What is FinOps?

Collaborative Cloud Financial Management

FinOps is a core practice area within Technology Business Management (TBM), extending TBM’s principles of cost transparency and business alignment into the cloud. As organizations shift to cloud and AI‑driven architectures, FinOps provides the standards, best practices, and operational framework necessary to manage the variable economics of cloud.

Expert insights on future-proofing the ROI of your cloud spend

Control costs and deliver business value

At its heart, FinOps—also known as cloud financial management—applies financial accountability to cloud’s consumption‑based model. It brings together distributed teams across IT, engineering, finance, and the business to continuously optimize cloud usage for speed, cost, and quality. This collaborative, data‑driven approach helps organizations make informed decisions, maximize the value of cloud investments, and align cloud deployments with strategic business goals.

A mature FinOps practice can help organizations tackle challenges such as:

Massive, difficult‑to‑analyze cloud bills
Rapidly expanding cloud and AI infrastructure costs
Limited visibility into cloud spending and its business impact
Complex and time‑consuming cloud financial planning

Apptio is a proud member of the FinOps Foundation, a global community of practitioners and experts shaping and maintaining the standards for cloud financial management.

Financial Management for your Cloud Journey

The FinOps Framework by the FinOps Foundation consists of three iterative phases:

Inform delivers cost visibility for all stakeholders by allocating fully burdened cloud costs back to the business and focuses on enabling team ownership of cloud spend with the goal of achieving financial accountability.
Optimize is focused on reducing cloud costs by making intelligent decisions about resource usage and through effective use of financial levers to lower rates.
Operate refines those shared IT, finance and business goals to focus and scale operational efforts through continuous improvement.

Three Phases of the FinOps Framework

FinOps has a lifecycle. It’s less of a finite start-stop process and more of a flywheel that spins faster and faster in an organization.

Inform

Understand Fully Loaded Costs

Visibility into IT spend
Granular cost allocation
Team-level budgets & tracking

Performance Benchmarking

Trending & variance analysis
Internal team benchmarking
Industry peer-level benchmarking

Optimize

Real-Time Decision Making

Remove underutilized services
Automation of resources
Understand if resources are under or over-provisioned

Predict, Plan & Purchase Capacity

Rightsizing instances & services
Centralized RI buying process
Comparing pricing

Operate

IT, Finance, & Lob Collaboration

Finance moves at the speed of IT
Continuously improve for efficiency & innovation
Defined governance & controls for cloud usage

FinOps Phases by FinOps Foundation

FinOps Poster

FinOps is a continuous, iterative journey that traditional enterprises and cloud-native organizations embark on as they adopt cloud solutions. The goal of FinOps is to build capabilities to balance cost, speed, and quality to ensure alignment with your organization’s priorities.

Check out this poster for a brief introduction into the principles, phases, and domains that comprise a FinOps practice.

The Six Core Principles of FinOps

FinOps has six core principles. Embrace these principles to establish a self-governing, cost-conscious culture that promotes cost accountability while maintaining the velocity and innovation benefits of the cloud.

Teams need to collaborate

Business value drives cloud decisions

Everyone takes ownership of their cloud usage

FinOps should be accessible and timely

A centralized team drives FinOps

Take advantage of the variable cost model of the cloud

FinOps Principles by FinOps Foundation

Accumulated over $200,000 of annual savings through changing how they deploy VPCs (virtual private cloud)
Determined the most cost-effective compute and storage options on an application-by-application basis

Read the case study

FinOps Metrics & KPIs

Organizations have always taken a total IT spend view (by environment, department, workload) to see cost drivers and predict future growth. This was as true for the on-premises world as it is for the cloud—it’s a standard IT financial management (ITFM) principle.

FinOps differs and expands on ITFM by looking at cloud-specific spend decisions. Commitment discounts promise 70%+ saving over on-demand pricing, but only if usage is optimized.

FinOps isn’t about cutting cloud spend. It’s about putting the right people and processes in place to make ongoing, intelligent decisions to maximize the value from that spend.

Common FinOps Metrics

Understand fully loaded costs

% cost of untagged resources
Total spend by period by <key organizational identifiers>
% of spend that is reservable

Benchmark performance

% of spend that is budgeted
Scorecard performance over time

Optimize usage

$ in optimization
Recommendations over time (by team)
Utilization % by resource type
Estimated Idle savings (by turning things off)
Estimated optimized spend (by rightsizing)

Optimize rates

Estimated RI/SP savings
% of Spot (or other desired service) use vs. expected %

The phases are designed to provide a foundation for organizations to effectively manage cloud spend while still balancing business needs – maximizing the value they can generate from their cloud strategy. IBM Cloudability was designed upon the same principles, uniquely tailored to support cloud financial management of multi-cloud, hybrid cloud, and SaaS ecosystems.

Interested in learning more? Start a free trial today and see first-hand how Cloudability can help you achieve your cloud goals.