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What is cloud FinOps?

An operational framework and cultural shift that brings technology, finance, and business together to drive financial accountability and accelerate business value realization through cloud transformation.

• FinOps enables enterprises to drive financial accountability and maximize business value

• FinOps helps understand the complexity and challenges to traditional IT financial management 

• FinOps helps to identify the building blocks and key success metrics for business value realization

Value of cloud FinOps

1. Accelerate business value realization and innovation

2. Drive financial accountability and visibility

3. Optimize cloud usage and cost efficiency

4. Enable cross-organizational trust and collaboration

5. Prevent sprawl of cloud spend

The five key building blocks of cloud FinOps

Adoption of the cloud FinOps design principles will establish a self-governing, cost-conscious culture and promote both financial accountability and business agility in the cloud.

Accountability and enablement

This pillar focuses on establishing lean / centralized cross-functional teams (including engineering, architecture, finance, operations, and app owners) to establish governance and set standards for managing cloud spend. 

Measurement and realization

This pillar focuses on developing a key of business-value metrics and KPIs to measure success of transformation. Oftentimes, we see customers start with a set of cost-optimization metrics and eventually shift to unit economics / business value metrics such as cost per transaction or cost per customer serve.

Cost optimization

This pillar focuses on identifying key cost-optimization drivers and is an iterative and continuous process that provides a consistent methodology to manage cloud consumption in a most cost-effective manner.

There are three key areas of optimization:

  1. Resource optimization
  2. Pricing optimization
  3. Architecture optimization

Planning and forecasting

Proper planning and forecasting in the cloud requires organization to better understand the cost drivers, allocate spend, and benchmark efficiency.

Tools and accelerators

Finally, bringing this together, employing proper tools and accelerators is important to effectively manage and track cloud spend. This includes:

  1. Deploying Google Cloud cost-management tools to analyze real-time billing and cost data
  2. Developing a reporting dashboard to manage cloud spend and value tracking
  3. Implementing automation scripts to set account guardrails and budget alerts

Cultural principles

Cultural principles play a critical role in the success of the cloud FinOps program.

Regardless of the organization size and their experience in cloud, we have seen these guiding principles deeply rooted for successful execution of cloud FinOps: 

Accountability

Hold application teams responsible for value realization reporting and cost optimization with a set of clearly defined KPIs and metrics.

Agility

Drive agile processes for budgeting and planning within IT by promoting iterative budget allocation, IT spending, and forecasting.

Blamelessness

Treat mistakes as blameless opportunities to learn and improve existing processes.

Business value realization

FinOps is successful when decisions are made from a business value perspective.

Collaboration

Partner with IT finance, application development, and infrastructure teams for cloud financial management.

Cost transparency

Access to real-time billing/cost data at all layers in the organization.

Variable nature of the cloud

Embrace the pay-as-you-go nature of cloud and benefit by serving your customers dynamically during their constantly changing needs. 

Five key success metrics to measure cloud FinOps impact

Well-defined success metrics are critical for measuring impact.

Accountability and enablement metric

This pillar is foundational to building a culture of cost and value awareness and charts the course for both the process and cultural transformation journey in cloud FinOps. The primary goal is to help drive financial accountability and accelerate business value realization by streamlining IT financial processes and enabling frictionless cloud governance.

Measurement and realization metric 

Foundational to any good process is accurate data and effective metrics, which starts with the notion of cloud costs visibility and traceability. This is driven by proper resource hierarchy and project structure standards and supported by a labeling and tagging data architecture behind your organization’s use of cloud resources.  

Cost optimization metric

Cloud cost optimization is not just about cutting costs—it's about knowing where to spend your money to maximize the business value. It is an iterative and continuous process that provides a consistent methodology to visualize and manage cloud consumption in a most cost-effective way.

Planning and forecasting metric

Financial planning is a foundational capability within finance organizations that will directly influence each company’s capabilities of cloud computing forecast accuracy. Financial planning focuses on accurately forecasting financial metrics that are set on an annual basis to guide the company’s financial objectives.

Tools and accelerators metric

Employing proper tools and accelerators are important to fully benefit from FinOps practices. In earlier stages, companies may have limited their ability to report detailed analysis of cloud spend. 

See the 5 key metrics for FinOps blog post.

Cloud FinOps benefits

The following are a few high-level benefits that enterprises can achieve following the FinOps best practices and processes.

Cost efficiency

Measure cost efficiency through infrastructure savings, migration, and support costs.

Focus on infrastructure, support, and implementation.

Resiliency

Enhance operational resiliency with improvement in service quality and security risk posture.

Focus on service quality, security posture, and operational stability.

Velocity

Increase time to market by accelerating fluidity in product and service delivery.

Focus on developer productivity, release frequency, and business agility.