FinOps

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.

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 its cloud structure, a 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.

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.