Everything changes faster in the cloud. In fact, that increased velocity is a big reason why so many companies are embracing it for their infrastructure. Procurement that took weeks or months with on-prem data centers can now be done with a few keystrokes. Infrastructures shrink and expand to fit demand, with extra capacity available and ready when you need it.
It’s a speed that fuels innovation and opens the door to a degree of infrastructure control previously impossible. It’s also a speed that is simply too fast for traditional IT financial operating models. After all, it’s hard to be proactive if you only look at your cloud spend at the end of the month when you get your cloud bill.
You need a new, more agile operating model — one designed, tested, and proven in the cloud. Enter FinOps. A cloud operating model that brings together Technology, Finance, and Business Leadership teams, FinOps increases the business value of cloud, enabling teams to fully understand cloud costs so they can make informed tradeoffs.
Let’s dig a little deeper into where FinOps came from, how it’s used, and why you should develop a FinOps practice in your company.
Where did FinOps come from?
If you’ve been using the cloud, then you’ve probably heard of DevOps — the combination of software development and IT operations to provide continuous delivery. It’s a model that’s proven to effectively leverage cloud infrastructures for rapid iteration.
As DevOps was used more, it became apparent that the current IT financial management models just weren’t enough. And sure enough, cloud teams started heading off on their own to figure out new, better practices that were workable in the world of cloud.
Over time, these best practices became more and more defined, an action driven by conferences and meetups like the Cloudability Customer Advisory Board. Around 2016, people like J.R. Storment, co-founder of Cloudability and the FinOps Foundation, started calling this collection of practices FinOps, adding that extra dimension to the DevOps story.
And in 2019, after years of refinement and real-world testing, leaders in this new field of FinOps came together to form the FinOps Foundation — a group of cloud financial management experts dedicated to refining, clarifying, and sharing the best practices that have worked at their companies.
Today, the FinOps Foundation is over 600 members strong and growing every day. FinOps is used by companies in the Fortune 100 all the way down to tech startups.
How is FinOps used?
Traditionally, IT Operations, Finance, Software Development, and Business Leadership were somewhat siloed. They might get together a few times a year to touch base, but mostly the teams stayed separate. Cloud changed that. Now Developers are spinning up and running resources, incurring costs, and impacting technology investments — all duties that were done in other departments when everything was on-prem.
Rather than fight over those responsibilities, FinOps strives to bring those teams together, breaking down siloes to encourage proactive, constructive conversations. Working together, those teams cycle through a set of phases to sustainably scale the practice with their cloud growth.
Those three phases are Inform, Optimize, and Operate. Together, they form the FinOps Lifecycle.
The Inform phase gives you the visibility for allocation and for creating shared accountability by showing teams what they’re spending and why. This phase enables individuals who can now see the impact of their actions on the bill.
Activities in this phase a built around reaching complete allocation and showback/chargeback, then using them for budgets/forecasts. Tagging strategies, compliance, and taxonomies are developed during this phase with the goal of tracking every last cost back to the team responsible for it. Budgets and forecasts are also developed during this phase (and refined in further iterations), enabling them to be used to define benchmarks and success metrics.
The Optimize phase empowers your teams to identify and measure efficiency optimizations like rightsizing, storage access frequency, or improving reserved instance coverage. Goals are set based upon the identified optimizations that align with each team’s area of focus.
During this phase, you set out the framework for processes in the Operate phase. Now that you’ve fully tracked your spend, you can start to find opportunities for improvement. Activities include setting up anomaly detection systems, identifying underutilized services for rightsizing, discovering opportunities for rate optimization, and performing workload cost comparisons.
The Operate phase defines processes which enable the goals of Technology, Finance and Business to be achieved. Automation can be deployed to enable these processes to be performed in a reliable and repeatable manner.
As part of the Operate phase, you’ll start taking action to achieve the goals set out in the Optimization phase. And since those goals are completely informed, you’re able to go to that next level and create scalable processes to continually refine and improve your cloud. This includes automation, rightsizing recommendation workflows, tag and storage lifecycle policies, and more.
By going through all three phases, you’ll enhance the value of your organization’s cloud investment and helped pave the way for further innovation. But your job’s not done. Cloud is constantly evolving and improving — and so should your FinOps practice. By consistently cycling through the FinOps lifecycle, you’ll continuously improve your cloud and better reach your business goals.
Download the eBook, FinOps: A New Approach to Cloud Financial Management to learn more about FinOps.