If You’re on the Cloud, FinOps is Essential to Manage Costs

What is FinOps?

FinOps, a combination of finance and (dev)ops, acts as a framework that brings together finance and engineering teams to collaborate on cloud cost management. Its focus is on deriving the most value out of cloud initiatives to drive efficient growth. Not to be confused with cost optimization or cost reduction, FinOps practices are built to recognize that cloud spend can indicate growth, enable faster product development, and drive revenue. FinOps helps teams make critical business decisions regarding the trade-offs between speed, cost, and quality in their cloud architecture.

With its recent rise in popularity, FinOps underscores the pivotal role of understanding and managing cloud costs across an organization.

Cloud Management with FinOps

What are the benefits of adopting FinOps for cloud cost management?
With cloud computing becoming ubiquitous, organizations are realizing the need to optimize spending on cloud resources. FinOps offers several benefits, including enhanced cost visibility, allocation of resources to align with business goals, and proactive cost monitoring. It facilitates a culture of financial responsibility across the organization. This concept is not just about cost-cutting, but also about making informed decisions based on data-driven insights.

The emergence of FinOps is driven by the complexity of cloud pricing models and the necessity to prevent cloud cost overruns. It’s not merely a role but a culture that encourages continuous improvement in cloud spending practices. Regardless of which cloud (AWS, Azure, or Google Cloud), organizations are embracing FinOps practices to avoid unnecessary expenses and allocate resources appropriately.

Who is responsible for FinOps?

Incorporating FinOps involves collaboration between finance, IT, and development teams, fostering a holistic understanding of cloud costs. By implementing this methodology, companies can strike a balance between innovation and fiscal responsibility, ultimately leading to sustainable growth in the cloud era.

Cloud FinOps initiatives are typically led by executives and involve various stakeholders. According to The FinOps Foundation, the personas involved in FinOps include engineering, business and product owners, executives, and finance.

It’s important to emphasize the difference between a Cloud Center of Excellence (CCoE) and FinOps. The former is responsible for creating and implementing cloud-related best practices, governance, and architecture, while FinOps teams are specifically designed for optimizing the financial performance of cloud resources.

Which roles are key to FinOps?

As organizations adopt FinOps practices, a range of stakeholders become involved, each bringing their unique perspective. The primary goal and challenge of each stakeholder often looks as follows:

FinOps Practitioner, whose primary goal is to drive best practices through education, standardization, and cultural growth and support. Their unique challenges include lack of access to needed data, distributed accountability, building adoption at enterprise scale, and tool reliance that does not deliver capabilities needed.
CEO, focused on aligning cloud investments with business objectives. Often unable to see the link between engineering and business goals, CEOs may grapple with understanding chaotic cloud spend and cloud ROI.
CTO and CIO, who strive to leverage technology to give the business competitive advantage. They’re often under extreme pressure to reduce cloud costs, while maintaining performance and reliability. Also responsible for technical teams, CTOs and CIOs must manage engineering productivity, time to market, and keeping operations within budget.
CFO, ensuring cloud spend (among other costs) is used wisely. They often deal with unpredictable cloud expenses and understanding ROI.
Product Owner, tasked with bringing new products and features to market quickly and at the right price point. Often unable to predict how cloud infrastructure factors into product development, the Product Owner may deal with unforeseen risks or misalign pricing.
Engineering Lead, working to deliver high quality services quickly to the organization while maintaining business as usual. Their challenges include long delivery cycles, overworked engineers, and unpredictable development costs. They lack an easy way to estimate infrastructure costs for additional features, or those estimates come as an afterthought.
IT Finance Manager, whose primary objective is to accurately budget, forecast, and report cloud costs. Frustrations involved in achieving these objectives stem from distributed cloud accountability, variable cloud spend, and in many cases, dealing with a legacy infrastructure cap-ex model (vs. op-ex). The complex pricing structure of the cloud along with varying fees from service to service make budgeting particularly challenging for the Finance Manager.

Within larger enterprises, roles like an IT Asset Management Leader or IT Sustainability Practitioner may serve as additional FinOps team members. These roles look at asset utilization and cost reduction with limited visibility into cloud usage (accounts, licenses, SaaS).

Across the board, team members use various tools to do their jobs — from native cloud provider tools (think: AWS Budgets, Azure Cost Management, GCP Intelligent) to hybrid/multi-cloud, observability, and other specialty tools. The State of FinOps 2023 reports that organizations use an average of 4.1 FinOps tools to do their job (an increase from 3.7 in 2022). Specifically, there is a lack of a holistic cloud spend forecasting tools, which necessitates communication among these FinOps roles.

The benefit of the wide variety of stakeholders means the group fosters a shared responsibility, comprehensive understanding of financial aspects, and increased visibility into cloud spending across the organization.

What are the key outcomes of FinOps?

By bringing key stakeholders together with the goal of cloud management, the organization builds a FinOps culture, which includes:

Knowledge sharing through collaboration: As teams align and work effectively, there is a natural encouragement of knowledge sharing among stakeholders. This revelation underscores the value of insights and expertise exchange among different roles involved in FinOps.
Holistic cloud management: Stakeholders, including cost analysts, cloud architects, and business representatives, gain insights into aligning cloud expenditure with overall business goals.
Efficient resource utilization: With effective alignment, companies discover the ability to manage cloud costs efficiently and the most of their cloud resources.
Shared cost management: Stakeholders implement processes, review cost allocation, and deploy key performance indicators (KPIs) to ensure accurate tagging and effective shared cost management.
Financial forecasting and reporting: The alignment of FinOps stakeholders, especially in the finance domain, leads to improved accuracy in budgeting, forecasting, and reporting on cloud costs.

These revelations highlight the transformative impact of FinOps, emphasizing collaboration, knowledge sharing, efficient resource utilization, and improved financial management of the cloud.

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