Сoud FinOps is a management discipline and a cultural practice that combines DevOps and financial operations to maximize the business value of the cloud. It encourages collaboration between business, financial, and IT teams aimed at bringing more accountability to finances associated with the cloud. It also promotes informed, data-driven decision-making regarding managing the speed, costs, and performance of your cloud infrastructure.
However, FinOps is a relatively new concept, and only 9% of companies included in the 2023 State of CloudOps survey have identified that they have high FinOps maturity. Which principles should you adopt to implement a cloud FinOps model across your organization? Which best practices should you consider to ensure the implementation goes smoothly? Let’s find out.
How to implement cloud FinOps: key principles you need to apply
There are six core principles at the center of the FinOps model. While they are not hierarchical, all of them must be utilized to ensure you achieve the desired results.
1. Team collaboration
Near real-time collaboration between the IT, finance, and business teams is crucial for enhancing the cloud FinOps practice and continuously improving efficiency and innovation. By fostering collaboration between the teams, financial operations can align with the pace and granularity of IT. It also empowers engineers to consider costs together with other efficiency metrics and helps build a standardized governance and control system for managing and using cloud resources.
2. Cloud business value at the center of decision-making
The pursuit of business value should guide all decisions. Trending and variance analysis, internal and peer-level, and other tools help teams get a clear picture of both the cost increases and company performance. They help comprehensively evaluate costs, growth, and performance to make decisions based on value rather than reducing costs reflexively in response to expense hikes.
3. Complete ownership of cloud usage among all teams
The decision-making process around cloud architecture, usage, and optimization should be decentralized. This helps all teams obtain a better understanding to efficiently oversee their cloud usage and stay within their predefined budget. Setting and monitoring targets at the team level fosters accountability from the grassroots level.
4. Easily accessible and up-to-date FinOps reports
Processing and sharing reports based on cloud cost data as soon as it becomes available facilitates more impactful decision-making. It allows you to quickly adjust resources that are either over or under-provisioned and obtain a clear view of all your workflows. This, in turn, helps establish effective real-time financial planning and forecasting, which are the key drivers of cloud FinOps success.
5. A centralized team driving FinOps
FinOps functions as a decentralized process that involves the entire organization, yet it requires ownership by a centralized team. A dedicated FinOps team can assess various cloud providers and services and take advantage of committed-use discounts, reserved instances, upgrades, etc. Centralizing the buying process also entrusts an experienced team with rate negotiations, cost allocation to specific teams, and other responsibilities. This, in turn, allows engineering and operations teams to focus on optimizing their environments.
6. Utilization of the variable cloud cost model
Businesses should leverage opportunities for cost savings within the cloud cost model to optimize the value gained from their cloud expenses. This includes but is not limited to evaluating discounts and pricing options provided by different cloud service providers, rightsizing purchased instances and services, and more.
The 3 phases of the cloud FinOps lifecycle
There are three primary phases of the iterative FinOps lifecycle, during which it is refined and improved. Depending on the department and/or workload, your company can be in multiple or all phases simultaneously.
The initial phase involves gaining insights into the costs and utilization of the cloud across your organization (setting, allocating, and benchmarking budgets, forecasting services and resources, etc.). This information is crucial for FinOps teams to communicate to stakeholders the business value of the cloud, as well as prevent unforeseen costs, and identify improvement opportunities.
The information gained during the Inform phase helps the FinOps team enhance and optimize cloud utilization. With a thorough evaluation of the cloud environment and the use of automated tools, your experts can efficiently scale back or deactivate unnecessary resources. This, combined with reserved instances or discounts, helps your team save costs.
The essence of the final phase is consistent monitoring and assessment of the cloud operations to ensure they align with business goals and metrics. Your FinOps team observes the alignment of cloud performance with business needs and communicates this information to stakeholders, showing the business impact of cloud operations and finances.
Top FinOps best practices for smooth and effective adoption
Introducing significant changes to your company operations and culture is no easy fit. Since this case is no different, you should consider applying several key FinOps best practices to ensure the process goes as smoothly as possible.
Start with an audit
Before implementing the FinOps model within your organization, you need to know where you stand. Performing a cloud audit before implementing the FinOps model within a business is crucial for several reasons:
- Existing inefficiencies, such as areas of overspending in the current cloud setup.
- Data accuracy and completeness, ensuring that data related to cloud usage, costs, and performance is accurate and complete.
- Compliance checks with industry regulations, internal policies, and best practices to meet legal and governance requirements.
- Resource utilization analysis to obtain insights into how resources are utilized, which, in turn, helps enhance resource efficiency and reduce unnecessary spending.
- Financial governance assessment to establish a solid foundation for FinOps and ensure that financial management aligns with organizational policies and standards.
- Cost attribution and tagging to verify that costs are appropriately attributed to specific projects, teams, or departments.
- Risk identification and mitigation will allow you to proactively address risks, enhancing the overall risk management strategy within the FinOps framework.
Performing a comprehensive cloud audit may be a daunting task. Therefore, it is often a good idea to seek the help of technology consulting companies specializing in both cloud and financial services software development. They have the processes, methodologies, and experts to make the audit as quickly and accurately as possible. Furthermore, they can lend their services to implement and maintain the FinOps model, with the cloud audit as a foundation for your partnership.
Build an experienced cross-disciplinary team
Your FinOps team must include experts from IT, business, and finance domains to operate correctly. Each expert must be well-versed and fully committed to the FinOps initiative and be proactive at establishing and maintaining a FinOps-focused culture across your organization. A technology consultant can also be helpful, as they can fill in some of the roles you may be missing.
Establish a single source of truth
The cloud cost information you use must remain consistent. To achieve this, you need to establish a single source of truth by standardizing the cloud cost tool used by all teams. This tool needs to provide each team member with comprehensive information about the usage and costs of cloud resources to enable effective decision-making. You can utilize the tools cloud providers offer, namely, AWS Cost Explorer, Azure Cost Management and Billing, or GCP cost management tools, or look for third-party alternatives.
Set and monitor key metrics
FinOps teams must set and adhere to metrics (cost-per-transaction, cost-per-customer, etc.) to monitor and analyze your cloud costs vs performance effectively. This will allow them to justify cost increases after upgrading or scaling workloads that can eventually lead to a boost in transactions, customer growth, or an increase in revenue.
FinOps seeks to align cloud operations with business objectives by emphasizing collaboration and data-driven decision-making. However, implementing FinOps operations and culture across your organization can take time and effort. Therefore, you should seek to partner with an experienced cloud consulting company that can ensure a smoother transition and long-term success in implementing the FinOps model within an organization.
N-iX is a software solutions and engineering company with 21 years of experience. As an AWS Advanced Service Partner, A Microsoft Solutions Partner, and a Google Cloud Partner, we offer deep expertise in cloud and DevOps. There are more than 400+ cloud experts and 60+ DevOps engineers at N-iX who can help you successfully set up, implement, and maintain FinOps practices and culture across your organization.