This article will break down the core FinOps principles—Visibility, Optimization, Teamwork, Responsibility, and Rules—and provide practical ways to apply each within your organization. With these principles, businesses can optimize their cloud spending and achieve greater financial transparency and accountability.
It’s interesting to note that global spending on public cloud services was predicted to reach nearly $600 billion by 2023. According to Gartner, the need for a robust financial management framework is more pressing than ever. However, despite its importance, only 9% of organizations have a mature FinOps practice, as highlighted by Wakefield Research in their 2023 State of Cloud Ops survey.
Let’s dive into these FinOps principles and see how you can apply them in your organization.
1. Cost Visibility: Where is the Money’s Going?
Why Cost Visibility Matters:
Visibility is the cornerstone of FinOps. If you don’t know where your money is going, it’s impossible to manage it effectively. With visibility, every team member has access to financial data, allowing them to understand how their actions impact the overall cloud spend. Given that 60% of professionals feel their cloud bill is higher than necessary, having clear insights into spending is crucial for effective management.
How to Apply It:
Start by implementing cloud cost management tools that provide real-time dashboards and reports. These tools should allow for detailed breakdowns of costs by project, department, or even individual users. Regularly share these reports with all relevant teams to keep everyone informed.
This transparency not only helps in tracking expenses but also in identifying areas where costs can be reduced. By making financial data accessible, teams can make informed decisions that align with the company’s budget goals, reducing the risk of waste—like the 32% of cloud budgets that were lost to inefficiency in 2022.
2. Optimization: Always Look for Ways to Save Without Losing Quality
Why Cost Optimization Matters:
Optimization is about getting the most value from your cloud spending. It’s not just about cutting costs but ensuring that every dollar spent contributes to the company’s success without compromising on quality. In fact, 92% of organizations struggle with FinOps, particularly when it comes to managing and reducing cloud costs, making optimization a key focus area.
How to Apply It:
Regularly review your cloud usage and look for opportunities to right-size your resources. For instance, if you’re consistently underutilizing certain services, consider downgrading or eliminating them. Use reserved instances or spot instances where appropriate to reduce costs. It’s also important to implement automated tools that can monitor usage and make adjustments in real-time, ensuring you’re not paying for more than you need.
Optimization should be an ongoing process, with teams encouraged to continuously seek out and act on cost-saving opportunities, given that nearly half of organizations struggle with accurately forecasting their cloud spend.
3. Teamwork: Finance, IT, and Operations Need to Work Hand in Hand
Why FinOps Teamwork Matters:
FinOps is not just the responsibility of the finance department; it requires collaboration across the entire organization. When finance, IT, and operations teams work together, they can align on financial goals, understand each other’s needs, and make better decisions.
However, the 2023 State of Cloud Ops survey revealed that only 9% of organizations have a mature FinOps practice, indicating significant room for improvement in collaboration.
How to Apply It:
Create cross-functional teams that include members from finance, IT, and operations. Regularly hold meetings where these teams can discuss cloud spending, review current strategies, and brainstorm new cost-saving measures. Ensure that communication channels are open and that all teams have a clear understanding of the company’s financial objectives.
By fostering a culture of collaboration, you can break down silos and ensure that everyone is working towards the same financial goals. Despite these efforts, 13% of organizations do not practice FinOps at all, underlining the importance of strengthening teamwork across departments.
4. Responsibility: Each Team Should Own Their Costs
Why Responsibility Matters:
When teams are responsible for their own cloud costs, they are more likely to make cost-effective decisions. This principle encourages accountability and ensures that all teams are mindful of their spending. The growing relevance of optimized cloud FinOps is evident, with 63% of organizations dedicating more than 7% of their cloud spend to FinOps practices.
How to Apply It:
Assign cloud costs to specific teams or departments within your organization. Use tagging and cost allocation tools to track expenses by team. Provide each team with a budget and hold them accountable for staying within it. This approach not only promotes financial responsibility but also empowers teams to take ownership of their cloud usage.
Encourage teams to regularly review their spending and make adjustments as needed to stay on budget. With 34% of organizations at the initial stage of FinOps adoption, and 40% in the growth phase, responsibility is a principle that will drive FinOps maturity across the board.
5. Rules: Set Up Guidelines to Manage Spending and Stick to Them
Why FinOps Rules Matters:
Without clear rules, cloud spending can quickly spiral out of control. Establishing guidelines helps ensure that everyone in the organization understands the dos and don’ts of cloud spending, leading to more consistent and controlled financial management.
How to Apply It:
Develop a set of cloud usage policies that outline best practices for spending. These could include guidelines on who can approve new services, limits on spending for different departments, and rules for using specific types of instances. Make sure these policies are well-documented and easily accessible to all teams.
Regularly review and update these guidelines as needed to reflect changes in your cloud usage or business objectives. Enforce these rules consistently to maintain control over cloud costs, ensuring that your organization does not contribute to the 32% of cloud budgets that went to waste last year.
Putting It All Together: FinOps principles
Mastering FinOps principles can transform the way your company manages cloud finances. By focusing on visibility, optimization, teamwork, responsibility, and rules, you can ensure that every dollar spent on the cloud contributes to your company’s success.
FinOps isn’t a one-time effort. It’s an ongoing process of monitoring, adjusting, and improving your approach to cloud finance. As your company grows and your cloud usage evolves, continue to refine your FinOps practices to stay ahead of the curve.
