FinOps Framework | Ways To Foster Accountable Cloud Spending

Of course, most modern business leaders recognize the value of utilizing the Essential FinOps Framework in their cloud computing operations, which is central to the IT strategies of about 85 percent of enterprises today. Unfortunately, not every chief executive officer, chief financial officer, or even chief technology officer is versed in the nuances of modern IaaS, SaaS, and PaaS technology.

Fortunately, most executives have at least a baseline understanding of how the cloud functions and which types of value (such as enhanced workload scalability and reduced infrastructure management requirements) it offers. However, the problem is that every kind of executive has different priorities. A CTO’s top priority is enabling the business with the most effective cloud technology.

A CFO, in contrast, wants to minimize spending and stabilize cash flow, goals which may lead to questions about whether the technology that the CTO wants to adopt is the most cost-effective. Meanwhile, you have chief revenue officers who care about optimizing revenue streams. In cloud spending, a CRO will most likely focus on how much revenue the cloud can attribute.

Let’s face it: Although the business executives belong to the same team, they don’t always act that way. For example, conflicting interpretations among executives about what their company should be spending on cloud infrastructure and services often lead to quarreling in the C-suite. Executives must understand business challenges to mitigate risks and work together effectively.

Understanding What Cloud FinOps Entails In Business Computing Environment

According to IBM, FinOps (Cloud FinOps) is an evolving cloud financial management discipline and cultural practice that aims to maximize business value in hybrid and multicloud environments. FinOps is a portmanteau of finance and DevOps, emphasizing that IT, finance, and business teams must collaborate to bring financial accountability to the cloud and make informed choices.

They can also make informed data-driven decisions when managing tradeoffs between speed, cost, and performance. There’s a misconception that FinOps is becoming cheap with cloud spend. It’s about removing blockers, empowering engineering teams to deliver better app features, migrating faster, and enabling a cross-functional conversation about where to invest and when.

Sometimes, a business will decide to tighten its belt. Still, sometimes, it’ll choose to invest more. But with FinOps, teams know why they’re making those spending decisions. The rapid cloud adoption has challenged traditional consumption models and procurement cycles. FinOps addresses this challenge by bringing procurement under the centralized control of a dedicated team.

This team advises all stakeholders on best practices for cloud cost optimization. It creates a common language that allows organizations to operate efficiently at scale in the cloud. FinOps is both a discipline and cultural practice, and it also refers to the FinOps Foundation. In this case, the FinOps Foundation is a nonprofit trade organization and is part of the Linux Foundation.

Differentiating Between The Basic Versus Advanced FinOps Framework

Distinguishing between basic FinOps and advanced or Next-Generation FinOps Framework can be challenging, as the line separating the two can be blurry. The primary difference, however, lies in the level of nuance and actionability that FinOps processes offer. With essential FinOps Framework integration, you get fundamental insights and strategies for spending reduction.

For example, an effective FinOps Framework might help you realize that most of your cloud server instances are grossly over-provisioned. You could cut spending dramatically by selecting different instance types. In contrast, the advanced FinOps Framework process provides deeper insight into your spending and the extent to which your spending drives revenue.

Related Resource: Top Priorities Shift To Reducing Waste And Managing Commitments

In most cases, advanced FinOps might allow you to map revenue to each cloud server instance that your business operates so that you can make granular decisions about how to configure each specific server. It could even enable you to modify server configurations across different times or days based on fluctuations in the amount of revenue opportunity linked to each.

On the one hand, the FinOps Framework provides the operating model for establishing and excelling in FinOps for businesses in cloud computing environments. On the other hand, like FinOps, the Framework is evolving and informed by community experiences, contributions, and conversations. Eventually, it’s built by the certified community for the cloud community.

Utilizing The FinOps Framework Models In Cloud Computing Operations

With economic pressure increasing worldwide daily, many organizations are leaning on their FinOps teams to help prioritize cloud optimizations. Reducing waste and managing commitment-based discounts unseated empowering engineers to take action as the top key priority for the first time. Teams are also investing in their forecasting capabilities to predict cloud spending better.

Notwithstanding, the cost of running Artificial Intelligence (AI) and Machine Learning (ML) is expected to impact FinOps practices significantly now and in the future. Sustainability teams have limited intersection with FinOps Framework teams today, but that number is expected to increase substantially. For the first time, reducing waste was the highest priority in the FinOps world.

Notably, macroeconomic trends may influence waste management, with businesses looking for ways to reduce spending without reducing the value they get from their cloud investments. Our experts strongly believe that most FinOps practitioners still view empowering engineers as an essential pathway to achieving cost efficiency, and it remains high on the list of critical priorities.

Gartner® forecasted that worldwide end-user spending on public cloud services would expand by 20.4% in 2022 to nearly USD 500 billion, reaching almost USD 600 billion in 2023, with more than 40% of enterprise workloads deployed in the cloud. While basic FinOps is a good starting point to curtail overspending, it doesn’t provide cost optimization. To achieve that, businesses need;

FinOps Domains

FinOps Domains represent a sphere of activities that every organization will perform during its FinOps journey. They are not exclusive to one another or represent process steps. Multiple Domains may be pursued during any phase of an organization’s FinOps practice. The FinOps Domains represent an organization’s capabilities to perform in the best practice of FinOps.

FinOps Capabilities

Capabilities are the building blocks of a FinOps practice; you can combine as many or as few as needed depending on where you are in your FinOps journey and your organization’s needs. Individually, they represent functional areas of activity involving FinOps Personas, tasks, and processes you implement iteratively to meet your FinOps challenges.

FinOps Maturity

The FinOps Maturity Model designations are intended to identify where practitioners operate across various concepts – without judgment – and empower practitioners to seek out opportunities for potential investment areas. They’re also used to give practitioners a sense of a benchmark for their performance as they grow their practices.

FinOps Personas

Implementing the FinOps Framework requires working with your organization’s FinOps Personas. Operating within the FinOps Framework requires finding allies in times of change, defining a common language, building enablement strategies to elevate, and developing communication programs.

FinOps Phases

The FinOps Phases are Inform, Optimize, and Operate. The Inform phase gives you the visibility for creating shared accountability. The Optimize phase is intended to identify efficiency opportunities and determine their value. The operation phase defines and implements processes that achieve the goals of technology, finance, and business.

FinOps Principles

Ultimately, FinOps Principles are north stars that guide the activities of your FinOps practice. They’re developed by FinOps Foundation members and honed through experience. Embracing these principles will help you to establish a self-governing, cost-conscious culture within your organization.

The principles are as follows:

FinOps Teams need to collaborate.
The business value of the cloud drives decisions.
A centralized team drives an effective FinOps Framework strategy.
Take advantage of the cloud’s variable cost model.
Everyone takes ownership of their cloud usage.
FinOps data should be accessible and timely.

Note that the above principles are in no particular order and should be taken as a whole. We encourage business webmasters, company owners, and organization managers to understand and practice them fully. One thing is sure: The above FinOps Principles act as a north star that guides the activities of an effective FinOps Framework practice.

They’re developed by FinOps Foundation members and honed through experience. Notwithstanding, they were initially proposed as part of writing the Cloud FinOps book in Sept 2019 as a joint AWS announcement. Now, they cover multiple clouds, and knowing how cloud services change every quarter, it seems they may change slightly over time now that we all gain new experiences.

The Best FinOps Framework Ways To Foster Accountable Cloud Spending

While cloud computing services cost may seem straightforward, it’s only simple if you want to gain visibility into your expenses and ways to lower costs. If you aim higher and want to optimize cloud spending in the truest sense of the word, don’t settle for quick wins that deliver limited value. You need a more comprehensive approach that entails a higher level of maturity.

Such as data enrichment, cloud spending analysis, and hiring experts to manage cloud costs. Moving beyond the basic FinOps Framework strictly depends on factors like the types of cloud spending data you have to work with. You’ll also need to consider what your cloud architecture looks like. However, it generally involves adopting some of the best practices we’ll explore below.

If your business hasn’t yet made it a priority to rein in unnecessary cost spending and maximize cloud resources, then by all means, start a custom FinOps plan. You can achieve this by embracing basic cloud cost management practices. But don’t settle for simple solutions if you’ve already covered the basics and want to get as close as possible to an optimal cloud spending strategy.

Embrace advanced FinOps practices that deliver the most granular visibility and actionability for managing cloud spending. At the same time, plug yourself into the growing FinOps community, where you can stand on the shoulders of giants. If you manage a team that wears FinOps as one of their hats, provide them with additional practices to help break through plateaus.

#1: Cloud Financial Management

Cloud spending can drive more revenue, signal customer base growth, enable more product and feature release velocity, or even help shut down a data center. A strategic FinOps Framework removes blockers, empowers engineering teams to deliver better features, apps, and migrations faster, and enables a cross-functional conversation about where to invest and when.

While a central FinOps function may work to enable organizational change, FinOps is not done by a single person or team. However, it somewhat changes how disparate engineering, finance, and business teams work together. Individuals at every level and in every area of an organization can have different roles to play in the FinOps practice: Executives, engineers, FinOps practitioners, operations, finance, and procurement.

#2: FinOps Maturity Model

The practice of FinOps is inherently iterative, and the maturity of any given model, functional activity, Capability, or Domain will improve with repetition. Typically, a “Crawl” stage organization is highly reactive and focused on addressing problems after they occur. A Run stage practice proactively factors cost into architecture design choices and ongoing engineering processes.

A “Crawl, Walk, Run” maturity approach enables organizations to start small and grow in scale, scope, and complexity as business value warrants maturing a functional activity. Taking quick action at a small scale and limited scope allows teams to assess the outcomes of their actions. They gain insights into the value of further action in a more extensive, faster, or granular way.

#3: FinOps Framework Database

If it seems that FinOps is about saving money, then think again. FinOps is about getting the most value out of the cloud to drive efficient growth. Regardless of the name, FinOps is bringing a financial accountability cultural change to the variable spend model of the cloud. At the same time, it enables distributed engineering and business teams to make trade-offs.

These trade-offs are between speed, cost, and quality in their cloud architecture and investment decisions. In most cases, it’s easy to collect data about overall cloud spending. But generic spending data isn’t enough to drive sophisticated choices. For that, you need data easily interpreted for diverse purposes and stakeholders.

For instance, an engineer probably wants to see metrics about cloud spending that map onto cloud resources, whereas an executive will want to link spending data to business revenue. This is where data enrichment comes into play. Data enrichment means mapping cloud spending data onto other data types, like cloud infrastructure or revenue metrics, so it’s more actionable.

#4: FinOps Framework Structures

Similarly, advanced FinOps requires true-unit economics, meaning the ability to determine how much business revenue stems from each dollar you spend in the cloud. An increase in cloud spending is not alarming if it reflects an increase in income. A decrease in spending could be harmful if it decreases your revenue. There is no simple way to get true-unit visibility into cloud spending.

It starts by correlating spending metrics with business metrics. Analyzing spending on a unit-by-unit or workload-by-workload basis is also critical because spending by some departments or for some apps may drive more revenue than spending elsewhere. Regarding the FinOps Framework Structure, the Sustainability Practitioner within Enterprise IT works to integrate green initiatives.

Still, they actualize principles within the organization’s IT operations, drive energy/resource-efficient strategies, reduce IT infrastructure emissions, and foster a sustainable decision-making culture across procurement and operations. Balancing the demand for IT services and environmental goals helps reduce costs, manage risk, and introduce predictability in resource usage.

#5: FinOps Framework Developers

Sometimes, a business will decide to tighten the belt; sometimes, it will invest more. But now teams know why they’re making those decisions. In an essential FinOps practice, responsibility for managing cloud costs is treated, at best, as a secondary responsibility tacked onto the job descriptions. It includes personnel roles in other areas, like engineering, finance, and crypto.

This doesn’t suffice if you want to achieve advanced FinOps. To reach that goal, you need personnel — in-house employees or consultants you work with externally — who make FinOps a key focus and possess the unique blend of skills necessary to interpret complex cloud spending data and generate insights about improving spending without compromising business priorities.

We are not saying that the potential FinOps Framework responsibility should only be delegated to a few key stakeholders. On the contrary, everyone who can help influence cloud cost outcomes should play a hand in optimizing spending. However, to make the most of FinOps, personnel must treat it as more than secondary. It needs to be a top-of-mind concern across the organization.

#6: FinOps Framework Automation

Automation Tools can help achieve primary FinOps Framework integration goals by, for example, automatically collecting spending data and flagging anomalies. Markedly, this saves time and simplifies data analysis. However, automation becomes even more critical in the context of advanced FinOps because it can help operationalize cloud cost optimization goals.

For instance, businesses can deploy automations that block overprovisioning of cloud resources. With this approach, you don’t have to settle for merely asking employees to follow spending guidance. You automatically enforce the cloud spending rules.

#7: FinOps Framework Practitioners

FinOps practitioners lead the cultural shift required for FinOps success, uniting business, IT, and finance teams to optimize cloud usage and increase business value. They focus on several key areas using their knowledge of the FinOps framework, its principles, and its capabilities. These areas include establishing a FinOps culture and educating the organization on best practices.

They also set benchmarks, create visibility around cloud costs, and guide budgets and forecasts. At the same time, finance and procurement team members use information from the FinOps team to negotiate the most favorable contracts, exercise discounts and volume commitment programs, and create cloud budgets, forecasts, and cost reports.

#8: Engineering And Operations Team

Engineers and Ops team members, such as Lead Software Engineers, Principal Systems Engineers, Cloud Architects, Service Delivery Managers, Engineering Managers, or Directors of Platform Engineering, focus on building and supporting services for the organization. Cost is introduced as a metric in the same way that other performance metrics are tracked and monitored.

Members of these teams consider the efficient design and use of resources via activities like rightsizing (resizing cloud resources to match the workload requirements better), allocating container costs, finding unused storage and compute, and identifying whether spending anomalies are expected.

#9: The IT Finance Management Executives

Finance members, including Financial Planners, Analysts, and Business Managers/Advisors, use the reporting provided by the FinOps team for cost allocation, showback allocation, and forecasting. They work closely with FinOps practitioners to understand historical billing data so that they can collaborate and build accurate forecasting models used for planning and budgeting.

Executives, such as a VP/Head of Infrastructure, Head of Cloud Center of Excellence, CTO, or CIO, focus on driving accountability, building transparency, ensuring efficient teams, and not exceeding budgets. The participants are usually Business and Product Owner team members, such as a Director of Cloud Optimization, Cloud Analyst, or Business Operations Manager.

10# Maximizing The FinOps Personas Capacity

Implementing the FinOps Framework requires working with FinOps Personas. All those involved in FinOps will benefit from understanding the Framework’s operating model. Operating within the FinOps Framework requires finding allies in times of change, defining a common language, building enablement strategies to elevate, and developing communication programs.

The practice of Finops is more than a technology solution or a checklist handed to teams. For instance, procurement analysts, sourcing analysts, vendor managers, or directors within procurement teams use insights the team provides to identify sourcing and purchasing products and services within a cloud platform vendor. Procurement should work closely with FinOps.

As a result, this helps ensure that prices and terms negotiated in the contract are fulfilled and streamline the procurement process. Procurement may have a legal component that requires the review of contract language. Consider ITAM team members, such as IT Asset, Software, Analysts, Administrators, Specialists, Compliance, and IT Asset Procurement Specialist.

They all focus on maximizing the business value and all its assets. They are also responsible for managing risk related to asset optimization and contract compliance. They’ll work closely with other IT professionals, including architecture, engineering, security, and stakeholders, to develop and implement effective IT asset management strategies that align with the goals.

Summary Notes:

In short, enthusiasm for cloud computing technology remains high. It’s become clear that the adoption of complex multicloud architectures, and the spending growth that accompanies it, necessitates an overhaul in the financial management of IT. FinOps has emerged as the management discipline for organizations looking to optimize costs and maximize returns on the cloud.

Realistically, the FinOps Foundation Team uses various automation tools to rebuild its website thrice a week. As a result, this helps them capture the latest changes or make minor updates to maintain the website. The FinOps Foundation’s core operating members support the organization as a business. Its technical components, however, must be reviewed and voted upon.

Something that is done by a more remarkable group of community members. These meetings are scheduled throughout the month, and the timeliness of reviewing commits and changes will vary depending on when these meetings occur. Issues and small changes like link fixes and typos might happen immediately, as those don’t require much code review, voting, or approval.

In addition, the open-source FinOps Framework updates its definitions, guidance, and information based on the collective experience of FinOps practitioners. As a rule of thumb, these improvements come from Working Group outputs, Special Interest Group work, community events, discussions, etc. Read the Adopting FinOps In Your Organization Project for more info.

Other Related Resource References:

Finally, check out some FinOps Framework Contribution Guidelines to learn how to tell your story or present FinOps best practices. Likewise, you can also see active FinOps Framework Working Groups, small groups that meet regularly to create and iterate on new best practices and guidance for FinOps practitioners. Share about something that needs to be updated, augmented, or removed.

Remember, the FinOps Framework Project is by a team of community experts for the cloud community, and your voice matters. There are multiple ways to submit changes: Submit an update or inform us of an error through the “Make Suggestion” button (top-right corner of Framework pages). Or rather, consider reaching out to the members and team in the #framework slack channel.

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