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Ibrahim S
Ibrahim S

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Day 3: Fundamental FinOps Principles and Key Terminologies

#ibbus #100daysoffinops #cloudfinops #finopssi

FinOps (Financial Operations) is a cultural and operational framework that brings together finance, engineering, and business teams to maximize the value of cloud investments while ensuring cost efficiency and accountability.

FinOps is not a process you follow once. it’s a way teams collaborate to control cloud spend.

There are six core FinOps principles:

  1. Teams must come together and become collaborative.
  2. Decisions are driven by the business value of the cloud
  3. Everyone is responsible for their cloud use.
  4. FinOps data should be accessible and timely.
  5. FinOps is driven by a centralized team.
  6. Take advantage of the variable cost model of the cloud

Key FinOps Terms Explained:

  • Allocation Metadata: Information used to categorize costs based on where a resource is in your environment.
    Example: Environment=Production, Team=Marketing, and Project=AppX

  • Cost and Usage Reporting: The data source that cloud service providers use to derive your bill for the cloud services consumed.

  • Chargeback: A technique of cost allocation that directly charges teams for their consumption, usually implemented as a strategy for financial allocation.

  • Showback: This approach shows real consumption without directly charging teams, but it still informs them about their usage.

  • CAPEX: Capital expenditure-large one-off purchases that enable long-term value.
    Example: Before cloud adoption, a company might buy on-premise servers and data center equipment for $500 a CAPEX investment depreciated over several years.

  • OpEx: Operational expenditure is the recurring cost of operations.
    Example: After moving to the cloud, the same company now pays $25,000 per month for compute and storage resources — an OPEX model where costs vary with usage.

  • Shared Costs: Expenses belonging to several.

FinOps is not a tool you install. It’s a culture you adopt to get value from the cloud.

FinOps helps organizations balance cost, speed, and quality in the cloud by ensuring that everyone is accountable, data is transparent, and decisions align with business value.

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