As defined by the FinOps foundation — a community dedicated to advancing cloud financial management best practices — FinOps is “an evolving cloud financial management discipline and cultural practice that enables organizations to get maximum business value by helping engineering, finance, and business teams to collaborate on data-driven spending decisions.”
Source: FinOps Foundation
The FinOps model fundamentally changes the way IT, finance, and LOB groups interact to accomplish organizational goals. Cross-functional teams in Engineering, Finance, and Product Development work together to plan IT investments and enable faster product delivery, bringing financial accountability and cultural change to the variable spend model of cloud.
With a financial culture infused throughout the organization, engineering and business teams collaborate and make trade-offs between cost, speed, and quality as they map out cloud architectures and cloud investments. Shared reporting and accountability of costs and expenses keep everyone in the loop with near-real-time and transparent visibility into cloud spend.
“While cloud brings in increased agility, it comes with a great deal of complexity,” notes Sreenivasulu Maheshwaram, Kyndryl’s principal architect, ModernOps-Cloud Practice. “As cloud consumption accelerates, there is sticker shock over increasing costs. That’s why cost containment along with security are the No. 1 priorities.”
There are three iterative phases to the FinOps journey, and companies can be in multiple phases at any time, depending on which business unit, application, or team is embarking on the journey. Operationalizing FinOps at scale requires an enterprise-wide commitment to continuous improvement. At the same time, although FinOps aims to maximize cloud spend, the goal isn’t solely cost reduction — it’s also about making the best decisions on cloud usage as it relates to performance, quality, and costs. “The actual end goal of FinOps is not just cost savings; it’s delivering the most business value out of every dollar spent on the cloud,” Maheshwaram explains.
As defined by the FinOps Foundation, the three phases are:
Inform: The first phase of FinOps is all about empowering organizations and teams with visibility, allocation, benchmarking, budgeting, and forecasting data to make timely and intelligent decisions. Metadata and tagging help align business and operational requirements, enabling cross-functional stakeholders to drive ROI and stay within budgets. Visibility into spend enables accurate charge-back and show-back; as transparency increases, organizations establish trust in cloud spend decision-making, which is crucial for transformation and nurturing high-performing teams.
Optimize: Data is used to identify and validate optimization opportunities, either by inspection or exception, and employ automation based on policies. Artificial intelligence/machine learning (AI/ML) can also be leveraged to identify new optimization opportunities. The goal is to rightsize and automate the turnoff of underutilized IT resources, which can make a significant difference in optimizing hybrid cloud spend.
Operate: Optimization becomes ingrained in the service design and use. In addition, governance is implemented across the entire service life cycle, from planning to consuming to operating and paying. As part of the practice of continuous improvement, organizations establish and reconcile financial controls (budgets) on the front and back end of the processes and institute systemic multisupplier IT governance practices.
