Maximising Business Value with FinOps
An introduction to FinOps for Cloud Financial Management
From inflation and chip shortages to a historically tight labour market, organisations are facing a litany of economic and geopolitical disruption. Amidst this growing set of challenges, it is increasingly important to focus on actions that ensure organisations are maximising the return on their technology investments. They must find ways to increase efficiency and curtail costs to preserve their bottom line.
While a cloud-based solution is the direction of travel for most, the challenge of managing a growing cloud footprint and subsequent spend has become increasingly complex and can quickly get out of hand without proper financial management practices in place. As a result, FinOps practices are becoming more critical than ever, as they provide a framework for managing cloud costs and identifying areas of waste and inefficiencies.
Defining FinOps
At its core, FinOps is an operational framework and cultural shift that brings technology, finance and operations together to drive financial accountability and accelerate business value realisation through cloud transformation. The goal of FinOps is to ensure that an organisation's cloud spending aligns with its business objectives and that cross-functional teams work harmoniously to gain more financial control and predictability, reduce friction, and deliver products faster.
Before incorporating FinOps into an organisation, it’s important to ensure a strong understanding of the three phases of FinOps – Inform, Optimise, and Operate.
- Inform: This phase promotes a better understanding of cloud costs, analyses, and benchmarking of performance both internally and against peers.
- Optimise: Includes multiple optimisation levers. Organisations can, for example, leverage rightsizing insights, automate on and off times for workloads that don’t need to run continuously, and improve reservation planning (taking advantage of the discounts that cloud providers offer in exchange for longer-term commitments).
- Operate: Organisations continuously evaluate business metrics, measure business alignment, define policies, and build processes and workflows to further optimise the value of cloud.
Implementing FinOps – Crawl, Walk, Run approach
The implementation process begins by intentionally mapping out the strategic direction and then the pace of change increases as you move along the journey. With FinOps, that starts by taking a phased approach.
Crawl
The starting point should include a workshop-style analysis to validate the organisation’s cloud FinOps objectives and complete an honest assessment of capabilities maturity. Next, focus on building the foundation of the FinOps strategy. This involves establishing a baseline of cloud spending, gaining visibility into cloud usage, and identifying areas of waste and inefficiency. It clearly defines quick-win themes to help measure success and build the overall FinOps roadmap that will guide the programme.
Walk
At the walk phase, the FinOps framework has been established. The teams concentrate efforts on leveraging FinOps principles and foundation, onboarding the FinOps team and minimum viable product (MVP) implementation.
Run
At this phase, organisations are focused on the enablement and adoption of the FinOps strategy. Continually look for ways to drive business value with an iterative FinOps maturity assessment and reporting.
Adopting a crawl, walk, run approach can be a helpful implementation framework because it allows organisations to gradually build the necessary skills, processes and tools required to implement a solutions framework effectively.
Navigating the Challenges of FinOps Implementation
With any new practice, there are bound to be hurdles to overcome. Key challenges include:
Navigating a multi-cloud environment: The added complexity of managing multi-cloud environments demands more time and resources to manage. The lack of transparency in cloud environments and cloud spending sprawl conspire to drive up costs. Additionally, cloud technology is constantly evolving, requiring organisations to continuously learn and adapt to new services and features.
Managing shared resource costs: In many organisations, IT, finance and business teams work independently, making it difficult to collaborate effectively and create a culture of ownership and accountability. These silos, in turn, make it difficult to create a cost-conscious culture across technology, product and business teams.
Developing an accurate forecast of cloud consumption: Organisations may have limited visibility into their cloud usage, particularly if they have a decentralised cloud environment or are using multiple cloud providers. Limited visibility can make it challenging to identify areas of waste and inefficiency and limits the ability to accurately forecast cloud consumption.
Implementing a practical FinOps model: Establishing a FinOps foundation requires a wide range of skills and expertise, including financial management, cloud technology and data analytics. Many organisations may not have the necessary expertise in-house to develop and implement a FinOps strategy.
To overcome these challenges, companies must adopt a strategic approach to cloud financial management, leveraging the principles of FinOps to optimise cloud spending, reduce waste and align spending with business objectives. By doing so, they can ensure that their cloud spending remains under control, even in an environment of rising costs and inflation.
As the world becomes increasingly digital, organisations are accelerating their rate of technology investment and strategically applying technology to enable business transformation. Cloud technology enables much of that transformation, promising to improve efficiency and competitiveness. With FinOps, the organisation achieves a complete programme-level view of how cloud resources are being utilised and that visibility creates synergies and accountability for cross-functional teams. A crawl, walk, run approach provides an initial framework to implement FinOps and once implemented, teams can then work together to gain more financial control and predictability, reduce friction, and deliver products and services faster.
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