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FinOps- Cloud Economics Accountability for All

FinOps- Cloud Economics Accountability for All
October 30, 2020

Enterprises today are witnessing the next level of cloud services adoption that is essentially value driven (in planning) and fast moving towards true multi-cloud for achieving their digital objectives. Furthermore, the addition of DevOps and automation means that the secret code to agility has been broken. However, the same DevOps and cloud combination that is reducing time-to-market, is also forcing organizations to rethink their cloud 2.0 spend management strategies.

The fact that the cloud has made everything available at a card swipe or single click has led organizations to rethink their cost management techniques and is making them wonder if they need a new process. This new cloud economics needs a different approach due to increased variability factor and an unprecedented rate of cloud adoption.

Poor financial management, inadequate reporting capabilities and inability to predict even the OPEX costs accurately are the realities of today’s multi-cloud environments. They maybe at different scales for different organizations due to different stages of their cloud journey and digital maturity, but the existence of such shortcomings are undeniable. Some of these shortcomings are grave enough to compel some organizations to shut down their cloud services (fully or partially resulting in repatriation). This happens, as they are unable to control costs – or even fully understand it – due to the nature of expenses being invariably complex in case of large deployments, let alone make accurate budget predictions. The cloud has, essentially, been considered as a cost center every time. However, with a value driven approach. It is time that we rewrite the rules for cloud economics through an alternative business driven approach – FinOps.

FinOps largely combines the principles (and representation) of DevOps, Finance, Business, and Procurement, while focusing on ending the siloed working of these teams. It looks at business metrics for cloud consumption rather than as a cost center, thereby ensuring prediction of cloud cost and value. It is agile and can be controlled despite being available to anyone in ‘as-a-service format’. FinOps aims to bring in a cultural shift in defining cloud economics by bringing the concept of Cloud CoE (Center of Excellence). Cloud CoE comprises Finance, Procurement, Cloud experts, HR and other disciplines who can drive this culture, decision, and appropriate trade-offs across the organization for cloud consumption.

FinOps aims to bring in a cultural shift in defining cloud economics by bringing the concept of Cloud CoE (Center of Excellence).

FinOps largely combines the principles (and representation) of DevOps, Finance, Business, and Procurement, while focusing on ending the siloed working of these teams.

The aim is to achieve enhanced visibility and transparency through proper cost allocation and chargeback KPIs, along with a business metrics-driven and product-based approach. The concept seeks to make ffinance and procurement a party to product, engineering, and planning functions thereby bringing in accountability and cross team collaboration across the board.

The FinOps journey is comprises of three phases as defined by the FinOps foundation – Inform, Optimize and Operate. While the Inform phase deals with the allocation, benchmarking, and visibility. Optimize is more about rightsizing, waste prevention (ex: unused instances) and ensuring cost controls are established. Operate is more about shared cross-functional goals that can be achieved through continuous improvement and trend analysis through the cross team represented CoE.

The FinOps journey is comprises of three phases as defined by the FinOps foundation – Inform, Optimize and Operate.

This essentially ensures that organizations are able to leverage cloud services effectively, measure its true effectiveness with business-centric KPIs, and utilize accurate data in making near-real time or real time decisions that can be traced to its lowest unit with clear accountability. For a small to mid-sized organization, FinOps may be centered around 1-2 people. Large and very-large organizations having considerable cloud 2.0 spend and high digital maturity would be looking at a larger team of minimum 10-12 personnel with an appropriate cross team representation.

The key to FinOps lies in bringing together the following:

  • Creating an effective cross-functional team that can induce cultural shift
  • FinOps is pushed from the top as a habit rather than an order
  • Accurately identifying tags, patterns and smart guardrails
  • More mature or larger organizations can also look at introducing a FinOps policy that can define access, levels, usage guidelines etc. and can evolve over a period of time with COE being the sole custodian
  • Identifying and inducting more cross-skilled personnel into the CoE
  • Correctly defining the levels of access, visibility and change permissions
  • Correctly identifying the business metrics for cloud 2.0 effectiveness management at all levels
  • Identifying the drivers rather than tools to drive cost optimizations

FinOps aims to cross leverage the learnings of tech (Product, Engineering, Development and Operations) and non-tech (Finance, Business and Procurement) functions through a CoE that can induce Cloud economics & management as a habit across the organization. It also inculcates shared responsibility across the users (Business, Product, Engineering and other teams) to manage spend that can be traced and audited to the lowest possible units. While most of the Cloud journeys started with cost control as a primary driver in the last decade, the next decade will surely be to manage Cloud economics better as a subset of value derived from the cloud services. FinOps would surely come in handy for that.