Historically, few people knew how best to promote a shared responsibility for an enterprise’s cloud infrastructure and costs. This led to the start of a small community of cloud practitioners who met to discuss best practices. The community grew quickly into the formal discipline of FinOps which is now practiced in many world-class organizations. The discipline includes thousands of Cloud, Finance, IT, and Engineering professionals from many diverse industries. FinOps streamlines cloud cost transparency and optimization, and planning processes in the cloud. Cross-functional teams collaborate to improve financial analytics and control, enhance budget and resource allocation, and implement an effective cloud usage strategy.
Guiding principles such as collaboration, timely reporting, centralized teams, cloud usage ownership and business-value driven decisions are at the heart of the FinOps mission. We’ve identified three fundamental building blocks that help organizations build a robust FinOps discipline upon that foundation. These components are setting up the FinOps team, implementing FinOps and leveraging software tools designed for FinOps.
The collaboration of various stakeholders is key to building a successful FinOps discipline. They keep cloud costs under control and detect cost anomalies to prevent unexpected expenses. Building effective collaboration around cloud financial management requires aligning competing priorities of fast development, watching spend and ensuring quality work. FinOps managers are responsible for overseeing cloud costs and enabling transparency with cross-functional stakeholders. Each stakeholder group owns a set of issues that need to be solved to achieve cost excellence with FinOps.
- Cloud Operations are responsible for supporting and architecting all cloud platform environments and applications. They continually monitor the applications to ensure resources are used effectively and provide recommendations for optimizing performance and operational resilience.
- Infrastructure and Operations teams establish technology roadmaps, operationalize technologies, and enforce governance, standards and processes. They require platforms and tools to ensure an organization’s IT estate is operating optimally.
- Finance must drive financial accountability and predictability in cloud costs. Forecast accuracy, effective cost allocation and the promotion of good governance ensure the enterprise is cost-efficient in the cloud.
- Engineering wants to create great products that are easily adopted and offer value to end users internally and externally. Moving the needle on cloud cost through initiatives such as cost transparency, staying on budget and monitoring application performance is important to this team.
- Leadership teams make strategic decisions based on the value the cloud drives for the business and customers that ultimately result in innovative solutions, satisfaction and loyalty. They strive for revenue to outpace cloud spend, accelerate savings, sponsor FinOps teams and hold them accountable for outcomes.
Cost optimization will save money, but that should not be the main goal. The goal of a successful FinOps implementation is to get as much as possible from investment in the cloud.
Every situation is different and there isn’t a single way to handle cloud optimization in FinOps. However, many organizations can achieve better control and manage their cloud spending by building upon the 4 strategies which we’ll examine in this section.
- Analysis. FinOps teams must have access to the latest data and analytics to make informed decisions. Data analysis, chargeback and showback push spend accountability to those that are responsible for creating the expense. It calls attention to total costs for the business entity, opportunities for cost avoidance and financial KPIs.
- Benchmarking. Well-defined success metrics are critical for measuring the impact of FinOps strategies. Knowing where to spend money, budget and forecast accuracy, monitor cloud-instance performance are just a few success benchmarks for successful FinOps transformation.
- Optimization. Organizations need to understand how spending fluctuates relative to cloud management decisions. Rightsizing instances and repositioning workloads are actions that improve cost and performance in the cloud. It’s easy to forget to turn off resources when not in use. While tempting to shut down unused resources to lower running costs, it can be dangerous to do so without knowledge of the downstream impact on production or other processes.
- Governance. When it comes to improving the efficiency of the organization, the establishment of effective controls and governance is critical. Organizations need a policy engine that ensures cloud optimization objectives are being followed, budgets are maintained, costs are properly allocated, reports are generated, and that communication is taking place across the enterprise.
FinOps practitioners know that technology is limitless, and intelligence is priceless. Optimizing IT spend, reducing risk and leveraging technology all help to prevent cloud usage and cost from spiraling out of control. This is especially important for organizations with large and disparate user bases. Software tools help cross-discipline FinOps team members to effectively track, manage and reduce cloud costs. Their capabilities include the following:
- Visibility. A top challenge for FinOps teams is the ability to visualize, understand and manage cloud costs and usage over time. Software tools analyze cloud data (including containers) from multiple cloud service providers. These tools allow teams to gain insight into cloud provider bills, identify trends, pinpoint cost drivers and detect anomalies.
- Cost Allocation. It’s impossible to accurately attribute costs to users until you know where each teams’ resources live. Cloud provider billing accounts often lack the granularity required for allocation. Software features such as tagging allow for efficient cost chargeback and drive greater accountability based on resources that are consumed.
- Reporting. FinOps teams face the challenge of investigating changes in cloud spend by cost center, application, service and resource. Software consolidates and visualizes billing, containers and other data from multiple cloud providers into a single, unified view. This makes it easy for teams to share and work from the same data set.
- Budgeting. Forecasting cloud budgets can be difficult because of the large number of services, resources and pricing variables involved. With FinOps tools, stakeholders can analyze historical spending data to accurately forecast cloud spend and usage.
FinOps inextricably links people, process and technology to break down organizational silos, facilitate information flow, improve decision making and more. While needs and usage may change over time, developing an effective plan for cloud financial management will help maintain balance between cloud performance and cost well into the future. A good FinOps strategy ensures that everyone who needs to be involved is included in the planning process.
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