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Why Do We Need FinOps?

22 January 2022

The advent of Cloud computing has brought a seismic shift in the way that business can now ‘switch on’ capability and scale, presenting new opportunities to grow, be agile and to spend exponentially in equal measure.

That can mean moving fast, and so to keep up with the new pace it has become apparent for many that a new operating model is required. FinOps is designed to present a structure the business can adopt to maximize Cloud benefits, whilst still closely controlling costs and potential risks.

In this series of 3 blogs we’ll look at what FinOps is, how you should implement it and how it should operate.

 

What is FinOps?

FinOps is a cross-functional operating model that has evolved as a direct response to Cloud challenges. Short for Cloud Financial Management, or Cloud Cost Optimization, FinOps is a collaborative and actively evolving model spearheaded by the FinOps Foundation. Here we have a guide to FinOps; what it is, how to introduce it and how it can bring about greater communication, accountability, control and ultimately Cloud cost-optimization.

Similar to how the DevOps concept broke down silos and increased agility across development functions and operations, FinOps addresses the same need to bring business functions and communication closer together to achieve efficient Cloud Cost Management, governance and optimization processes.

 

Why Do We Need FinOps?

By nature, cloud is fast, scalable and agile – that’s the business benefit. With volatile and unpredictable costs, it is a stark departure from the predictable charges of on-premises environments. As a result of this variable spend model it needs to be managed differently, with a more agile collaboration across business functions.

Procurement has shifted left when considering the cloud. Once in charge of negotiating and procuring resources, we are now seeing cloud engineers purchasing resources with strategic input from finance and procurement. This change means that cloud resources need to be managed in a different way, as procurement has historically been a back-office function. Now, procurement needs to move to join the forefront of business operations in the cloud if businesses are to benefit from the velocity and agility.

It is imperative that cloud resources are monitored and optimized routinely as these resources have the ability to increase exponentially with very little warning. This volatility and variability doesn’t need to be a negative, as organizations can use this ‘pay as you go’ model to their advantage, but only if they have efficient practices, processes and tools.

This variable billing model means that cloud costs can be adjusted on a monthly basis, so investing in cloud cost management can lead to immediate cost reduction—unlike the annual or even 3-5year investment cycles seen with on-premises assets. To achieve cost reduction, finance and procurement teams need a solid understanding of cloud resources and highly-accessible, accurate information to take advantage of external factors like cloud market rates, discounts and strategy. Only when fully informed can adjustments be made to the estate, so time-to-information directly effects time-to-value.

 

Bringing Together Key Stakeholders

As discussed, cloud cost-optimization cannot solely rely on the procurement team and so FinOps is about breaking down the barriers between business and IT functions, prioritizing communication and understanding the importance of collaboration. Technical teams need to understand the business need throughout the cloud asset lifecycle; from right-sizing and provisioning resources, migrating workloads and identifying over-spending / under-utilization that can be optimized. Business units need to be informed and accountable for the cost, purpose and value derived from their cloud resources. Equally, financial teams need to step away from quarterly, backward-looking cost reviews to more frequent spend analysis and optimization.

Being able to enact changes and drive optimization requires all of these business functions to communicate effectively and at the pace at which Cloud investment remains beneficial.

FinOps pulls together technical, financial and operational business leadership teams. They need to be able to communicate in common terms—a common ‘language’, use common metrics and KPIs. Functions need to understand one another and be progressing towards well communicated, shared goals. These teams need to be able to access, understand and trust the same information sources if they are to bring financial accountability to varying spend within the cloud and make strong strategic decisions.

FinOps therefore breaks down the traditional silos, creating smooth communication & collaboration across business functions that leads to broader accountability for cloud costs.

 

“FinOps is about removing blockers, freeing the potential for business to grow and increase revenues using cloud infrastructure as well as save money by avoiding over-spending as they progress.

This is how mature Cloud Management balances efficient cloud costs against beneficial speed/performance and the quality and availability of Cloud services.

FinOps is connecting the dots to be able to manage cloud investment costs through the lens of understanding and measuring business assets, delivering tangible business value.”

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How Vitado can help

Vitado offer helpful cloud management services and a unified technology platform to provide the full visibility and proactive alerting to gaps in processes and standards as outlined above. To find out more about the Vitado solution, to arrange a demo or to speak to your local Vitado team about any of our services, simply contact us today.

Find out more:

 

Vitado Guide to FinOps Blog#2: How to Gain Sponsorship and Implement a New Structure

 

Complete Guide to Cloud Tagging– Download the e-book

 

Contact Vitado – Vitado has a global team of experts in managing IT costs, so if you want to begin solving your technology challenges, our unique technology and services are here to help.

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