FinOps is the operating model for the cloud. FinOps enables a shift — a combination of systems, best practices and culture — to increase an organization’s ability to understand cloud costs and make tradeoffs. In the same way that DevOps revolutionized development by breaking down silos and increasing agility, FinOps increases the business value of cloud by bringing together technology, business and finance professionals with a new set of processes.
The Three Phases of FinOps
The FinOps journey consists of three iterative phases — Inform, Optimize and Operate.
Any company may be in multiple phases at any time depending on which business unit, application or team is on the journey.
This is the first phase in the FinOps journey, empowering organizations and teams with visibility, allocation, benchmarking, budgeting and forecasting. The on-demand and elastic nature of cloud, along with customized pricing and discounts, makes it necessary for accurate and timely visibility for intelligent decisions. Accurate allocation of cloud spend based on tags, accounts or business mappings enable accurate chargeback and showback. Business and financial stakeholders also want to ensure they are driving ROI while staying within budget and accurately forecasting spend, avoiding surprises. Benchmarking as a cohort and against teams provides organizations with the necessary metrics to develop a high performing team.
Once organizations and teams are empowered, they need to optimize their cloud footprint. Cloud providers offer multiple levers to optimize. On-demand capacity is the most expensive. To encourage advanced reservation planning and increased commitment, cloud providers offer discounts for commitments which typically involves complex calculations for making reservations (Reserved Instances (RI) / Committed Use Discounts (CUD – Google Cloud). In addition, teams and organizations can optimize the environment by rightsizing and automating turning off any wasteful use of resources.
Organizations start to continuously evaluate business objectives and the metrics they are tracking against those objectives, and how they are trending. Measure business alignment on speed, quality and cost. Any organizational success is only possible if the organization builds a culture of FinOps which involves a Cloud Cost Center of Excellence built around business, financial and operational stakeholders who also define the appropriate governance.
FinOps Team Structures
The above diagram demonstrates how, for organizations operating on the FinOps model, a cross-functional team known as a Cloud Cost Center of Excellence (CCoE) interacts with the rest of the business to manage the cloud strategy, governance, and best practices that the rest of the organization can leverage to transform the business using the cloud.
Individuals at every level and in every area of an organization can have a different role to play in the FinOps practice. This includes:
Executives like a VP/Head of Infrastructure, Head of Cloud Center of Excellence, CTO or CIO focus on driving accountability and building transparency, ensuring teams are being efficient and not exceeding budgets.
FinOps practitioners, such as an AWS FinOps Analyst, Director of Cloud Optimization, Manager of Cloud Operations or AWS Cost Optimisation Data Analyst are focused on forecasting cloud spend, allocating and budgeting cloud spend to teams.
Engineering and Operations
Engineers and ops team members, such as Lead Software Engineer, Principal Systems Engineer, Cloud Architect, Service Delivery Manager, Engineering Manager, or Director of Platform Engineering, focus on building and supporting services for the organization. Cost is introduced as a metric in the same way other performance metrics are tracked and monitored. Teams consider the efficient design and use of resources via such activities as rightsizing (the process of resizing cloud resources to better match the workload requirements), allocating container costs, finding unused storage and compute, and identifying whether spending anomalies are expected.
Finance and Procurement
Finance and procurement team members, including Technology Procurement Manager, Global Technology Procurement, Financial Planning and Analyst Manager, and Financial Business Advisor, use the reporting provided by the FinOps team for accounting and forecasting. They work closely with FinOps practitioners to understand historic billing data so that they can build out more accurate cost models. They use their forecasts and expertise from the FinOps team to engage in rate negotiations with cloud service providers.
FinOps Requires a Cultural Shift
At its core, FinOps is a cultural practice. This operating model is the most efficient way for teams to manage their cloud costs. Using FinOps, teams can come together to deliver faster while gaining financial and operational control.
Distributed decision making coupled with the move to variable spending in cloud allows technology teams to efficiently partner with finance and business teams to make informed decisions that drive continual optimization. FinOps processes enable these teams to operate at high velocity while improving the unit economics of cloud. This shift enables and empowers teams at the edge and allows team members in every part of the business to participate in the process of increasing efficiency, optimizing utilization and reducing spend.