FinOps: a never-ending journey, not a destination
What is FinOps? At a high level, it’s a simple question to answer: FinOps is any practice that helps optimize cloud spending.
However, if you dig deeper, you realize that FinOps is not that easy to define – let alone operationalize. FinOps is not a singular practice; on the contrary, it encompasses a wide range of processes and strategies, and it is practiced by different organizations in different ways.
That is why getting the most out of FinOps requires an understanding of the many approaches to FinOps. To provide guidance, this article walks through what I call the four stages of FinOps maturity and identifies opportunities where companies can double down on their FinOps initiatives, even if they already have some cloud cost optimization practices in place.
The challenges and opportunities of FinOps
Before we dive into best practices for leveraging the full value of FinOps, let’s discuss what FinOps means.
Most definitions of FinOps summarize it as a practice (some say “discipline”) dedicated to optimizing costs in the cloud.
That’s not wrong, but I’d suggest a slightly different definition – one that better reflects what makes FinOps fundamentally different from local cost management.
For me, FinOps is the practice of procurement in the cloud. The goal of FinOps is to ensure that organizations acquire cloud resources in a cost-effective manner.
The reason I like this definition of FinOps is that it highlights what makes cloud cost management so different from on-premises cost management: In the cloud, engineers become purchasing managers, because they are the ones making decisions about when and how to buy cloud resources.
This is a major departure from standard purchasing operations. Outside of the cloud, procurement involves acquiring large amounts of infrastructure at regular intervals – usually once every couple of years. Within a company, these decisions are usually made by purchasing managers who spend most of their time analyzing costs and mapping out ways to achieve the best balance between spend and performance.
But when you move to the cloud, you’re entering the wild west from a consumption perspective. People who typically have no background in procurement or cost management—engineers—suddenly start making decisions that have huge financial implications for the business. In addition, their ability to spend is literally unlimited, since cloud platforms offer a virtually unlimited access to resources.
In this environment, FinOps becomes absolutely essential to ensure that procurement decisions are sound from a cost management perspective. It’s the only way to guarantee that engineers responsible for cloud spending have the data and insights they need to spend wisely.
Towards a FinOps Maturity Model
The best way to explain what these data and insights consist of is to think in terms of FinOps maturity. Although many businesses now have FinOps practices, not all have achieved the same level of effectiveness or sophistication in terms of how actionable their FinOps insights are and how much value FinOps adds to their businesses.
Here are the different levels of FinOps maturity you’re likely to encounter at different businesses.
FinOps Step 1: Predict cloud costs
The most fundamental aspect of FinOps is having the necessary data to predict how much cloud resources will cost. Engineers can’t make smart cloud procurement decisions if they lack information about what a VM instance or serverless feature will cost them. Fortunately, cloud providers offer cost calculators and prediction tools, making it easy to achieve this level of FinOps maturity.
FinOps Step 2: Track chargebacks
Slightly more advanced FinOps practices allow companies to not only predict costs, but also manage chargebacks so they can understand which parts of the organization are spending which amounts in the cloud. To do this, you need to collect cloud cost monitoring data in a granular way, workload by workload and allocate it to different business units.
Achieving this level of maturity is easy enough as long as you monitor cloud spending and label or tag cloud resources with sufficient detail to know which business units or teams they belong to.
FinOps step 3: Cost optimization
Once companies have gained visibility into their cloud spend, they can move on to the next stage of FinOps, which is to identify and act on opportunities to optimize costs. They can identify situations where VMs can be migrated to a different instance type that reduces costs without compromising performance, for example, or leveraging multiple clouds to find cheaper services.
This is a more advanced level of FinOps maturity because it requires the ability to consider many variables—for example, what workload configurations are available on the cloud services you use, what additional cloud services you could potentially use, and what near- and long-term performance and reliability requirements until each workload is. Analyzing this data effectively to deliver actionable real-time cost insights requires automated, predictive analytics.
FinOps step 4: Optimization beyond costs
By the time you reach FinOps Maturity Stage Three, you have pretty strong control over your cloud spend. But there is room for further improvement by leveraging FinOps to support initiatives other than cost optimization.
The most mature FinOps practices are not only able to optimize for cost, but also for other purposes. For example, an organization can use FinOps tools and processes to identify how changing a VM instance type will reduce energy consumption and support ESG goals.
Ultimately, the points I’ve made above boil down to the lesson that FinOps is about continuous improvement. You can’t just implement a FinOps function in your business or adopt some cost monitoring tools and call it a day. Instead, think of FinOps as a never-ending journey where there is always room to do more with cloud cost optimization tools and practices. The only way to achieve true optimization is to never settle for the norm.
About the author: Jas Adams is Director of DevOps at Lemongrass
