Taming the Cloud Cost Beast: Understanding the 3-Stage FinOps Lifecycle

Will Mather
Consultant

Todd Hintze

Traditionally, the model of managing consumption through purchasing physical infrastructure was straightforward – you could only use what you physically owned.

Things have since changed. Operating in the public cloud requires continual consumption, capacity, performance, and cost management. You need specific skill sets and operational functions to keep costs under control.

Although you can get many benefits from migrating to the cloud, you must address financial threats and exploit available opportunities. To do so, business, financial, and technical teams must align and collaborate to optimize costs.

Cloud expenditure is now an issue for all three teams, and all require access to cost data to help optimize and ultimately drive decisions.

What are the benefits of FinOps?

Financial Operations (FinOps) creates a cross-functional and transparent cloud organization that:

Successfully managing cloud costs requires a role and culture combining finance and operations. With the organizations we’ve worked with, we recognize that establishing a Cloud Center of Excellence is one of the keys to a successful FinOps organization. This defines pricing models, promotes communication and the sharing of best practices, organizes governance, produces reports, defines roles and responsibilities, and implements tools.

Driving optimizations by identifying FinOps roles and processes

The FinOps Manager is a hybrid role spanning a financial manager and a cloud architect that is responsible for the implementation, smooth running, and governance of cloud operations. For FinOps to be effective, the FinOps Community, led by the FinOps Manager, needs access to crucial information, like consumption data and associated costs.

At an application level, it is the job of the IT teams to:

Historically, cost management was the business of a few and is now the business of all. Accurate, efficient reporting will fuel the FinOps teams’ motivation, making data access to all parties essential.

With a formalized structure and strategy, you can focus on deploying FinOps best practices. These can be viewed in a 3-stage lifecycle:

Key Takeaways

By creating a unified cycle of financial, business, and architectural processes, FinOps can optimize cloud value. Your investment in FinOps can sometimes be difficult to quantify as the costs saved are dispersed across the organization.

Immediate, large savings occur in more immature environments and then flatten out over time because they are processed through continuous improvement. In the long run, from a “FinOps by design” perspective, FinOps’ benefits will no longer be quantifiable in the form of cost reduction but rather in the more abstract form of the level of adoption of best practices.

From our experience in delivering FinOps engagements, we have observed that all clients have achieved their ROI in less than 1 year. Across your cloud bill, it is reasonable to expect optimization of around 10%. Our experience shows that deploying effective and mature FinOps practices can reduce cloud expenditure by 20 to 30% in the long run.