Cloud

FinOps: A Way to Manage Growing Cloud Costs

A well-implemented cloud spend optimization strategy can help CFOs get the benefits of cloud computing at the most optimal cost.
Bob ViolinoJanuary 23, 2023
FinOps: A Way to Manage Growing Cloud Costs
Photo: Getty Images

Along with the growing use of cloud services and providers comes the potential for complexities and management challenges that can lead to cost overruns and other issues. This is the main reason why more organizations are turning to FinOps

As defined by the FinOps Foundation’s Technical Advisory Council, FinOps is an evolving cloud financial management discipline and cultural practice that allows organizations to get maximum business value by helping engineering, finance, technology, and business teams collaborate on data-driven spending decisions.

The foundation, which is a part of the Linux Foundation dedicated to advancing the discipline of cloud financial management through best practices, education, and standards, said FinOps is ultimately a cultural practice — a way for enterprises to better manage their cloud costs. The practice emphasizes communication and collaboration among different teams involved in the use of cloud services.

  J.R. Storment

“FinOps is proliferating across the world into Global 2000 companies,” says J.R. Storment, executive director of the FinOps Foundation. “This is why the FinOps Foundation has seen such rapid growth from organizations globally. We now have nine of the Fortune 10 and 43 of the Fortune 50 participating.”

Foundation research indicates as many as 60% to 80% of organizations are building FinOps teams, Storment said, and FinOps is now practiced in every major industry. Further research shows larger companies are driving adoption, and the practice is particularly popular in the financial services sector. 

Benefits of Cloud Financial Management

“Organizations that have adopted FinOps are seeing benefits. Data, analytics, and technology company Equifax invested $1.5 billion to rebuild its technology and security infrastructure into a cloud-based environment,” said RJ Hazra, senior vice president and CFO of global technology and security at Equifax.

“A key part of our transformation is introducing a cloud culture across our teams globally, implementing modern tools and methodologies across all our domains,” Hazra continued. 

To help manage cloud costs, the company is using Cloudability— a FinOps tool from Apptio, integrated with a general ledger application and a configuration management database for enterprise reporting on cloud usage, trending, and anomaly detection.

  RJ Hazra

“We are also using it operationally to define and drive cloud optimization targets,” Hazra said. “Cloud management tools have allowed us to develop a standard view across the enterprise globally for better real-time management of cloud costs across a multi-cloud strategy.”

Another company, data integration software provider Tealium, is using FinOps products from NetApp and ProsperOps as well as in-house tools to manage its cloud costs. These products have helped the company achieve the best available pricing, enhance cloud migration, and scale services, according to Ricky Ibarra, FinOps analyst at Tealium.

Getting Started

Here are four tips CFOs can use to help implement FinOps in their organizations. 

1. Have Support and Collaboration 

Among the most important early steps in deploying FinOps are getting support from senior business leaders and collaboration among various departments. 

“FinOps is key to unlocking the promises of cloud computing but requires the collaboration of finance, engineering, and executive leadership. Without proper organizational support, nascent FinOps practices often get stuck battling other priorities in the organization,” Storment said. 

Purchasing, vendor management, forecasting, and budgeting are all radically different in the cloud, requiring skills and abilities chief information officers and CFOs have not used as extensively before. — J.R. Storment, FinOps Foundation

The most successful practitioners enjoy the support and attention of senior leaders in finance as well as IT and product teams that provide the incentives for everyone to take on a culture of responsibility for cloud spending, and who demand the efficiency a FinOps practice can bring to cloud spending, said Storment. 

2. Prepare Employees for a Workflow Shift

An organization hoping to succeed with FinOps needs to have a change in mindset as well. “Using the cloud represents a fundamental change in the way that IT is delivered to end users,” Storment said. “Cloud is consumed, not owned. Purchasing, vendor management, forecasting, and budgeting are all radically different in the cloud, requiring skills and abilities chief information officers and CFOs have not used as extensively before.”

A large part of the cultural shift is enabling teams across all of an organization’s disciplines to collaborate on new processes, new ways of buying and managing IT costs, and new ways of measuring the value the organization is receiving from the cloud, Storment said. 

“Enabling the organization to use the cloud effectively, like managing cloud use, is a continuous effort across the entire team that takes focus and attention to maintain,” he said. “The cloud providers are constantly changing the landscape of services and pricing and organizations that use cloud must change too to keep up.”

3. Set Goals 

An organization’s FinOps strategy needs to be implemented with a measurable goal or purpose in mind, Ibarra said. “Introducing a new FinOps dashboard doesn’t do anything if it doesn’t support what the stakeholder needs,” he said.  

  Ricky Ibarra

The real achievable savings with FinOps comes from finding inefficiencies within the organization’s infrastructure, “which most FinOps tools will not be able to advise on,” Ibarra said. “We have saved more money digging deep into our code/workflow diagrams and rearchitecting components.”

Organizations likely adopted cloud services to drive innovation, enhance scalability or improve the speed and quality of digital assets, Storment said. Accordingly, they should set goals and key performance indicators (KPIs) to measure “unit economics” for the business, he said.

“Avoid the pitfall of focusing only on cost-takeout goals, which focus only on cloud or IT cost,” Storment said. “Instead, identify KPIs that your FinOps team can help you incrementally deliver to show the monetary and non-monetary advantages the cloud can bring. FinOps is not only about reducing cloud costs. It’s about enabling you to get maximum value from cloud spend to drive company growth.”

4. Create Best Practices 

“Organizations should consider creating a cloud center of excellence (CoE) to ensure different areas and functions are sharing best practices and to centralize the approach to FinOps,” Hazra said. “To be successful, FinOps needs to involve both technology and finance, rather than one or the other.”

We also created architectural controls to allow us to start differentiating our development workloads versus run workloads, which helped us achieve [a] more optimal accounting outcome,” Hazra continued. “These types of activities help push the industry forward in how to think about cloud operations, and it is beneficial to centralize them for a unified approach.”

Equifax also developed analytics initially for use by the CoE and then for sharing more broadly within the organization. “We have democratized the analytics, but still keep a base set of gold standard analytics with the [CoE] team,” he said. 

As with any large-scale change program, success with FinOps will come with repetition and experience, Storment said. “FinOps requires teams across the organization to make new decisions using new data, and to flip the script on traditional data center IT,” he said. “Starting small enables you to get comfortable with the demands of new capabilities and learn where to find value in your own organization.”

Bob Violino is a freelance writer based in Massapequa, N.Y.