An Exhaustive Guide on FinOps – The Modern Management Practice
“FinOps is not just a solution, it’s not just a one-time action. It’s a continuous process that needs to be established and optimized.” – Max Guhl
The rise of digitalization and cloud computing has put more prominence on cost and cloud financial management. With cross-functional teams working together, certain gaps are encountered in terms of centralized purchasing, operational management complicated pricing structures, wastage of resources, etc.
Thus, came the cultural cum management practice, FinOps – a merger of Finance and DevOps. It is also referred to by other names such as Cloud Financial Management, Cloud Cost Management, and Cloud Financial Engineering.
The basic concept of FinOps has come up to implement the traditional way of financial management to services like cloud computing in a modern-day DevOps environment and rule out cloud financial management challenges. It aims to align business objectives, enhance the decision processes, and garner maximum business value.
This comprehensive guide attempts to detail the basics of FinOps, its principles, benefits, way of working, challenges, and all that you need to know.
What is FinOps?
“FinOps is an evolving cloud financial management discipline and cultural practice that enables organizations to get maximum business value by helping engineering, finance, technology, and business teams to collaborate on data-driven spending decisions.”
The basic goal of FinOps is to assist the finance, engineering, business, and technology teams in an organization, realize maximum business value, and sustain financial accountability for cloud services. It offers shared responsibility to help cross-functional teams collaborate better, strike a balance and bring in increased performance, quality, and cost control. In a FinOps framework, the IT and DevOps groups collaborate closely with the finance, purchase, and other teams in hybrid and multi-cloud environments.
The FinOps Foundation promotes this discipline as a nonprofit trade organization. It gets procurement under the centralized umbrella of a consolidated FinOps team so that the entire organization operates at a similar wavelength to get in efficiency, optimization, and continuous improvement.
Who Collaborates in a FinOps Environment?
The major stakeholders in any FinOps environment are
- Executives – CIO, CTO, CFO, head of Cloud CoE
- Business/Product Owners – Cloud analyst, Director of cloud optimization, operations manager
- Engineering & Operations – Software engineers, system engineers, managers, cloud architects, service delivery managers
- Finance/Purchase – Financial planners, financial advisors, purchase specialists
- FinOps Practitioners – especially for implementing FinOps
The FinOps Lifecycle
The FinOps lifecycle, as recommended by the FinOps Foundation, is a continually managed process that involves three fundamental steps. Any organization could be in multiple phases at a particular instance depending on the level of maturity of teams. It is not a linear procedure that goes one after the other. It is more of a continuously executing one till the FinOps process attains maturity. Here are the three steps:
- Inform
Accurate and timely information is the key to success. The process includes empowering all users with the information they need for making decisions regarding cloud services, budgeting, forecasting, and determining RoI.
- Optimize
Optimization of costs and resources depends on different factors like licensing options, committed discounts, upscaling and downscaling of resources as needed, and workload performance.
- Operate
Evaluating the performance, cost, and quality aspects against business objectives with key metrics and measures, to enhance the FinOps practice. Constantly adjust cloud resources to control cost without affecting performance.
Key Advantages of FinOps
FinOps is a modern-day practice that offers a great deal of benefits, it is implemented properly, under the guidance of a practice expert. Here are some of the major advantages, it tags along:
- Optimization of cloud resources and cost efficacy
- Acceleration of business value and process transparency
- Increase in financial accountability and cloud reporting
- Controlled usage of cloud spends
- More cross-functional collaboration
- Enhanced decision-making depending on data
- Increase in operational resiliency with better quality
- More focus on productivity, agility, and release frequency
Few Limitations of FinOps
Though there are several benefits FinOps brings along, there are some limitations that must be catered to, for a fulfilling experience, here are they:
- Multiple Tools for FinOps – Organizations may need several tools or platforms for the effective implementation of this process. That could cause an issue, especially, if not planned or accounted for.
- Dependency on Best Practices and Policies – FinOps can best be implemented with proper processes and policies. If it is not done properly, there are chances of failure.
- Alliance Issues – FinOps operates optimally only when all involved teams work in complete synchronization with each other, failing which, there are chances of less efficacy levels.
Basic Principles on Which FinOps Works
For any FinOps practice to succeed, there are certain fundamental principles on which it is based. These are general guiding theories that must be adapted to implement the FinOps methodology:
- Collaboration Between Teams
Teams form the fundamental base of FinOps. Hence, getting support for ensuring collaboration between the business, finance, technology, and engineering teams is a must. A good synchronization enhances the results of the management strategy and optimizes financial performance in the cloud. Working together can garner better opportunities for cost control and work towards a common objective.
- Taking Ownership of Cloud Utilization
Each workflow owner must realize and take ownership of their cloud utilization portion. The FinOps process empowers users to own their cloud usage within the stipulated budget. This helps them in finding out redundancy and wastage, leading to better cost utilization. It also brings in more accountability from the lowest level up.
- Centralized Controls
FinOps, as a distributed process, believes in taking centralized control of all operations for better management and monitoring of all departments and users. The team is competent to centralize resources and cost components with proper negotiation and management of issues like reserved instances, upgrades, and discounts.
- Timely and Accurate Reporting
FinOps looks for precise, appropriate, and comprehensive reporting through a variety of reports so that stakeholders can make optimal business decisions in a fast manner. It also helps in making informed decisions about cloud spending, visualizing trends, and increasing forecasting. It also assists in taking corrective actions, perceiving workflows, and rightsizing of resources.
- Ensuring Business Value
FinOps looks for value-driven business, not cost driven. Yes, cost does matter a lot but is not the only criterion. It looks more by offering visibility and control, thereby optimizing business value. It depends upon good quality data to strike a balance between quality, best practices, culture, performance, and cost of cloud usage for the organization.
- Variable Cost Model
The FinOps teams implement variable cost models empowering teams for instance optimization/rightsizing and minimization of their unused capacity. It also consists of a comparison between pricing options and discounts given by different stakeholders
FinOps – A Bright Future Ahead
We hope the above details about FinOps as a cloud financial management and cultural practice have been fruitful. It must be perceived that FinOps is more about telling teams if their spending is right or not, avoiding wasteful expenses, and understanding a common language.
Cloud computing surely has a bright future and hence FinOps and the future of cloud financial operations are also on the rise. Some of the futuristic trends that are being observed under FinOps are the omnipresence of the cloud, sustainability, vertical and regional cloud services, and a programmable, AI-enabled, fully managed cloud infrastructure.
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