What is FinOps?

The Collaborative Cloud Financial Management Practice

FinOps is the operating model for the cloud, a set of standards and best practices developed to help cloud practitioners manage and optimize the variable economics of cloud to drive collaboration, informed decision-making, and value.

Control costs and deliver business value

Cloud financial management, also known as FinOps, enables you and your team to bring financial accountability to the variable spend model of cloud. Establishing a FinOps practice, distributed IT, finance and business teams are brought together to continuously fine tune cloud deployments to align to key business objectives, like speed, cost and quality.  

Apptio is a proud member of the FinOps Foundation, a community of experts and cloud practitioners working to develop and maintain the standards for the cloud financial management practices. Learn more about this community and join their network at finops.org.  

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FinOps Cloud Financial Management Graphic

Financial Management for your Cloud Journey

The FinOps framework 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 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

Koch logo

How Koch Business Solutions Drives FinOps Practices across the Enterprise

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. 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.

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FinOps - Graphic

Additional Resources

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The ATUM Poster

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FinOps: A New Approach to Cloud Financial Management

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The Complete Guide to Building a Successful Agile Team