With the ever-changing business strategies of growing organizations today, differentiating between the “needs” and “wants” gets extremely complicated. Working on various marketing strategies and product-led growth initiatives may lead businesses to overlook one of the most important aspects, i.e. finance.
Therefore, companies are now adopting the use of FinOps (finance operations) for proper financial management. It is a modern business management methodology and analytics software that calculates the cost of public cloud infrastructures.
FinOps is extremely important for businesses that have shifted from traditional computing systems (fixed-cost data) to flexible clouds (SaaS-based).
What is FinOps?
FinOps or financial operations bring together individuals, processes, and technologies to simplify and manage all the financial operations of organizations. This cloud financial management system is extremely crucial for SaaS businesses as it allows them to have flexibility in the operations while satisfying all the critical needs in parallel.
At its core, FinOps is a practice for bringing together all the members for managing the cloud cost at a place with full transparency for the ownerships of cloud usage that are managed by a central group. Many cross-functional teams also work collectively for bringing out quick deliveries along with attaining better control over financial and operational measures.
Moreover, it allows all the operations teams and product owners to easily access the near real-time data required for making decisions regarding expenditure and helping them to make better decisions that will end up providing a balanced cloud cost along with better speed and quality of the services.
Moreover, considering FinOps for saving money would be a quite narrow approach, as it can be used for making money. Cloud spend drives better revenue, boosts client base, allows more products and frequent feature updates, etc.
It helps businesses to work in all the scenarios and times where they have to tighten up the budget along with the periods where they have to invest more. Have a look at some of the benefits of adopting the FinOps model in your business:
- Optimized cloud spend: Have an optimized and real-time tracking on all the cloud expenditure and make the use of apt financial incentives and consumptions cloud services offer.
- Adopt a cloud-centric future: Make use of a robust operating model that is properly associated with all the dynamics of cloud computing for a better future for your business.
- Better decision-making: Data-based decision-making always leads businesses in making decisions with solid proof along with a higher probability of positive results.
- Empowered product team: Aiding product teams with all the transparency, visibility, and responsibility will help in empowering them to make financial decisions by themselves along with operating in parallel.
3 Stages of FinOps
The journey of FinOps passes through the following 3 major stages. Companies can also find them in more than one stage at any instance, however, it depends on various factors like a business unit, application, and their team.
This is the first phase of the journey that includes humans and tools used for empowering various teams with improved visibility, allocation, benchmarking, budgeting and forecasting. The flexibility of the cloud along with modified pricing and leads in necessary and timely visibility for intelligent results. Benefits of this stage include:
- Allocating cloud services for appropriate chargeback and showback.
- Benchmarking as a cohort to liberate organizations with a high-performing team.
- Budgeting for receiving proper Return On Investments along with eliminating over expenses.
- Real-time data references for eliminating financial surprises.
Right after the ‘inform’ phase, they need to have an optimized cloud footprint. Businesses can have an optimized environment by automating the turning off of all the wasteful usage of resources. Few steps on this phase are mentioned below, have a look:
- Switching from on-demand capacity, which is an expensive feature of the cloud to the Reserved Instances wherever possible.
- Making the use of Committed Use Discounts for implementing cost controls.
- Reducing the use of unwanted resources reduces expenses and increases storage.
- Making the use of AI tools for enhancing the efficiency of applications along with improving the performance.
This is a less technical phase that is just used to ensure that the journey isn’t a one-off activity. Organizations need to have simultaneous tracking and business objectives along with all the metrics they’ll use for tracking objectives and the performance.
Generally, metrics to measure the same are speed, quality, and cost, and the success of all the goals is possible. Businesses construct a model of FinOps including all the Cloud Cost Center of Excellence. Moreover, they should resonate with business, financial and operational stakeholders defining apt performance.
FinOps Team Structure
An ideal FinOps team should have the following members for successful workflows. Every role or team will be aligned with various important tasks within the FinOps framework:
Executives make the process and result more accountable with better transparency along with ensuring the efficiency of the budget.
FinOps practitioners, like Analysts, work on maintaining and creating the teams’ budget and its allocation along with keeping up with cloud spend.
The DevOps team maintains a keen focus on creating and maintaining services for organizations. They are shared with the decided cost for using it as a metric for developing future projects. Moreover, they should keep the quality of the products along with making the use of the available resources to the fullest.
Finance and Procurement
The FinOps team shares all the reports with them for accounting. Other teams reach out to them for the information regarding billing data history and build out more accurate cost models. These cost models further get used for engaging in budget manipulations with cloud companies and service providers.
FinOps and Cloud Optimization
The major area that shall be optimized is Cash Cows, and the best practice includes bringing the costs down for getting more revenue. However, one must keep track of the performance of these cash cows and shouldn’t cut the costs if the performance is getting low because it may put the user experience at risk.
In FinOps culture, cloud optimization has a lot of significant roles to play, such as minimizing cloud spend and eliminating unnecessary wastage in DevOps budgets. These are also the basic reasons behind the existence of FinOps in the first place.
Important Factors of FinOps
Handling the cloud ecosystem and associated cost is an important factor that should be maintained with keeping the capacity, planning, security, and other conditions in mind. Following are some of the most important factors that should be considered while managing cloud cost:
1. Transparency and Optimization
Monitoring and aligning the cloud resources consumption along with the expenditure in a specific time period should be done. Many of the global giants have acquired software to achieve the same. For example, Microsoft acquired cloudyn for tracking usage, allowing transparency, and forecast future cloud spending.
2. Capacity and Resource Planning
For making the most out of FinOps strategies and cloud computing, organizations should carefully allocate the capacity and resources. Therefore, identification and finalizing of the final resources in need and when to use should be pre-decided.
3. Security and Identity
Everything associated with the cloud comes with security-related issues, such as risk management, single sign-on, and key management. Their management should be primarily focused in order to build a strong wall against fraudulent actions.
4. Governance and Policy
Before putting FinOps in the picture, it is important to launch and implement policies with detailed information regarding the individuals who can access the properties in the cloud, how much, and when.
FinOps works as a unified platform that brings all the finance, operations, and governance in one place for better functioning and makes the use of cloud tools for optimizing operations costs. Most importantly, it reduces the cost of cloud services along with increasing efficiency and smooth communication between operational and financial stakeholders.
However, it is also observed that sometimes, the process doesn’t work out in the first place especially in the case of new companies. But it largely varies according to the way businesses are operating it.
With the channelized guide, the right mindset, and the right cloud optimization tools, companies can successfully switch to FinOps saving tons of dollars spending on resources. Let us know in the comments section regarding any queries or suggestions.