What is FinOps? Managing Cloud Costs for Business Success with FinOps

In the past, a firm's success was measured by the revenue generated. In today's world, the cost of doing business is just as important. After all, a business cannot be profitable if the overhead costs are high.

With the adoption of the cloud came its associated cost. To address this, a new discipline has emerged called FinOps to optimize cloud costs and financial management. Here we will discuss FinOps, how it works, and why it is essential for cloud computing organizations.

What is FinOps?

FinOps is a term that combines the words "finance" and "operations." FinOps helps organizations manage their cloud costs. It suggests cloud computing costs be treated as operational expenses rather than capital expenses. This means that the focus should be on optimizing cloud costs in real-time rather than just reducing them.

FinOps Foundation defines FinOps as "the practice of bringing financial accountability to the variable spend model of the cloud, enabling distributed teams to make business trade-offs between speed, cost, and quality."

The main components of FinOps include cost optimization, financial management, and cloud governance.

• Cost optimization is identifying opportunities to reduce cloud costs while maintaining or improving the service quality.
• Financial management focuses on budgeting, forecasting, and accounting for cloud costs.
• Cloud governance refers to the policies and processes that ensure that cloud resources are used in a way that aligns with business objectives and regulatory requirements.

What is Cloud FinOps?

Cloud Computing has transformed how organizations use IT resources. It has enabled them to scale up or down without adding significant capital expenditures. However, this flexibility comes with the charges of Cloud providers' services. Since predicting usage can be challenging, many organizations seek help in managing their cloud costs.

Cloud FinOps is an application of FinOps that focuses on managing cloud costs. It helps organizations optimize their cloud costs by providing the tools and processes to monitor and control cloud spending. This includes tools for tracking usage, analyzing costs, and identifying areas for optimization. Some FinOps tools include CloudZero, ProsperOps, Harness, Densify, and AWS Cost Explorer. Cloud FinOps works along with IT and finance teams so that cloud costs align with business objectives.

Also, Read: AWS vs Azure vs Google Cloud - Choose for your Enterprise​

FinOps Benefits

FinOps is quickly becoming necessary for organizations looking to succeed in the cloud. FinOps helps to optimize cloud costs, improve financial management practices, and increase agility. Here's a closer look at some of the key benefits of FinOps:

1. Cost Optimization:

FinOps enables organizations to optimize their cloud costs by identifying opportunities. It helps to reduce costs while maintaining or improving service quality.

2. Improved Financial Management:

FinOps provides organizations with the tools and processes to manage their cloud costs effectively. The tools help with budgeting, forecasting, and accounting for cloud expenses.

3. Better Collaboration between IT and Finance Teams:

Collaboration between IT and finance teams is essential for effective FinOps. This ensures that cloud costs are aligned with business goals and within the budget.

4. Faster Time-to-Market:

FinOps enables organizations to provision cloud resources more quickly, allowing them to deploy new applications and services faster.

5. Increased Agility:

FinOps provides organizations with the ability to rapidly respond to changes in business requirements by scaling cloud resources up or down as necessary.

FinOps Framework and Principles

The FinOps framework is a set of best practices and principles for managing cloud costs and optimizing financial management practices. The framework is designed to provide organizations with a structured approach to FinOps.

The FinOps framework is based on the following principles:

1. Democratization of Cloud Cost Data:

FinOps is not limited to IT and finance teams only. FinOps provides visibility into cloud costs for every department in the organization.

2. Responsibility and Accountability:

FinOps encourages everyone to take responsibility for their cloud usage. Hence each team takes ownership of the cloud costs they incur.

3. Cost-Aware Design:

FinOps encourages organizations to design their cloud infrastructure with cost in mind by using cost-effective services and architectures.

4. Continuous Optimization:

FinOps is a continuous process that involves ongoing analysis and optimization of cloud costs.

5. Automation:

FinOps involves using automation tools and processes to optimize cloud costs and reduce manual effort.

6. Collaborative Culture:

FinOps requires collaboration between IT, finance, and business teams to ensure that cloud costs are as per business objectives.

Also, Read: Top 5 Fintech App UX Design Practices for Gaining User Trust​

FinOps Implementation

Implementing FinOps involves a series of steps that must be carefully planned and executed. The following are the key steps:

1. Define the Scope and Goals of the FinOps initiative:

The first step in implementing FinOps is to define the initiative's scope and identify its goals. This means knowing the cloud services that will be included in the FinOps program, setting cost optimization targets, and the metrics to measure success.

2. Establish a FinOps team:

The next step is to establish a FinOps team for implementing and managing the FinOps program. The team's responsibilities include monitoring cloud costs, identifying cost-saving opportunities, and implementing cost-effective measures. The team should be cross-functional and include finance, IT, and operations.

3. Implement a Cost Allocation Model:

A cost allocation model is required to accurately track and allocate cloud costs. This involves defining the cost centers and drivers, identifying the cost sources, and understanding how the capital will be allocated across the organization.

4. Implement FinOps Tools and Technologies:

A range of FinOps tools and technologies are available to help organizations manage their cloud costs more effectively. These include cost management platforms, automation tools, and cloud cost analytics solutions. The options should be selected based on the organization's specific needs and budget.

5. Establish a Governance Framework:

To ensure that the FinOps program is successful, it is essential to establish a governance framework that defines the policies, processes, and controls that will be used to manage cloud costs. This includes defining roles and responsibilities, establishing guidelines and setting up regular review and reporting mechanisms.

FinOps Trends

As cloud computing environments become more complex, traditional cost management methods are insufficient. FinOps is a relatively new approach to managing cloud costs, and as such, it continues to evolve rapidly. One of the most significant trends in FinOps is the increasing adoption of automation and machine learning.

Automation Tools can help organizations quickly identify cost-saving opportunities and optimize their cloud resources. Machine learning algorithms can help predict future usage patterns. This enables management to make informed decisions about cloud spending.

Another trend in FinOps is the increasing focus on Security and compliance. As organizations move more of their operations to the cloud, they face new security and compliance challenges. FinOps teams are ensuring that cloud usage complies with regulations and that sensitive data is secured.

How is FinOps evolving to meet the changing needs of organizations?

As organizations move towards a cloud-base, they need to ensure that their cloud infrastructure is secure and they can deploy new applications and services quickly. FinOps is expanding its scope to work with DevOps and security. By integrating with other business areas, FinOps teams can help optimize spending.

Another way FinOps is evolving is by developing new tools and technologies. New tools are being developed to automate cost optimization tasks, provide real-time visibility into cloud spending, and help future usage and expenditure. These tools can help save money, and time and improve decision-making processes.

Also, Read: How Does Cloud and DevOps Accelerate Digital Transformation​

Conclusion

FinOps is a new discipline rapidly gaining traction among organizations using cloud computing. FinOps helps organizations save money in the cloud by giving them tools and processes to optimize costs and manage their finances. This can be done without compromising service quality. As organizations move to the cloud, FinOps is expected to be increasingly important in managing cloud costs and improving financials.