Unless there is an actual commitment to fight against Cloud spending, the costs related to Cloud computing have a natural tendency to keep increasing over time.
To counteract this aspect, FinOps is making a stand.
What is FinOps?
This movement was spontaneously established worldwide. As of 2012, FinOps has been the market’s natural response to the strong stimulus caused by the Cloud. Faced with the rapid growth of « on-demand » Cloud resources, the FinOps phenomenon has emerged to fill a void, when no suitable managing methodology existed. This powerful surge has deeply impacted the organizations, creating a strong cultural change, along with a shift of the decision-making process in IT.
The FinOps phenomenon has emerged to fill a void.
Initially created as a planning methodology for Cloud resources, FinOps has become an analysis tool for Cloud optimization rates. Thanks to the Cloud, IT ownership as well as outsourcing decisions have been transferred from IT services directly to the Business units. This transfer represents a considerable cultural change within organizations.
In this respect, FinOps financially structures the model of Cloud variable expenses. These impactful changes have forced IT, procurement, finance, and the Business to work together. This was highly unusual until now. Old fashioned ways of working are disappearing, allowing new practices to emerge. The previous methods of infrastructure management are not only inefficient, but they are also irrelevant and outdated.
The previous methods of infrastructure management are irrelevant and outdated.
The fundamental principles of FinOps.
Before adopting the FinOps terminology, companies were talking about “Cloud cost management”. Later, the expression “Cloud cost optimization” was favored, however, it did not include the notion of Cloud allocation which constituted the real challenge. AWS and other suppliers started to use “Cloud financial management”, a “catch-all” phrase which was finally replaced by the term FinOps. By choosing this compound term – which deliberately echoes DevOps – the transversal aspect of FinOps is emphasized, along with the notion of agility. Nowadays, this movement has reached all levels of the company.
Why does adopting FinOps allow companies to take full advantage of the Cloud?
FinOps brings the rigorous accounting required to master the Cloud variable costs model.The methodology allows teams that are geographically scattered to make real time compromises between speed, cost, and quality when it comes to Cloud usage.
FinOps, a cultural change.
FinOps has certainly become the best way to control Cloud expenses. It is especially suited for an organization where the Business units handle their own Cloud usage independently. The teams benefit from the advantages of the Cloud while ensuring their financial and operational management.
The era where procurement had to approve every IT expense is bygone. Now, the FinOps manager is responsible for establishing Cloud best practices and buying guidelines for the whole organization. He optimizes the pricing conditions of Cloud suppliers for all the company departments by operating the triptych technology, Business, and finance.
Thanks to FinOps, each operational team has access to usage data almost in real-time. Collecting this data enables them to determine the correct level of spending.
Ultimately, generating useful Cloud expenses is the main goal. The expected benefits require a balancing act of Cloud services between speed vs. performance and quality vs. service availability.
A balancing act of Cloud services between speed vs. performance and quality vs. service availability.
FinOps should not be viewed as a simple potential savings source. It is first and foremost a generator of business and income.
The FinOps methodology aims to empower the engineering teams so that they can create better applications and services for the end users. It facilitates cross-team decision-making to know when and where to invest. Therefore, when a department from the company decides to tighten their Cloud spending, or on the contrary increase the investments, these decisions are made knowingly.
FinOps, first and foremost a generator of business and income.
The advantages of real-time reporting.
The 3 prerequisites for a successful FinOps
Real-time reporting + just-in-time process + cross-company collaborations
The earlier the consequences of an action are known, in real-time, if possible, the more the necessary solutions to correct it will be efficient. This is also valid for the Cloud.
FinOps offers the capability to take the right decisions based on data collected in real-time. It also facilitates exchanges between the different departments within the company.
When is the right time to launch a FinOps approach?
Cost optimization is the main advantage mentioned when speaking about FinOps. This is the reason why its implementation is most often, and rightly so, considered once a certain Cloud expense threshold is exceeded. By adopting this type of solution, a company that has high levels of Cloud spending will be able to achieve significant savings right off the bat. However, this same company might draw less benefits from FinOps than a company with lower levels of Cloud spending but with teams spread across many sites. The amount of Cloud spending is not the only determining factor to justify and succeed in implementing FinOps.
The person in charge of FinOps will be able to have a significant impact on the Cloud expenditure if they play their role of promoting the methodology within the whole company.
This is a mutual enrichment: the financial teams will have a more detailed knowledge of the Cloud, and inversely, the IT engineers will be able to better get to grips with purely financial notions.
The amount of Cloud spending is not the only determining factor to justify and succeed in implementing FinOps.
We will never be able to reproach an IT service for engaging in a FinOps approach too soon. The benefits of doing so can be felt and measured almost immediately after its implementation.
Cloud FinOps book by Mike Fuller & J.R. Storment
Using traditional Cloud expense management processes causes companies to lose control of their spending and represents a major obstacle to innovation. The Cloud FinOps book details the Cloud billing subtleties which are often misunderstood. It points out the strategies required to create a Cloud cost management culture. Describing real success and failure stories from the Cloud sector, this book maps out the way to building a FinOps culture within one’s own organization. Starting with the fundamental concepts of Cloud billing, professionals from all sectors will be able to learn how to build an efficient, powerful and useful tool.