What is FinOps?

FinOps is the practice of managing variable cloud spend responsibly and efficiently.

In a short answer FinOps is a cultural practice. It's the way teams manage their cloud costs by combining optimization, time to market and quality.

In other words, FinOps is a model of operating in the cloud in a combination of systems, best practices and organizational culture to increase the ability of companies to understand their cloud costs and make better choices.

This is all achieved through the formation of cross-functional teams in IT, Finance, Product, Development, among other skills. These teams work together applying best practices to enable faster product delivery while gaining more financial control and predictability.

FinOps is not just about saving money. A mature culture can provide growth in the customer base, more speed to launch products and features. That is, this process is also about increasing revenue. Unlike traditional cost management, companies know how much they are spending and where they are spending at different levels and perspectives, whether by project, functionality, customer or business unit. This makes it possible to be more confident and assertive in decision making.

In 2019, a survey carried out by the institution 451 Research and published at the Cloud Economic Summit evaluated the maturity of the acquisition process. The 300 Finance and IT Leaders report finding that most companies did not have a formal process for acquiring and controlling the variable costs provided by the cloud.

Many companies have already faced negative business impact due to poor cost management. I highlight a few:

• Slow cloud adoption due to not having an efficient process to manage how cloud resources are consumed and budgeted.

• Direct impact on innovation as the cloud provides agility in the adoption of technologies.

• Misuse of the cloud overloads the operation by degrading the SLA.

• Idle or poorly dimensioned resources generate high costs, directly impacting the company's competitiveness.

In addition, some organizations mistakenly believe that tighter control of cloud consumption can hinder innovation.

Still on the survey, which was conducted in the US and UK, 51% of respondents from the financial area of ​​companies admitted excessive spending, while 37% of IT executives believe they are operating in the red. Additionally, 68% of CFOs surveyed said they are alerted about overspending only after the event has occurred, while 80% of CTOs are alerted before the event occurs. These data tell us that there is a clear disconnect between the IT and Finance areas of organizations. Finally, 82% of respondents reported that they either rely on suppliers, spreadsheets and manual processes to track costs or simply lack visibility.

This data shows that a new operating model is needed that implements best practices as soon as possible, creating the culture of FinOps, for organizations to remain competitive, as the share of cloud spending is becoming increasingly larger in the world. IT budget.

The FinOps journey can be conceptualized in 3 integrated phases: Information, Optimization and Operation. A company can be in several phases at the same time depending on the project or business unit.

Information

This first phase of the FinOps journey is where we have visibility into allocated costs. Through specialized tools, the cost is compared with forecasted budgets and market estimates. As the cloud provides elasticity and on-demand spend, you need to monitor your usage daily for smart decision making. The more accurate the allocation of cloud spend using tags, separation of accounts/projects and functionality mappings, the better the control and management financial reports will help in the direction of the business. In this phase, automatic alarms are applied to increase the level of automation.

Optimization

Since the teams are equipped with measurement tools and trained through specialized training, it is necessary to optimize the use of the cloud. Cloud providers, particularly the market leading ones, offer a variety of ways to optimize, from early commitment to reduce unit cost to rightsizing techniques to avoid idle resources.

Operation

Once the team has tools, training and adopts process optimization techniques, it is necessary to continuously monitor whether the business objectives are being achieved. Traceability metrics and trend curves are used in this phase to continuously measure speed, quality and cost, contributing to the evolution of the product, project or service. Thus, the FinOps cycle closes and we return to the visibility (Information) phase.

Finally, we can conclude that, like any culture, FinOps must be adopted by everyone in the company, from business managers to the entire technical team, including the financial area. In this way, everyone becomes aware of gains and control of costs at detailed levels.

FinOps is not a one-day job. It is a continuous process of optimization and improvement.

Mobicare and Akross started the FinOps culture in 2018 at the initiative of the Cloud Engineering and Operations team. Today the entire company is mobilized around the theme, knowing its importance for the health of the projects.