What is FinOps and how can this concept help a company’s financial management?

Breaking down traditional silos that waste time and money is the objective and, through the search for efficiency, practices are influenced, operations are streamlined and metrics are used to measure performance. In addition, it is possible to see a more pervasive influence of the importance of operations, or Ops, which recognize processes, practices and tools involved in running a business.

However, over the years, there has been a considerable increase in new initiatives that have, at times, popularized the term Ops in other areas, such as technology and business. An example is DevOps and FinOps — you have most likely seen one of these two terms being addressed around.

Today, our focus will be on understanding what FinOps is and how it can help the financial management of a business. Eager to learn? Let’s go!

What is FinOps?

In short, FinOps is an operational model for the cloud that works as a union of systems and practices that help and facilitate the understanding of the costs of cloud services.

In addition, in practice, professionals from business, technology and, of course, finance, come together with new processes to help companies realize the maximum business value possible.

How did FinOps come about?

In 2006, cloud services where you only pay for what you use have become more complex to cost, especially those involving systems, servers and services that use Cloud Computing .

In addition, to solve this demand, therefore, a cloud operation model was created, in which the user only pays for what he consumes, using a model with the best practices for managing variable expenses: FinOps .

FinOps vs DevOps: What’s the Difference?

Some people believe that FinOps and DevOps are very similar. And they really are. In short, they share the following business-friendly attributes:

• Cost containment and management;
• Quality and performance improvement;
• Problem reduction or simplified problem solving;
• Iterative approach throughout the lifecycle;
• High collaboration;

Well, the two concepts address the deployment of software for the business, the divergence is:

• DevOps: refers to the software development process and IT operations involved in producing and fielding a software product;
• FinOps: Focuses on the cost and performance efficiency of the cloud across the enterprise, thereby effectively fielding a software product.

That is, we can say that, if we are working on the operational side of a DevOps project that is destined for the cloud, the responsibility may fall to a FinOps team.

What are the goals of FinOps?

FinOps seeks, in short, three main objectives. Are they:

Inform

Considered the first stage, the Inform phase is essential to train companies and teams in topics such as allocation, benchmarking, budgeting and forecasting, for example.

It is important to emphasize that, as clouds are super elastic in terms of use and prices, IT management needs to have strict visibility so that the decisions taken are assertive.

optimize

After training, it’s time to optimize your cloud presence. That is, teams will be able to optimize the environment by scaling the platform and turning off unnecessary features.

Operate

It’s time to make the migration to cloud computing . This step will only be successful if the company succeeds in building a broad FinOps culture. In addition, this culture, in turn, needs to include a cloud cost center, involve commercial, financial and operational teams that also have appropriate governance.

FinOps Principles

The north stars that guide FinOps activities are known, in short, as FinOps Principles.

Shall we meet them?

1. Everyone must collaborate

Its focuses are:

• Finance moves at the speed and thoroughness of IT;
• Engineering starts to consider cost as a new efficiency metric;
• Continuously improve its practice to gain efficiency and technological innovation ;
• Define governance and controls for cloud usage.

2. Everyone is responsible for their cloud consumption

In the second principle, the actions are:

• Product and feature teams are responsible for managing their own cloud usage against their budget;
• Seek to gain visibility into cloud spending at all levels;
• Track team-level targets to drive accountability.

3. Centralized team manages FinOps

In the third principle, it is observed, in short:

• Centrally govern and control Committed Use Discounts, Reserved Instances, and Volume/Customer Discounts with Cloud Providers;
• The centralized discount purchasing process is responsible for removing rate negotiations from the engineering team’s considerations;

4. FinOps reports must be accessible and up-to-date

In the bedroom, therefore:

• Fast feedback loops result in more efficient behavior;
• Visibility helps determine whether resources are under or over provisioned;
• Feature automation drives continuous improvement.

5. Decisions must be made for the added value of the cloud

In the penultimate principle, we find:

• Trend and variance analysis helps you understand why costs have increased;
• The team’s internal benchmarking drives best practices and celebrates wins;
• Industry-wide benchmarking determines how your company is doing.

6. Cloud variable cost should be taken advantage of

Then, in the sixth principle:

• Entitlement and service instances help drive appropriate resource levels;
• Comparing prices across services and resource types leads to better decisions.