What is FinOps?.

Dec 7, 2021. By Anil Abraham Kuriakose

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What is FinOps?

FinOps is the short-hand form of Cloud Financial Operations. FinOps is a direct response to cloud transformation. In the simplest terms, FinOps brings financial accountability to the variable spend model of the cloud. In addition, it is a forward-looking capacity planning methodology to optimize cloud usage. This methodology enables distributed teams to make business tradeoffs between speed, cost, and quality. At its core, FinOps is a cultural change similar to DevOps. It's the most efficient way in the world for teams to manage their cloud costs, where everyone takes ownership of their cloud usage supported by a central best-practices group. As a result, cross-functional teams work together to enable faster delivery while at the same time gaining more financial and operational control. Phases of FinOps There are three iterative phases for the FinOps journey. The phases include (1) informing the visibility and allocation, (2) optimizing the utilization, and (3) operations and continuous improvement. The inform phase empowers the cloud operation team with visibility, allocation, customization, benchmarking, and forecasting. In the optimizing phase, optimize the cloud footprint by right size the resources and avoiding wastage. Finally, the operation and continuous improvement phase measure the business alignment based on quality, alignment, speed, and cost. Princicples of FinOps To establish a self-governing, cost-conscious culture with FinOps, that promotes cost accountability and business agility, the adoption of FinOps must base on the below principles. (1) The FinOps cross-functional team needs to collaborate:- The first thing is the finance team moves along with the IT, aligned with their speed and agility. Next, the IT team, both dev and ops team, must consider cost as an efficiency metric. Then the team needs to work together continuously to improve efficiency and innovation. (2) Both IT and business take ownership for their cloud usage:- Need to build inferences and mechanisms to get visibility into the cloud spend by every team member and track the organization level and team level targets to drive the accountability between teams. (3) FinOps must be driven by a central team: The centralized team can automate every step and reduce duplication effort. Also, they can centrally control the committed use discounts, other commitments from the cloud providers and get negotiation power in front of the cloud providers. (4) On-demand report generation:- The cloud cost and usage need to be provided continuously and on-demand to improve the usage efficiency. Also, give a trending and variances analysis to explain the cost differences. (5) Manage the Cloud usage in line with the business value created:- FinOps must support organizations to map the cloud usage totally in line with the business value it makes through business value dashboards. Also, provide an industry benchmark to compare how it compares with other organizations. (6) Make use of the variable cloud cost model:- optimizing and right-sizing helps to take advantage of the variable costing model of the cloud. It is possible to convert the variable cloud costing model to an opportunity with cloud usage optimization. Domains of FinOps The activities in the FinOps area had grouped into different domains. Each FinOps domain represents a sphere of activity or knowledge area. Each FinOps Domain consists of many FinOps capabilities that outline various functional activities. The Domains are interdependent and provide a high-level overview of what functional activities are needed to run a FinOps practice in the organization. The results of an organization implementing these domains can serve as inputs to subsequent iterations through the FinOps Phases. The different domains are 1) Cloud usage and cost management:- The capabilities in this domain are cost allocation (metadata and hierarchy), data analysis and show back, managing shared cost, data ingestion and normalization, managing anomalies, forecasting, and measuring unit costs. 2) Performance, tracking, and benchmarking:- The capabilities in this domain are measuring unit costs, managing commitment-based discounts, resource utilization and efficiency, forecasting, budget management, and managing anomalies. 3) Real-time decision making:- The capabilities in this domain are cost allocation, data analysis and show back, managing anomalies, managing commitment-based discounts, resource utilization and efficiency, and measuring unit costs. 4) Cloud rate optimization:- In this domain, the organization works to define its pricing model goals with capabilities including data analysis and show back, managing commitment-based discounts. 5) Cloud usage optimization:- The capabilities in the domain includes data analysis and show back, onboarding workloads, resource utilization and efficiency, and workload management and automation. 6) Organizational alignment:- The capabilities in this domain are establishing FinOps culture, data analysis and show back, managing shared cost, budget management, cloud policy and governance, chargeback and IT finance integration, and IT asset management integration.

In Summary, FinOps is the operating model for the cloud with a combination of systems, best practices, and culture to increase an organization's ability to understand cloud costs and make tradeoffs. To learn more about FinOps please contact us (https://www.algomox.com/company/contact/)

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