accountability where engineering, finance, and business teams collaborate on continuous, incremental action based on the data generated in the Inform phase, selecting the best opportunities identified in the Optimize phase, and using a bias for action developed throughout the organization.

Working through this phase, keep in mind the goal to iteratively develop strategies and refine workflows; this involves looping back to the Inform and Optimize phases to mature the activities adopted from the Framework Capabilities, evaluate introducing new capabilities and evolving FinOps operations for the organization.