One of the main concerns of the financial departments of companies that use one or several clouds to manage their information storage and their workloads, is to keep the expenses that are made in their infrastructure at bay. Above all, because it has become common for various divisions or work groups to use different clouds, and if they do so independently, and without coordinating with other teams that also use them, spending can skyrocket. To avoid this, a management method known as FinOps.
What is FinOps
This term, which stems from the combination of the terms Finance and DevOps, means Finance Operations. It is a management practice that promotes the sharing of responsibility for a company’s cloud computing infrastructure and costs. Operating within a FinOps framework, IT and DevOps teams collaborate on it with other areas of the business further removed from anything technology-related in the business. Among them finance and purchasing.
Therefore, one of its objectives is to ensure that the technology, business development and finance teams work in a coordinated manner to control the costs of the cloud services they have contracted. But this management system goes beyond working to save money.
It also helps several teams, as we have seen, agree to make the best possible decisions in relation to the performance and quality of investment in technology. Also in the use that is given to cloud computing in the company. The idea behind this methodology, therefore, is to make a company make the best decisions when investing in the cloud, and not only make the ones that imply the lowest cost.
The work of the FinOps Foundation
The practices that are implemented when using the FinOps methodology have been developed by the FinOps Foundationan NGO that counts among its members and promoters technology companies such as Atlassian, Cloudify or VMware.
Although it does not establish fixed guidelines for companies or in terms of technology, the Foundation is in charge of promoting standards, best practices and training, which allows teams from all types of organizations to learn to take advantage of its management techniques. In addition, it offers various certification programs in FinOps. Today, the FinOps Foundation has about 5,300 members from more than 1,500 companies.
The idea of the FinOps methodology was born as a system of applying certain traditional financial practices to costs and resource management for external services, while supporting dynamic business areas, such as DevOps. Especially for everything related to the cloud, as well as other elements that used a variable budget.
Its basis is very simple, and consists in that, instead of leaving each department manager or group leader to make their own decisions regarding the cloud, they opt for create a multidisciplinary and collaborative group to perform various tasks in a coordinated manner.
Among these tasks are the evaluation of the needs of the workloads, the creation of the most efficient cloud architecture for each application, the central negotiation of the pricing scheme for the most efficient cloud, the use of cloud resources from a pool common, and the application of best practices in budgeting, reporting, management and monitoring.
In the midst of this, the FinOps Foundation was born, on August 20, 2020. It was launched by the Linux Foundation to advance cloud financial management through best practices, standards, and education. As we have mentioned, it has strong support from entities in the technology sector. And among other things, it established what is known as the FinOps life cycle.
The FinOps Life Cycle
The FinOps Foundation recommends a iterative approach to managing the cost of cloud services. To do this, he recommends following three phases, which require continuous management, and which can coexist in an organization for different projects or cloud workloads. The first phase is the information. Neither management nor cost allocation can exist if there is no accurate information on what is needed and what is available.
This information is key for testing, budgeting and forecasting, and essential for calculating, among other things, ROI. Among the information necessary to apply the FinOps methodology are resource labels and business mappings, so that each area that consumes resources in the cloud is identified and controlled.
The second phase of the FinOps life cycle is the optimization, which implies control of both costs and the use of resources. In some cases, optimization may depend on cost savings, such as the use of usage discounts, to set aside money for long-term use of an instance. In other cases, it may consist of reducing or turning off resources that are not needed or that are underutilized. Other optimizations may focus on performance of workloads, or scaling of vital resources.
The third and final phase of the FinOps life cycle is the operation. It includes the use of FinOps metrics to assess the performance, quality, and cost benefits of having workloads in the cloud. This phase allows business, finance, technology, and engineering teams to collaborate with other business assets on workload activity and governance.
FinOps Core Principles
The FinOps methodology is built on several principles, focused on outlining the main objectives of a FinOps environment. The first of these principles is collaboration, noting that FinOps teams need to collaborate. To do this, it is necessary to eliminate traditional watertight compartments, in addition to encouraging various areas of the company to adapt to the dynamics of cloud use.
The second of these principles is property. Thus, while a FinOps team can provide a company with a centralized cloud center of excellence, GFinOps principles encourage < direct visibility to, and ownership by, key company assets of their use of their cloud in relation to the established budget. In this way, each workload owner, or department, is able to understand and take responsibility for their share of cloud usage.
Another of the FinOps principles is the centralization. Companies will have a FinOps team, made up of expert professionals capable of centralizing the important elements, in terms of cost and resources, related to the use of the cloud. It is the members of this team who are in charge of negotiating and managing problems.
These include volume discounts, instance reservations, and usage rebates. This shifts concerns about cloud costs to other business assets, where the most cost-effective and available cloud resources will reach for workload deployment.
For the FinOps methodology to work, it is also important to preparation of reports. FinOps teams operate on accurate, complete, and timely information. This gives the team and workload owners feedback so they can make critical business decisions as quickly as possible. In addition, reporting can help spot trends and improve forecasts.
Another of the principles of this system resides in the worth. That is, in that decisions are made in relation to the business value of the cloud, and not only taking costs into account. The ideal is to achieve a balance between performance, quality and cost of using the cloud. The last principle is cost, and it is based on FinOps teams using variable cost models for the cloud, focused on benefiting the organization. With them, teams can optimize instances and services so that they reach the appropriate levels.
Advantages and disadvantages of FinOps
When implemented correctly, the FinOps set of practices and standards can be highly beneficial to areas of the organization that work with the cloud. Among these advantages are cost savings, visibility of these, their optimization and the possibility of attributing to a team or area what it consumes or spends in the cloud. But this methodology also presents certain drawbacks and challenges for companies.
The first one is related to tools, as companies need various tools and platforms ready for FinOps planning. These include cost optimization utilities for specific cloud providers. In certain cases, tools with multicloud support are also needed.
There may also be collaboration issues. The FinOps methodology works best when the team charged with putting it into practice in a company includes members of engineering, technology, finance and business development. This can therefore be a problem for organizations that have compartmentalized and isolated departments, and that do not encourage collaborative work.
But the application of FinOps can also lead to problems and barriers in management. This methodology is based on policies and processes designed to achieve technological efficiency, and also cost efficiency. If not planned and executed correctly, it can fall short of execution, or fail altogether.
