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Home Snow Blog The Fundamentals of FinOps: Cloud Cost Transparency and
Optimization

Categorised as Cloud


THE FUNDAMENTALS OF FINOPS: CLOUD COST TRANSPARENCY AND OPTIMIZATION

By Kevin Jessop

Published on Feb 08, 2023



Historically, few people knew how best to promote a shared responsibility for an
enterprise’s cloud infrastructure and costs. This led to the start of a small
community of cloud practitioners who met to discuss best practices. The
community grew quickly into the formal discipline of FinOps which is now
practiced in many world-class organizations. The discipline includes thousands
of Cloud, Finance, IT, and Engineering professionals from many diverse
industries. FinOps streamlines cloud cost transparency and optimization, and
planning processes in the cloud. Cross-functional teams collaborate to improve
financial analytics and control, enhance budget and resource allocation, and
implement an effective cloud usage strategy.

Guiding principles such as collaboration, timely reporting, centralized teams,
cloud usage ownership and business-value driven decisions are at the heart of
the FinOps mission. We’ve identified three fundamental building blocks that help
organizations build a robust FinOps discipline upon that foundation. These
components are setting up the FinOps team, implementing FinOps and leveraging
software tools designed for FinOps. 


ORGANIZATIONAL MAPPING

The collaboration of various stakeholders is key to building a successful FinOps
discipline. They keep cloud costs under control and detect cost anomalies to
prevent unexpected expenses. Building effective collaboration around cloud
financial management requires aligning competing priorities of fast development,
watching spend and ensuring quality work. FinOps managers are responsible for
overseeing cloud costs and enabling transparency with cross-functional
stakeholders. Each stakeholder group owns a set of issues that need to be solved
to achieve cost excellence with FinOps.

 * Cloud Operations are responsible for supporting and architecting all cloud
   platform environments and applications. They continually monitor the
   applications to ensure resources are used effectively and provide
   recommendations for optimizing performance and operational resilience.
 * Infrastructure and Operations teams establish technology roadmaps,
   operationalize technologies, and enforce governance, standards and processes.
   They require platforms and tools to ensure an organization’s IT estate is
   operating optimally.
 * Finance must drive financial accountability and predictability in cloud
   costs. Forecast accuracy, effective cost allocation and the promotion of good
   governance ensure the enterprise is cost-efficient in the cloud.
 * Engineering wants to create great products that are easily adopted and offer
   value to end users internally and externally. Moving the needle on cloud cost
   through initiatives such as cost transparency, staying on budget and
   monitoring application performance is important to this team.
 * Leadership teams make strategic decisions based on the value the cloud drives
   for the business and customers that ultimately result in innovative
   solutions, satisfaction and loyalty. They strive for revenue to outpace cloud
   spend, accelerate savings, sponsor FinOps teams and hold them accountable for
   outcomes.


IMPLEMENTING FINOPS

Cost optimization will save money, but that should not be the main goal. The
goal of a successful FinOps implementation is to get as much as possible from
investment in the cloud.

Every situation is different and there isn’t a single way to handle cloud
optimization in FinOps. However, many organizations can achieve better control
and manage their cloud spending by building upon the 4 strategies which we’ll
examine in this section.

 * Analysis. FinOps teams must have access to the latest data and analytics to
   make informed decisions. Data analysis, chargeback and showback push spend
   accountability to those that are responsible for creating the expense. It
   calls attention to total costs for the business entity, opportunities for
   cost avoidance and financial KPIs.
 * Benchmarking. Well-defined success metrics are critical for measuring the
   impact of FinOps strategies. Knowing where to spend money, budget and
   forecast accuracy, monitor cloud-instance performance are just a few success
   benchmarks for successful FinOps transformation.
 * Optimization. Organizations need to understand how spending fluctuates
   relative to cloud management decisions. Rightsizing instances and
   repositioning workloads are actions that improve cost and performance in the
   cloud. It’s easy to forget to turn off resources when not in use. While
   tempting to shut down unused resources to lower running costs, it can be
   dangerous to do so without knowledge of the downstream impact on production
   or other processes.
 * Governance. When it comes to improving the efficiency of the organization,
   the establishment of effective controls and governance is critical.
   Organizations need a policy engine that ensures cloud optimization objectives
   are being followed, budgets are maintained, costs are properly allocated,
   reports are generated, and that communication is taking place across the
   enterprise.


TECHNOLOGY TOOLS

FinOps practitioners know that technology is limitless, and intelligence is
priceless. Optimizing IT spend, reducing risk and leveraging technology all help
to prevent cloud usage and cost from spiraling out of control. This is
especially important for organizations with large and disparate user bases.
Software tools help cross-discipline FinOps team members to effectively track,
manage and reduce cloud costs. Their capabilities include the following:

 * Visibility. A top challenge for FinOps teams is the ability to visualize,
   understand and manage cloud costs and usage over time. Software tools analyze
   cloud data (including containers) from multiple cloud service providers.
   These tools allow teams to gain insight into cloud provider bills, identify
   trends, pinpoint cost drivers and detect anomalies.
 * Cost Allocation. It’s impossible to accurately attribute costs to users until
   you know where each teams’ resources live. Cloud provider billing accounts
   often lack the granularity required for allocation. Software features such as
   tagging allow for efficient cost chargeback and drive greater accountability
   based on resources that are consumed.
 * Reporting. FinOps teams face the challenge of investigating changes in cloud
   spend by cost center, application, service and resource. Software
   consolidates and visualizes billing, containers and other data from multiple
   cloud providers into a single, unified view. This makes it easy for teams to
   share and work from the same data set.
 * Budgeting. Forecasting cloud budgets can be difficult because of the large
   number of services, resources and pricing variables involved. With FinOps
   tools, stakeholders can analyze historical spending data to accurately
   forecast cloud spend and usage.

FinOps inextricably links people, process and technology to break down
organizational silos, facilitate information flow, improve decision making and
more. While needs and usage may change over time, developing an effective plan
for cloud financial management will help maintain balance between cloud
performance and cost well into the future. A good FinOps strategy ensures that
everyone who needs to be involved is included in the planning process.

Ready to take the next steps to improving your cloud visibility and lowering
costs? We’re ready to help.


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