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2023
3.26.2024

FinOps: The Secret Key to Cloud Cost Control?

Last updated:
12.27.2023
3.26.2024

Gone are the days of enterprises asking, ‘what is the cloud?’ As of today more than 90% of enterprises have migrated their infrastructure to the cloud or are using some level of cloud-based applications in their day-to-day business. We’ve now entered an era of optimization and refinement of your cloud usage.

As companies implement the cloud, a few stumbling blocks appear to have created a pause for re-evaluation. This is common with any new wave of a technological frontier of course. In this case, optimizing spending on existing cloud resources has come to the forefront of this new chapter. Many organizations are finding common issues around controlling cloud spending, including cloud visibility, complex pricing, and managing your cloud environment in a way that aligns to business drivers.

So how does one address these issues? Enter FinOps. This is a new practice that’s been bubbling to the surface of the tech community over the last year or so, and it’s gaining traction.

FinOps is a portmanteau of the terms ‘finance,’ and ‘DevOps’ which is intended to stress the importance of collaboration between business and engineering teams. You may even already be using some elements of this practice under another name; ‘Cloud Financial Management,’ ‘Cloud Optimization,’ or even ‘Cloud Financial Engineering.’

Let’s explore what exactly FinOps is, how to implement it, and how it will benefit your organization.

Defining FinOps

FinOps: “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.” – FinOps Foundation
FinOps framework as outlined by the FinOps foundation

To break this down, FinOps is not a one-size-fits-all rigid solution but a cultural practice to mold into the operations of your company, driven by a centralized team. FinOps practices will bridge the gap between your teams for transparency and due-diligence purposes. Your right hand will have a much better idea of what the left hand is doing. By sharing information between teams and creating discipline in collaboration, you can achieve better informed and better executed spending decisions.

At its foundation, FinOps is meant to change the way your teams think about cloud management so everyone can take ownership of their cloud usage. You must be intentional about how you implement FinOps capabilities and concepts into your organization, and you must be flexible to take time to assess, introduce, and evaluate best practices according to your unique needs over time.

When it comes to actually applying FinOps practices and introducing it to your enterprise, we’ve found several steps to help make the introduction stick. You’ve already done the most important part: recognizing the opportunity to set your organization up for success in its cloud adoption and usage. Next, following these five steps can help you introduce FinOps successfully. These steps were developed by the FinOps foundation, and we’re going to break them down into digestible discussion points.

Step One - Plan

This is your chance to lay the groundwork. You need a stake holder to be on board for the implementation of FinOps; having an executive sponsor will assist in gaining and keeping momentum in the early stages. You likely already have an idea of why you need to implement a FinOps team and what your areas of concern are. Whatever the cause, it’s time to do your research and gather your resources. Understand your specific pain points, as well as what teams, groups, and individuals will be impacted, and discuss them with your executive sponsor.

Once you’ve got a stakeholder on your side, and have discovered your main areas of concern, you’ll need to create a vision of what the future will hold. Determine what tools you’ll need to achieve this future. Identify KPIs to measure the progress of your FinOps integration and performance for stakeholders.

This is also where you will determine the central home base for your FinOps practices. As stated earlier, FinOps is a cultural practice, but it’s driven by a central team, which can be created through a few different avenues:

1.     Create a cross-functional transformation program office and create workstreams and working groups.

2.     Incorporate the FinOps function as an extended part of your Cloud Business Office or Cloud Center of Excellence.

3.     Curate a designated Cloud FinOps Team

This planning stage will allow you to bring your supporters together, open lines of communication, and examine opportunities that can be exploited. Planning will allow for your key actors to understand what FinOps is, and why it’s important to your organization’s success.

Step Two - Socializing

With the details have been hashed out during the planning phase, now it’s time to determine how FinOps is going to be promoted within your organization. You’ll need to determine just how your stakeholders are going to promote FinOps through a high-level roadmap. The affected teams you discovered in step one will need to be brought into the conversation so the FinOps team understands their pain points, and what their FinOps interaction will look like.

It’s important to designate your channels of communication and establish what interaction will look like among your cloud teams, business stakeholders, and your FinOps team. This is your chance to create transparency within your organization which builds stronger and more effective teams.

Step Three - Prepare

It’s time to assess your FinOps readiness. Your team will need to deploy, configure, and smoke test the tools that determine your starting points, and will help you track your cloud spend initiatives. Tools like resource tagging and charge backs help you track cloud spend back to specific business initiatives and units. Another great tool is Azure Cost Management + Billing, a cloud-native tool that helps you manage, analyze, and optimize cloud costs. Consider metrics like cost per client and if you’re not already tracking it, how would calculate it and continue to track it? What works? What needs to be changed? At this preparation stage, you’ll also need to finalize your first wave of KPI's. Here are a few example KPI’s you may be setting for different objectives:

Cloud Visibility:

-       Percentage of the cloud environment has proper tagging in place

-       Forecasted cost against the cost of cloud resources per team

Cloud Optimization:

-       Production incidents by application or team

-       Average time to repair or average time between failures

Cloud Governance and Automation:

-       Percentage or number of automated services

-       Cost optimized over time

Your goals will evolve over time as you introduce new practices into your organization, and working in phases allows for you to grow in a crawl, walk, run mentality. This allows for less mature departments and executives to be prepared with a step-by-step plan. Keep in mind, that with multiple business units being involved comes varying degrees of maturity, thus…being prepared to adopt new practices at different paces.

At this step, engage your early adopters to further optimization wins. If you’re able to establish small, early wins among stakeholders and teams, this will help you deliver adoptions more efficiently in the future.

Engagement is going to be crucial to your FinOps adoption and this step is where your FinOps or Cloud Center of Excellence team should be speaking regularly with business units, app teams, stakeholders, etc. This should be natural, but if not, ensure you’re introducing a cadence of regular meetings to maintain communication pathways. This preparation step ensures alignment across teams, finalizing the right approach, and delegating responsibilities.

Step Four - Launch

Whether you are using a hybrid, multi-cloud, or single-cloud service, managing cloud costs manually is difficult. Thankfully, you have done research, formulated, gathered resources, and the right tools, and built your teams. Now it’s time to put it into action.

Remember the crawl, walk, run phases we mentioned? FinOps can be most successful when adopted in an Agile manner with a commitment to continuous improvement and automation. Your FinOps practices will not be implemented all at once with grandiose dreams of success and big wins. Practices like this require flexibility, incremental introductions, and constant communication. Here’s a look into what your crawl, walk, run phases may look like as you launch your FinOps model.

Crawl – Reactive

-       Frequent check-ins and workshops

-       ‘Cloud Optimization‘ evangelism

-       Quarterly cost reviews

Walk – Proactive

-       Wins are being highlighted

-       Monitoring metrics to get-ahead of issues, rather than catch up to them

-       Teams begin to actively engage with practices

Run – Integrated

-       High-quality training

-       Pre-allocated budgets

-       Automation has evolved to be in use for discovery and resolution

You will be working toward one of the biggest benefits that FinOps can offer, proactively managing cloud cost efficiently. You’ll begin to see reduced waste in cloud spend and will be making more of your resources with techniques like automatic scaling and load balancing.

FinOps will help you create accountability and align it to cloud users and teams. An organization will gain confidence around budgets, forecasts, and ensuring smooth performance without having to increase your budget. However, you can’t expect this all to happen immediately.

Step Five - Run

Now, this isn’t saying you’ve made it to the ‘run’ phase of your FinOps maturity and growth. Rather, you’ve launched your FinOps practices and it’s time to observe, refine, evaluate, and track progress. How does your progress compare to the KPIs you’ve set? What kind of feedback are you receiving from your impacted groups and teams?

You’re entering a cycle of informing, optimizing, and operating. This is a cycle that will become second nature and drive steadfast growth.

Hopefully, by now you’ve seen a glimpse of how impactful FinOps can be to your organization. The benefits are numerous and the execution does not have to be flawless. Your organization just has to develop the right tools, communication pathways, and teams to allow for flexibility and change. Yes, development of your FinOps model and practice does need to be thorough and well-researched, but not perfect. There will always be room for improvement.

While FinOps practices will change as the cloud changes, the key outcome will remain the same: optimizing cloud spend, which is not just about saving money. Rather, it’s about enabling your business and gaining confidence in budgets and forecasting.

The FinOps Foundation has created several principles that help us understand what we need to be practicing and observing as we optimize our cloud expenditures and launch our FinOps practice.

1.     Teams need to collaborate

2.     Decisions are driven by business value of cloud

3.     Everyone takes ownership for their cloud usage

4.     FinOps data should be accessible and timely

5.     A centralized team drives FinOps

6.     Take advantage of the variable cost model of the cloud

FinOps will allow you to enforce cloud financial responsibility across teams and stakeholders. By creating transparency and aligning accountability for cloud spend, you’ll avoid financially backtracking after cloud adoption efforts.

What Does All of This Mean?

Migrating to the cloud can be an easy decision and quick to jump into, but without the proper framework for adoption best practices, you’ll leave actualized business value on the table. As we’ve discussed, the benefits of FinOps practices run far beyond that of financial responsibility.

Just through the process of developing your unique FinOps model, your organization will gain better cloud visibility, increase cross-functional transparency and communication, and empower your organization to accept positive change. The interdepartmental collaboration that begins to occur will prevent siloed workloads and operations. There will be more room for innovation, rather than putting out fires and climbing over roadblocks.

Once these practices and tools are running within your organization you’ll get more value from your cloud investment. FinOps is a dynamic practice that genuinely shifts company culture, rather than a set of rigid standards and policies to follow. You can uncover and create a FinOps model unique to your organization for an equally unique list of benefits.

Want to learn more about FinOps? Check out our On Demand Webinar: Optimizing Your Azure Cloud with FinOps & Cloud Adoption Framework, presented by Lunavi's Vice President of Digital Consulting - Engineering, Mike Douglas. Click here to view it now!

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