The Definitive Guide to

FinOps

FinOps is an IT and financial model that was created in response to the structural volatility of the cloud and its rapidly increasing costs.

What is FinOps?

Financial Operations, or FinOps, is an IT and financial model that was created in response to the structural volatility of the cloud. FinOps is not defined by a single company, group or organization, but is heralded by an organic and spontaneous cultural movement across the world’s technological sector.

In short, FinOps is a change in mood. It is a shift in operating style that creates tethers between areas of a company that otherwise would only communicate minimally. This newly generated link between once disparate departments results in greater cross-communication, ultimately refining many stages of a company’s internal supply chain.

Over the last decade, we have seen companies embrace cloud infrastructure more and more, and with that increased reliance on cloud systems, pre-established frameworks are quickly becoming obsolete and unsatisfactory. FinOps is a direct response to this vastly-emerging need. The model’s progressive approach facilitates the sharing of information which leads to dynamic and almost real-time information collation.

FinOps is not a package or service, but rather a FinOps solutions framework. It is also not exclusive to a certain type of company, as the member count of the FinOps Foundation, a non-profit for groups that use the FinOps model, exceeds over 800 companies. This includes national banks, financial institutions and music streaming services.

You may have questions like “How much is cloud storage?” or “How does the cloud FinOps model give teams the necessary tools to answer cross-team queries specific to their products and services?”

In the next section, we take a more detailed look at FinOps, examining each of the model’s three phases, and how they affect a company’s structure and line of business.

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Three phases of FinOps

The FinOps process involves three distinct phases. These stages of operation are not chronological or used just once, they are applied concurrently and repeatedly. And this is precisely how FinOps allows companies to adapt as fast as their cloud services require. Therefore, if a company wants to maximize its efficiency and adaptability within their cloud structure, constant review of the cycle’s three phases is needed.

With the combination of the phases that are outlined below, a competent and cooperative team of multi-department members can be constructed and the goals of cloud FinOps are achieved. Now, let us review each of the three stages in full.

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Inform

The first phase of the process is Inform. This phase is where visibility on expenditure is increased between teams, meaning that all cloud activities are highlighted and documented including their respective costs.

A robust understanding of expenditure in this phase allows for accurate budgeting and detailed forecasting in later stages. It also makes sure that information is up-to-date when unexpected or sudden decisions have to be made.

When the projected costs of all teams are captured and continuously recorded, it becomes much easier to determine where excess costs are being made, and accountability can be pinpointed to individuals, teams or departments.

It is assumed that a collection of different methods are used to achieve both an accurate forecast and tracking system, which calls for a fundamental strategy for tagging and recording.

 

Optimize

Optimize is the stage where organizations can best allocate their resources and minimize expenditure.

According to the FinOps Foundation, this process of “stripping the fat“ is based on real-time decision-making. This involves the location and removal of underused services, an examination of whether resources are over- or under-funded, and the automation of resources where possible in order to maximize efficiency.

Conversely, the other side of Optimize is focused on projections. Teams follow the steps “predict, plan and purchase” and create strategies to lower the cloud footprint ahead of time, which results in lower cloud rates. This also helps to evaluate costs and answers questions like “How much is cloud storage?”

 

Operate

The third phase, though not necessarily the last phase, is Operate, the fast-moving application of the FinOps model. It is the direct implementation of processes that allow for the goals of the Optimization phase to succeed. Here is where different departments like IT and finance as well as executives create a channel of communication for greater success.

This group of multiple teams is known as the Cloud Cost Center of Excellence, also abbreviated to CCoE. However, this is discussed further in the FinOps team structure and positions section below.

In the Operate phase, constant evaluation is conducted to measure metrics related to the objectives of the company, meaning teams can continuously make changes towards both efficiency and innovation.

 

FinOps team structure and positions

As mentioned above, the coalescence of groups that create a cross-team collection for FinOps is known as the Cloud Center of Excellence (CCoE). In this section, we will examine the FinOps framework within the context of team structure and positions.

As is the case with many models, theories and frameworks, implementing FinOps is a task that is not a “simple flick of the switch” for every single company. An empirical approach is required, and the FinOps model provides a frame that helps companies achieve organizational innovations. Thus, it is not a clear cut-and-paste structure that can be automatically applied to any workplace or any type of service for positive results.

With that said, a company’s CCoE does require a number of set roles to ensure successful implementation. For example:

  • Practitioners tasked with assigning cloud related budgets and predicting future expenditures
  • Finance members that work closely with the practitioners to create forecasts and engage with cloud service providers to negotiate rates
  • Engineers that can better use the details gleaned from FinOps to design efficiently
  • Executives or heads of the CCoE that manage team efficiency and expenditure.

 

Conclusion

To summarize what has been discussed so far, let us remember the primary goal of FinOps: promoting a cultural change in the workplace towards efficiency in the cloud. By connecting teams that would otherwise go without contact for extended periods of time, this solution framework allows cloud services to be more streamlined, efficient and functionally progressive.

By using a model that is more prepared and accurate, teams can manage cloud services that are far more dynamic and responsive, leading to streamlined cloud expenditure. Again, FinOps is not a singular change, but a total reformation in management style that should be applied continuously and updated constantly.

FinOps is a naturally occurring response to pre-established ways of working within IT. With a world full of organizations that are increasingly using the cloud within their services, FinOps is just the beginning of a progressive approach to cloud-based services and cloud-based ways of conducting business.

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