Analyst Coverage: David Terrar, Paul Bevan and David Norfolk
FinOps is an essential component of Cloud Management. There’s a Foundation for it. Practitioners can get badges of certification for it. For most organisations FinOps will be a new approach or a cultural shift from their “business as usual” management of IT costs. It combines tools, techniques, and processes in a revised framework. The foundation’s website explains it this way:
FinOps is shorthand for “Cloud Financial Operations” or “Cloud Financial Management” or “Cloud Cost Management”. It is the practice of bringing financial accountability to the variable spend model of cloud, enabling distributed teams to make business trade-offs between speed, cost, and quality.”
No matter what size of business you operate this approach to operational and cost management is essential, and for Enterprises from medium heading towards large it’s a big deal, made even bigger by the accelerated use of cloud services, disruption and change we’ve lived through in 2020 and 2021. As of today, not everyone in tech or IT will know or use this relatively new catch all term, but everyone will immediately “get it” once you’ve explained it to them. They’ll recognise that this is somehow both “business as usual” and a necessary cultural shift in our rapidly changing, hybrid cloud world.
FinOps changes the focus. Too many businesses think of cloud purely in terms of cost – treating IT as a cost centre only. Today all organisations in all sectors are, to a greater or lesser extent, becoming, software companies alongside what they do to support what they do. Thinking cost only is the wrong approach. Depending on the application scenario you may make a good case that a Cloud approach savescosts over an on-premises solution, but that’s only one factor, and shouldn’t be the starting point. You need to think more strategically than that. Technology should be used as a weapon to gain competitive advantage and get closer to your customers. FinOps demands you think differently in terms of value to the business first. Think transformation. A shift to effectiveness, not efficiency.
This is what the growing practice of FinOps is all about. FinOps practitioners will suggest tools for cloud pricing, billing reporting or resource tagging along with recommending techniques to help you identify, understand and manage the costs, but you’ll need to set KPIs too to measure the value to the business. You might track cloud spend allocated to business owner or realized savings from cloud optimization. Many businesses will need a cultural change in the way they consider technology investments, and on who is involved. Decisions should be made and monitored on the business value of cloud. You’ll need to adopt a FinOps framework that integrates in to your company’s operating model, that treats technology as a value creator, not a cost centre. You’ll probably need to break down barriers in your organisation so that everyone and every department takes ownership of their cloud and technology usage. Business, finance, procurement, and IT all need to be aligned and talking the same language, with spending tied to business metrics, with governance and security baked in. FinOps drives a shift in focus from cloud spend to business growth, with control, speed, and innovation.
Even before the Pandemic a Gartner report “Software Assessment Management for the Cloud: Consumption Management and Optimisation Take Center Stage” (handily hidden behind a paywall) suggested that 30% of enterprise cloud spend is wasted. That’s a significant percentage of 100s of billions of dollars of cloud software and services going to waste rather than adding value or improving the customer experience. Flexera’s 2020 State of the Cloud Report suggests we are wasting a third. Then the Pandemic hit, and companies had to transform and do things differently in days and weeks, not months and years. Cloud infrastructure and services were a huge component in that innovation, and doing things fast usually results in compromises in cost, governance and risk. That means the potential cost implications might be even bigger, particularly if your business is consuming these services at scale.
Most businesses are using two or more of the major cloud infrastructure providers, on premise applications which use cloud architecture, and multiple Software as a Service offerings too. The larger the enterprise, the larger the number of choices implemented, or options being considered by line of business units, as well as IT, to get things done quickly in an innovative way.
The Gartner and Flexera reports we mention (see Why is it important? tab) suggested 30-33% of Cloud spend is wasted. That’s a problem for any organisation, but it’s more than that. FinOps is more than cost saving, FinOps is about adding value, adding velocity, reducing risk and about making money as well.
That means CIOs, CTOs and IT Operations leaders need to care about this, but business leaders and line of business heads need to take this seriously too. We need a mindset change. FinOps needs to be considered holistically across all functions and may require organizational change. FinOps is not done by a single person or a single team but rather changes the way that engineering, finance, and your business teams work and collaborate. As in so many requirements of becoming an agile, adaptable, Mutable Business new cross functional thinking and working is required.
The FinOps Foundation is a programme of the The Linux Foundation. It includes over 5300 individual members, representing more than 1500 companies. It provides a variety of training and certification programs for practitioners, platforms and service providers. Dozens of major service and platform providers are part of their vendor certification programs including Accenture, Cloudability, CloudHealth, Cloudsoft, Contino, Exivity, Flexera, HCL, Kubecost, Neos, SoftwareOne, Ternary, Thebes, Timspirit, Voxowave, Virtisant, and Yotascale.
If you go to the major cloud providers’ websites you will find FinOps explanations and resources at Google Cloud, Microsoft Azure and AWS.
FinOps is both an operational framework and a cultural shift that brings technology, finance, and business together. More and more vendors are adopting the approach and the discipline with their language shifting to focus on the business value of cloud.
These organisations are also known to offer solutions: