Introducing FinOps Maven

Welcome to FinOps Maven, your bi-weekly guide to mastering the FinOps mindset. Every two weeks, I’ll dive into different aspects of FinOps, offering fresh perspectives on how to navigate this evolving field. Whether it’s understanding KPIs, exploring the intersection of FinOps and ITSM, leveraging AI for optimization, or promoting sustainable IT practices, each edition will bring valuable insights tailored to your needs.

What FinOps truly means

Despite the progress made by the FinOps Foundation since its founding in 2019, confusion still lingers about what FinOps truly entails. This confusion isn’t due to the complexity of the framework or unclear communication from the FinOps Foundation, but rather stems from IT solution providers who simply rebrand their monitoring tools as "FinOps tools," and from conservative strategies of many CIOs who prefer to limit themselves to optimizing Cloud service capacity rather than implementing a centralized FinOps function capable of maximizing the business value of Cloud services.

In December 2023, the Technical Advisory Council of the FinOps Foundation released a precise definition of what FinOps truly is, but unfortunately, it’s often easier to simply cut Cloud costs rather than embrace a new approach to Cloud management.

FinOps is an operational framework and cultural practice which maximizes the business value of Cloud, enables timely data-driven decision making, and creates financial accountability through collaboration between engineering, finance, and business teams

That’s why this first issue is dedicated to defining FinOps clearly and concisely, setting a strong foundation for everything that will follow.

To accurately describe what FinOps truly is, it’s crucial to position it as the pinnacle of evolution in Cloud cost management transformation, which begins with Cloud Cost Management, progresses to Cloud Cost Optimization, and ultimately matures into FinOps.

• Cloud Cost Management focuses on “Being aware of Cloud costs.” This phase provides an overall view of past Cloud spending, without taking optimization actions.
• Cloud Cost Optimization centers on “Fixing past errors to reduce Cloud costs.” This stage allows for a granular analysis of past Cloud expenses, emphasizing the optimization of costs for already deployed Cloud services.
• FinOps is about “Predicting the future and extracting value from every cent spent in Cloud.” It offers a detailed view of both past and future Cloud costs, ensuring optimization of expenses for both existing and new Cloud services.

Right after rereading the definition of FinOps that I had written, a memory from my study of Latin came to mind. FinOps, in the pantheon of "technological gods," would be akin to Janus, a uniquely Roman god without any Greek equivalent. Janus is described as the Roman god of beginnings and ends, entrances and exits, change, transition, gateways, doorways, and archways.

Just like Janus, FinOps supports a structured definition and allocation of the budget at the beginning of the fiscal year and ensures control to minimize the delta between the planned and actual spending at the end of the year. Similarly, FinOps is a journey of change that requires a long transition phase involving all the key personas in the company’s Cloud strategy. Lastly, like Janus, FinOps sets guidelines and policies to be applied "by design" and validated during key approval gates, acting as a doorway for innovation, guiding new investments funded by the savings already achieved.

The distinction between Cloud Cost Management, Cloud Cost Optimization, and FinOps becomes even more apparent when you examine the key activities associated with each approach.

These three models represent a progression of maturity, where each step not only increases the sophistication of cloud cost management but also demands longer implementation times and deeper integration within the organization.

At the foundational level, Cloud Cost Management is all about visibility. Organizations at this stage focus on understanding where their Cloud expenses are going. This involves monitoring resource usage, tracking costs, and generating reports to keep stakeholders informed. Budgeting and billing alerts are set up to prevent overspending, but the focus is largely on tracking rather than optimizing. The goal is to ensure that Cloud costs are correctly allocated and invoiced across various departments or projects. The analysis at this stage is basic, providing a general overview of Cloud spending without delving into more complex optimization strategies.

As organizations evolve, they move into Cloud Cost Optimization, where the focus shifts from simply understanding costs to actively reducing them. Here, organizations start to implement more advanced strategies, such as automated resource scaling to adjust resources in real-time based on demand, thus avoiding unnecessary expenses. Anomaly detection becomes integrated with IT Service Management (ITSM) systems, allowing for quick identification and resolution of unusual spending patterns. The emphasis also moves towards rightsizing Cloud services, ensuring that resources are perfectly matched to workloads to avoid paying for excess capacity. Reserved instance management comes into play, where organizations make long-term commitments to Cloud providers at lower costs. Additionally, this stage involves strategically disposing of unnecessary services, continuously refining and optimizing the Cloud environment based on usage patterns and performance data.

Finally, FinOps represents the pinnacle of cloud cost management, where the focus is on not just managing costs but maximizing the business value of Cloud investments. FinOps builds on the optimization strategies from the previous stages, but it also introduces a strategic dimension that involves financial accountability and precise forecasting. At this level, organizations develop a robust cost governance strategy, ensuring that Cloud spending is tightly aligned with business objectives. Usage patterns are continuously analyzed, and automation is heavily leveraged to proactively optimize costs. FinOps fosters a culture of collaboration across teams, encouraging finance, engineering, and operations to work together towards common goals. Continuous monitoring and improvement processes are put in place to ensure that Cloud investments are always delivering maximum value, and any deviations from planned budgets are quickly addressed. FinOps not only optimizes existing Cloud services but also looks ahead, guiding strategic investments that are aligned with the organization’s long-term goals.

I haven’t reinvented the wheel in this edition of the newsletter, but I’m eager to share my vision with you to lay the groundwork for all the exciting topics we’ll dive into together in the future.

See you in two weeks with the next edition of FinOps Maven. Stay tuned for more insights and strategies to master your financial operations in the Cloud ??

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??Sources:

• FinOps Foundation website

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