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FinOps – Cultural Transformation

For the past few years everything in IT has been about – the cloud. New expressions, unknown only a decade ago, such as IaaS, PaaS, SaaS, cloud native, Public, Private, Hybrid cloud are everywhere around us.

The Cloud in modern IT

 

More and more enterprises are in the cloud adoption process, moving their resources from traditional infrastructure and traditional application software to SaaS, PaaS or IaaS. It’s normal for a company to be cloud native today, or even more popular, be born in the cloud.

Predictions are that cloud spend will more than double over next 4 years, from just shy over $200 billion dollars in 2019 to nearly 500 billion dollars in 2023! Gartner projects Cloud Services Industry to grow exponentially in the following years.

Due to all these changes, new challenges are emerging. How to manage them all? There is a significant difference between cloud and on-prem infrastructure. One of the biggest changes is procurement of resources. Standard for on-prem environments, purchase of resources includes budgeting once a year with an x number of years investment cycle, which is approved by few top decision makers within the organization.

Cloud business changed all that with its own on demand resources provisioning, which enabled practically everyone with a cloud account to set up their own infrastructure. All of this requires a change in a way we manage, control and predict future financial cost.

 

FinOps

 

Now is the time to learn one more expression, FinOps. Remember it, it’s her to stay.

FinOps is the operating model for the cloud. The practice of bringing together Finance, Technology, and Business to master the unit economics of the cloud for business advantage. The goal is to create balance between cost, sped and quality in order to gain most from cloud and to keep reinvesting in innovation.

 

FinOps rests on five fundamental capabilities:

  • Understanding fully loaded costs. Decision making in regard of true cost for operating in the cloud.
  • Performance benchmarking. Under-utilized or over-utilized resources are a bottleneck for optimized cloud. Use performance benchmarking to adjust cloud infrastructure and optimize business results and cost.
  • Real-time decision-making. The best way to improve efficiency and cut cloud spending is to make real-time decisions with the right data like metrics and benchmarks.
  • Predicting, planning and purchasing capacity. As deployment of cloud resources is enabled to many end users, a proper strategy regarding reliable predictions and plans about purchasing capacity is necessary.
  • IT, Finance and LoB collaboration. Cross-company collaboration is key in FinOps. Departments like IT, Finance and Management must work together to accomplish greater level of agility, innovation, decentralized decision-making and fast adaptation to change.

The right foundation

In February 2019 the FinOps Foundation was established. This is a non-profit trade association made up of FinOps practitioners around the world. The Foundation is focused on codifying and promoting cloud financial management best practices and standards to help the community members and their teams become better at cloud financial management.

CloudVane was developed based on FinOps Foundation principles and best practices, ensuring the provision of better support for cloud financial management.

 

The (internal) team

 

This cultural shift creates a new team in business organization, FinOps team. The team’s goal is to make sure everyone comprehends the relationship between the actual infrastructure, its costs and business goals. Financial planning belongs to finance teams, decisions on optimization between quality, speed and cost falls onto management and DevOps team focuses on operational efficiency while building applications on cloud resources with optimization in mind.

 

 

 

The life cycles

 

Typically, there are three phases from which FinOps evolves in every organization.

 

The Inform Phase

This is the first phase in the FinOps journey, empowering organizations and teams with visibility, allocation, benchmarking, budgeting and forecasting.

The Optimize Phase

Once organizations and teams are empowered, they need to optimize their cloud footprint. Cloud providers offer multiple levers to optimize.

The Operate Phase

Any organizational success is only possible if the organization builds a culture of FinOps which involves a Cloud Cost Center of Excellence built around business, financial and operational stakeholders who also define the appropriate governance.

 

 

One can conclude that this operating model is the most efficient way for an enterprise to manage and optimize their cloud infrastructure. This cultural shift is in action at many enterprises; it enables and empowers teams and allows team members in every part of the business to participate in the process of increasing efficiency, optimizing utilization and reducing spend.

 

A Fortune 100 financial services company who implemented FinOps reports following results:

  • In less than a year, over 15% of the 5,000 person IT organization is utilizing tooling to get daily updates on the costs and utilization of their cloud environment
  • Product/application teams are using the FinOps best practices to manage their cloud consumption
  • Financial accountability is being built into the architecture and operations of product/application teams

 

Embracing FinOps is the future will prove to be a smart business decision. A specialized tool such as CloudVane can guide you through the process, as the team is focused on your success.

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