Exploring The Benefits of FinOps | Mastering The Fundamentals

Jason Kelly:

Hello, I’m Jason Kelly, and I’m the Director of FinOps at Anglepoint. I oversee our FinOps and cloud cost engineering organizations here. I’m excited to talk you through some of the basics of FinOps today.

We’re going to cover topics such as what is FinOps, why FinOps is important, and the synergy between FinOps and ITAM. FinOps is a portmanteau of finance and DevOps. In the past, it was known as financial operations, among some other terms. But over the last 18 months or so, it’s become known as the portmanteau of finance and DevOps.

So, it’s an approach and a cultural practice within a company that’s focused on cloud financial management, cloud cost management. It looks to maximize your business value and align finance and business within the cloud. FinOps is not just cost savings. It’s not just finding wastage in the cloud. A large part of FinOps is going to be collaboration and accountability. It is bringing together disparate organizations within a company. It’s bringing together teams that don’t traditionally work together and getting them all on the same page and speaking the same language around what are costs within the cloud.

Many companies have traditional ITAM, HAM, SAM, and other business units which exist within procurement and maybe a TBM, and they’re very good at focusing on physical hardware. But the cloud is new for a lot of companies, and that same model doesn’t exist.

That’s what FinOps is trying to create. That’s a big part of its function, creating that accountability and visibility in the cloud, allowing organizations to make informed business decisions based on what they’re doing in the cloud. So FinOps as an organization is meant to help guide companies through their decision-making processes. And this is based on the value of cloud resources, cloud services, but that also has to encompass what’s happening within a physical IT or a data center aspect as well. If you’re a company that is in a data center, FinOps just can’t operate within a silo the same as procurement. And ITAM can’t operate within a silo when it comes to making decisions based on what’s happening in the cloud of these organizations. All need to work together. FinOps enables that. That’s its big core value of a FinOps organization.

Similar as you would have with ITAM and procurement. FinOps is beholden to a project management term called the Iron Triangle. As you look to increase things like cost, speed, and quality within FinOps, you have trade-offs among those, and these three components of this Iron Triangle mean that as you start focusing on one, you have to give up on one of the other two, or maybe a combination of the other two.

So, things like cost, if you want to increase your savings and efficiency, you might have to start limiting resources or reduce your flexibility if you want to be more agile and innovative. You might increase your risk or have higher costs when it comes to focusing on those areas, but as a company, you have to decide what’s important. Which one of those three is important for you? And which trade-offs make sense and which you’re willing to take on.

These all play together not just within FinOps and Cloud, but with other parts of the business as well. And the final part of FinOps that we’ll talk about, and you’ll hear often, are the phases of FinOps.

This is crawl, walk, and run. This is a common FinOps term, and it’s just the maturity in which an organization is. Not just for FinOps as a whole, but for different aspects of FinOps. A company might be in the crawl phase of, let’s say, cost allocation and tagging and things like that, but they might actually be in the run phase when it comes to cost avoidance for things like RIs and savings plans and whatnot. They may be very good. Run would mean they’re very good at it. They’re making major business decisions based off of it. They have maybe automation in place. They have a full process around it that is vetted and works. Whereas Crawl is, they’re just starting to do that. And it’s okay to be in different phases within different areas of FinOps and different areas within the business.

FinOps is modular. It’s meant to accommodate all of that and help work through it. There are very few companies that are fully run across all of FinOps and all of cloud, but it is something that companies should strive for.

Now we’ve got three major points as to why FinOps is important for an organization. You’ve got enhanced collaboration decision-making. This is core to FinOps. This is core to your TBM and your business decision-making in general. FinOps bridges different functions in an organization. It unites engineering, finance, business procurement, and all these different areas to make data-backed spending decisions. The point of this is to maximize your cloud value, to get the most efficiency out of what you’re doing in the cloud. It’s not just finding waste. You’re removing it. It’s making better business decisions around the resources you have, the budgets you have, and so on.

So you’ll hear it often that FinOps is a tool. You just need a tool. But core to that, more than just a tool than anything else, is this collaboration and decision-making, bringing groups together, not creating silos, but breaking them down.

Next is real-time financial transparency and optimization. This is FinOps providing a real-time view into what you’re spending in the cloud, where it’s going, who owns it, your reporting, your automation around alerting and budgeting and all this kind of stuff. This is core to FinOps as well. It’s what gives you that insight into what you’re spending.

One of the nice things about cloud and cloud-based engineering is that everything is data. There’s data for all of it. There’s an API, there’s a repository, there’s a CSV file with a million rows in it. There’s data for everything. You just have to know what you’re looking for and how to provide it, and that’s what FinOps does. It helps give that transparency, that reporting, that visibility into where your spend is going. And when you make changes as real-time as possible, visibility into the changes that you’ve made. You don’t have to wait months or weeks or longer to get the visibility into some of the changes you made. Oftentimes it’s within a couple of hours at most for these kinds of things.

And then it’s a cultural shift towards cost accountability. We touched on this with the enhanced collaboration. FinOps helps create a sense of accountability. It is a catalyst for cultural transformation within a company. It engrains cost ownership and proactive optimization in every team, every engineer, every product in their ethos and their way of thinking. You get people to think about what they’re doing, what they’re spending, how every button they click, every line of code they write has a cost associated with it.

And that is very true within the cloud. It’s no longer measured in weeks or months in terms of cost or we’re talking about physical assets, depreciation over years. You’re talking milliseconds for a lot of the cost that you’re going to get in the cloud.

So every decision you make has a financial impact, small oftentimes in those millisecond increments, but those add up and those add up quickly. So FinOps is key to that cultural shift, getting everyone to think about what they’re doing before it becomes a problem.

Next, we’re going to talk about where FinOps is going. FinOps as a practice is relatively new. It’s only been around for maybe five or six years at this point. But it is establishing itself very quickly as the standard for cloud cost engineering, cloud cost focus, cloud cost culture change, all these kinds of things.

The FinOps Foundation is the governing body for a lot of that. But it is changing, and there are things you should know about how it is changing and where it’s going and things that you should be looking towards in the future. These are things to consider as you move through your journey, things to consider as you get to the run stage of your FinOps maturity and just things to keep an eye on as they’re coming, as you grow your practice.

The first is going to be the FinOps Open Cost of Use and Specification, or FOCUS. This is a standard being set by the FinOps Foundation to homogenize multi-cloud data third-party data into one unified billing report. So, the aim is to standardize cloud cost and usage data, resource data across clouds. AWS, Azure, GCP are all involved in this. Some third-party vendors, such as Datadog and others, are involved in this. This is a look to standardize because when you build out your usage, your cost and usage reporting, whether you’re using a tool, you’re using a tool that you built or whatever it is, you’re going to have totally different data from AWS than you’re going to have from Azure. You’re going to have from GCP.

So, the foundation realized that there is a huge need to homogenize this and bring it together. The goal of this is to enhance FinOps practices through an open technical specification. This is completely open source. It can be found on Git. There are resources on the FinOps Foundation website I myself contribute to FOCUS. And it’s a push forward for the entire community to bring this together so that we’re all looking at data from the beginning.

Next is going to be automation and AI or artificial intelligence. Right now, this is already being used when it comes to recognizing wastage and resources in the future, AI is looking to be used to help write better code so that you are shifting farther left, and you’re no longer dealing with resources that are wasted. Once they’re in the cloud, you’re stopping code from being deployed that has wasted unit at all. And you’re using AI using automation to do that.

You’re using AI to integrate for real-time insights and alerting. So real-time cost overruns, real-time budget alerting, that kind of stuff that is intelligent. It’s not just a set number. So you go over this, it’s looking back, looking forward and letting you know, really in real time so you can stop waiting until the end of the month or maybe the end of the day or the end of the week to realize that something costly is going to happen.

And it’s looking to streamline a lot more of FinOps in the cloud. So a lot more of your end-of-the-month reconciliation being done by maybe your accounting teams your finance teams FinOps wants to automate a lot of that. It wants to take what sometimes takes an accounting team a week’s worth of time to reconcile an invoice from AWS to the billing reports, what was actually sent and actually billed to a matter of seconds or minutes. So, this is a big area in which FinOps is looking to go and looking to help.

And then finally, community and standardization efforts. So similar to FOCUS, the FinOps Foundation is looking to develop a set of universal standards across not just cost and usage, but other terminology and work with the ITAM review and work with ISO and other standards and other specifications to get everyone again speaking the same language.

Finally, a contribution of a community towards a standardized FinOps field. So getting everyone to start calling the resources. The same thing if you look at any company their FinOps practitioners are going to be called cloud cost engineers, cloud optimization engineers, FinOps engineers, FinOps analysts, data scientists. They’re spread amongst everything. So it gets difficult to understand if you’re not part of. Big FinOps organization, who really is at my company part of this. So FinOps is looking to try to standardize that and bring it all together so that we know who’s who and who to go to. And we have questions about this stuff.

That’s a brief overview of where FinOps is going. And then finally, we’re going to talk about the synergy between FinOps and ITAM. So, in the traditional sense, you’ve got a SAM or ITAM team that is handling your physical assets, and then you’ve got a cloud engineering team that is your cloud ops and your DevOps, and maybe a FinOps team. They exist in silos for most companies. There’s not a lot of collaboration between the two, and that’s something that we want to help break down those silos and bring the teams together.

There’s a lot of blind spots that both sides have, but they’re often looking at the same thing, the same kind of data. They’re just looking at them in different environments and they’re not realizing that decisions that are made on the ITAM side will often have an impact on the cloud side, on the FinOps side. And same with FinOps side. Major decisions made there can impact what’s being done on the ITAM side.

Some of the ways in which we can help bring that together and bridge this gap are things like hybrid infrastructure management, so integration of FinOps with an ITAM practice within a TBM sitting maybe next to procurement as well. This gives you a more holistic view of your management of resources, regardless of where they live, resources or resources, you should be managing them in roughly the same way, or at least pointing in the same direction.

And then as part of hybrid infrastructure management automation and scaling to manage your multi-cloud environments and not just multi-cloud, but your on-prem and cloud environments as well. You should be using tools and automation and process to help manage all of those things together to create a cohesive, transparent management model for your assets, again, regardless of where they live.

The next section to help bring these together is going to be data sharing and understanding priorities. So again, as we talked about, ITAM and FinOps are often looking at very similar data. They’re talking about very similar resources. They’re just maybe talking about them in slightly different ways, or they’re talking about them in silos and they’re not bringing it together. These two teams should be not only meeting regularly, but data sharing. Everything that they do is related to data in some way. And most times it’s the same data just being siloed because one is physical hardware, one is in the cloud. But bringing that data together, presenting it in a unified way, exchanging that data in a way that’s more real-time instead of requesting data and then hoping you get a response and share that out in Excel in other ways. There, there should be this real-time flow of data between the two. Then using that data to maximize your asset utility, maximize your efficiency and resource usage, maximize your return on investment.

Make sure that you’re, in terms of FinOps, that the resources you’re using in the cloud are being used efficiently, long-term based on the data that you’re getting from your ITAM side based on the data you’re getting in terms of your migration to the cloud and your licensing considerations and things like that. Both, again, both sides are using data that should be shared amongst the two, and they should be sharing that data with the goal of pointing in the same direction, have the same north star, whether it’s to use resources, efficiencies, to drive down costs, to provide transparency, whatever it is, be pointed in the same direction, have similar priorities, but understand what the priorities are for ITAM and the priorities for FinOps because there are going to be differences there as well. But if both sides can understand what those are, they can help each other bring that together.

The next section in bringing FinOps and ITAM together is unified language and strategic alignment. So, this is bringing together the teams and speaking a common language. Again, both teams are probably talking about similar things and maybe even using the same terms, but they could mean something different. So, let’s figure that out. Let’s translate, let’s bridge that gap and let’s figure out what are we talking about? What are we actually looking to accomplish here? Let’s develop a common set of terms that we can agree on and a common set of goals. Let’s align on financial accountability with the idea of having operational efficiency. Let’s make sure that the way we’re talking about resources and allocating resources and holding teams accountable in data centers is similar to how we’re doing it in the cloud.

Again, we might be looking at the data a little bit different and collecting a little bit differently, but our goal should be the same operational efficiency, so let’s bring that together. Let’s have that strategic alignment. Let’s have that unified language. Get everyone in the same room speaking the same language.

And finally, we have cost optimization and efficiency. This is bringing everything together so that we can combine all of our focus on cost management across assets regardless of where they live. This is where we start. This is in the FinOps lifecycle. We start getting to that operate phase where we now have all the data. We have decisions that are now being made based on data that we’re bringing together from physical hardware, from license management, from the cloud from FinOps, from DevOps, from all these different teams. And we’re managing our hybrid environments or multi-cloud environments in such a way that is efficient for the business but is successful.

So, this is that final, that intersection of the objectives and your priorities and your north stars from ITAM and everyone else. So, this is that final step of creating that, that unified cost optimization regardless of where your resources live. This is a long process. This doesn’t happen overnight. This is something that’s going to take a lot of investment from every side that is involved here.

But bringing teams like FinOps and ITAM together, DevOps and ITAM, FinOps and procurement, FinOps and Finance, whatever it is, bringing them all together is paramount to making this successful and, operating your resources in the most efficient ways possible, regardless of where they live. So, thank you, and if you have any questions, reach out to us at anglepoint.com.