Cloud migration jumped in 2020, with multiple factors expediting its application. Of
course, the biggest factor driving this shift was the need to go remote during the COVID-19 pandemic. As companies strove to lift the maintenance burden off the IT teams and focused on taking advantage of the cloud’s cost savings, the need for finance teams to adopt governance best practices arose. This is where FinOps (cloud financial management) comes into play. FinOps refers to a portmanteau of “Finance” and “DevOps”, stressing the communications and collaboration between business and engineering teams. This is an evolving cloud financial management discipline and cultural practice.

Cloud and FinOps

Cloud has become the new normal, empowering businesses to make their operations more seamless, resilient, and agile. However, the goal isn’t as simple as embracing cloud computing. Your organization needs a cloud strategy to account for cost governance and workload optimization.

We have observed that the FinOps framework prescribes appropriate finance practices for cloud management ranging from: forecasting costs, negotiating rates with vendors, auditing licenses, optimizing and tracking free trials, and other financial management tactics. It helps companies take full advantage of the migration’s cost management, optimizing the cloud to drive maximum value for the enterprise.

Consequently, enterprises enjoy greater financial accountability in the variable spend cloud model. Moreover, the collaborative efforts of the IT, finance, product, and other departments yield faster product deliveries and better business decisions that balance cloud costs against the availability, quality, performance, and speed of services.

With the FinOps framework, companies can gain a competitive edge and stay relevant in evolving industries by achieving digital transformation. Organizations of all sizes are achieving digital transformation with FinOps to make scaled improvements. Bringing finance, technology, and business together has accelerated business value realization through cloud transformation.

With FinOps, companies can:

  • Drive financial visibility
  • Optimize cloud usage
  • Enable cross-organizational collaboration and trust
  • Break down departmental silos
  • Prevent cloud spend sprawl
  • Better understand technology investments and create sustainable business outcomes

Commercial transformation through FinOps

Commercial transformation is the need of the hour. Companies that digitize their business models and embrace digital transformation with increased agility, velocity, and resilience win in the modern business landscape.

IT professionals report an average cost savings of 20 per cent after moving to the cloud. However, these savings are not achieved in all migrations. Enterprises that are intentional about their financial planning and governance are the ones reaping the greatest benefits. At its core, FinOps is a cultural practice that drives the commercial transformation of a company.

For example, Airbnb built a cost-efficient centralized team by adopting FinOps, achieving a bird’s eye view of the company ecosystem. When teams started trusting each other, it created a magic business dynamic, fuelling commercial transformation. The company’s hosting costs decreased by US$63.5 million year-over-year, resulting in a 26 per cent decline in the cost of revenue in 2020.

Spotify also encouraged the culture of sharing cost savings, incentivizing the engineering teams to take accountability for the costs incurred during product building. As a result, they were able to create and deliver better features and migrations in minimal time. This step led to significant cost savings, allowing the company to fund the equivalent of 25 teams.

Similarly, other companies have adopted FinOps to get their products to market and test them faster to beat the competitors. They’re also able to recoup development costs faster, therefore the company starts making money faster too.

FinOps drives more revenue, achieves greater product and feature release velocity, and improves customer base growth. Enterprises have also realized the business impact of their decisions and actions, and thus, they can make better decisions while moving faster.

The pathway to a successful FinOps implementation

Implementing these FinOps best practices will help your organization start on the right foot on the FinOps journey.

1. Map a strategy

Visibility is critical on a FinOps journey. The first step is to map out each cloud user/stakeholder of the company, their cloud purchases, and their signed agreements. Promoting collaboration among engineers working in the cloud is the key to accelerating the process of cloud migration.

2.  Define a cloud budget

Once you have laid the solid groundwork and the engineering team is on board, it’s time to determine a realistic cloud budget.

Mapping your cloud usage must give you a clear idea of your run rate, enabling you to build winning cloud architecture. Make sure the cloud usage is monitored regularly and the budget is in line with it.

3.  Build a FinOps team

To make your FinOps journey successful, you need your technical colleagues’ buy-in, expertise, and cooperation. You must ensure no cloud management plan comes at the expense of their innovative abilities.

Make sure each FinOps team member has vast knowledge in a particular area. Here are some roles you need to fill:

  • An engineering or infrastructure expert with significant experience working in the cloud, building cloud architecture, developing applications, and understanding technical storage needs and challenges.
  • A financial specialist adept at planning and budgeting.
  • A business analyst who can delve deep into the systems, processes, and cloud resources and find ways to optimize them.
  • An executive or governance in charge that can ensure all stakeholders take ownership of the resources under management.

4.  Adopt FinOps as an ongoing practice

FinOps is not supposed to be a one-time strategic task. Once you have created a plan before migration, you should set clear, ongoing roles and duties to keep the costs under control in the long run.

You must understand engineering and business pain points for this to work out. Create a system that empowers engineers to act as per their cloud storage. Moreover, make it easier for them to optimize costs. Automation makes cloud management easier, requiring little to no effort to maximize savings.

5.  Measure FinOps success

KPIs are the best way to measure FinOps success. The metrics you use will depend on your unique business goals. However, the list below provides a great place to start:

  • Custom pricing commitment tracking
  • Committed Use Discount coverage
  • Rightsizing opportunity value
  • Aged snapshots
  • Hours between the cost incurred and cost displayed to end team
  • Price per hour of computing

Conclusion

FinOps has become a mainstream practice in organizations with varying sizes of cloud spend. It indeed is the cornerstone of brand identity, paving the way for a culture of efficiency with increased savings, effective risk mitigation, better operations integrity, and enhanced discipline across departments.

Embracing a cultural change in how you see technology investments is crucial to identify and bridge gaps in cloud management before spending increases. Furthermore, it supports a company’s ESG goals, improving its reputation in the industry as well as in the eyes of consumers. With FinOps, you can achieve commercial transformation and enjoy smooth business operations in the long run.

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Jim Love, Chief Content Officer, IT World Canada
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Subrato Basu
Subrato Basu is a global leader with over 25 years experience. He has contributed to digital transformational initiatives for Fortune 500 companies. Some notable outcomes being Motorola DIRECT on-line marketplace, CREDU (Samsung) a digital learning platform, Innovation Labs & Smart Cities for UN, Next Gen Services Model through Commercial and Technology Transformation (SoftwareONE). He has also built C-Level Global Communities Viz. Research Board an Executive Circle, Advisory Board for CIO’s, ESG Board for sustainability officers.