FinOps: what it is and why it is necessary to manage Cloud costs

7 minutes read
10 May 2022

The Cloud Cost Management topic is always more often linked with the term FinOps. Behind the meaning of the contraction of the words Financial (Fin) and Operations (Ops) ‑ which resumes the more popular DevOps, from Development and Operations ‑ hides a concept that represents the natural evolution of the traditional logic of management of technologies and information resources resulting from the cloud transformation. 

In a world characterized by the massive adoption of the as‑a‑service model ‑ where the most innovative companies are modernizing their IT infrastructures through the Cloud Migrationadvantages such as agility, scalability, and process security require the introduction of new tools and approaches to manage the increasing complexity of new systems. The spreading of increasingly layered solutions, licenses, and tools used and shared by teams with different purposes will inevitably complicate their management, and increase the risk of losing visibility into the actual costs generated by the cloud: this is where FinOps comes in.


What is FinOps? Definition and principles

According to the FinOps Foundation, the definition is: “FinOps is an evolving cloud financial management discipline and cultural practice that enables organizations to get maximum business value by helping engineering, finance, technology, and business teams to collaborate on data‑driven spending decisions”.

Essentially, then, when we talk about FinOps principles we are referring to a set of approaches and mindsets that enable teams to effectively manage cloud costs. How? First and foremost, building awareness of how the technology is actually being used, starting with a core set of best practices to be cross‑functionally shared across teams. It also means adopting a collaborative model at all levels of the enterprise, bridging IT and business. This collaborative approach aims at faster product development and release, better financial control, and more accurate and detailed forecasting of operating costs.

So it’s not just about adopting practices and tools, it’s also about developing a new, expanded mindset fostered by a dedicated, cross‑functional team. Such an approach is the best option for managing complexity and implementing a comprehensive, centralized system for tracking an expense item that is expected to grow exponentially in the future.


How FinOps model works

To understand how FinOps works, it might be helpful to list the other designations by which the practice is generally known. From “Cloud Financial Management” to “Cloud Financial Engineering”, moving on to the above‑mentioned “Cloud Cost Management” and the more specific “Cloud Optimization” and “Cloud Financial Optimization”, it is evident how much the discipline brings together management theories and optimization practices. Only by highlighting the responsibilities linked to each operation, and controlling its costs through an overarching view, it is possible to take action to optimize the flows assigned to the Cloud.

On the practical side, the FinOps is divided into three phases:

  1. The first step covers all activities of collecting and sharing information. This includes not only the company’s information assets but also the data generated by the interactions of the services and applications that the organization uses to communicate with the outside world. The key is to organize the information so that it can be easily presented to each stakeholder.
  2. The second step is to optimize the available resources. This can only be achieved through accurate assessment, i.e. by systematically identifying potential areas for intervention (for example, services no longer in use and the inevitable duplication from one team to another). It is also necessary to explore the possibility of converging the scalability of the tools made available by the Cloud and business needs, in order to rationalize the resources in use according to the actual users required for optimal operations.
  3. Finally, you need to operate. That is, implement the actions required by the roadmap developed to optimize Cloud consumption on the resource, cost, and architecture fronts.

The FinOps process, however, does not end there. Once the first cycle of information gathering, optimization, and implementation of interventions has been completed, the cross‑functional team has the task of keeping the process going. In other words, the team has to start a new process and make sure that all the experience gained in the previous cycle is conveyed into the next one, according to the logic of continuous improvement.



The 6 foundation principles of FinOps

This is a radical change in the perspective that has always been adopted in the company. The FinOps principles, indeed, aim precisely at guiding the different cores of the company in a territory, that of the Cloud, still largely unexplored. Therefore, it is important to highlight the rules and the pillars on which activities must be based in order to trigger a truly virtuous circle:

  1. A mandatory condition for FinOps is that teams collaborate on an ongoing basis;
  2. Each team should take responsibility for the Cloud resources they use;
  3. A dedicated, centralized, cross‑functional team should lead FinOps operations;
  4. It is required to produce prompt reporting, with complete and accessible information;
  5. Money‑saving is not necessarily the main factor; to guide choices;
  6. The ability to leverage the variable costs of the Cloud should be put at the service of business objectives.


The benefits of FinOps

Being able to integrate and harmonize these guidelines will help any type of business to embrace the logic of Cloud Cost Management, and experience all the benefits related to the adoption of FinOps. Those advantages are not only related to the possibility of saving on the Cloud costs. They are also linked to the ability of the organization to develop a complete and up‑to‑date overview of the tools, services, and licenses within the company. Thanks to this overview, the company can strengthen its business processes and improve customer and user experience. It is essential to know the concept of Invisible Infrastructures, being aware of both their potential and limitations, in order to seize opportunities to upgrade the technology stack and create increasingly reliable IT governance.

On the operation side, implementing FinOps practices essentially provides five benefits. In summary, thanks to FInOps the company is able to:

  1. Optimize costs through savings on infrastructure utilization, migration processes, and support activities;
  2. Improve operational resilience through more accurate risk analysis;
  3. Focus on quality of service, driven by safety and operational stability;
  4. Decrease time‑to‑market by making product and service development smoother and faster;
  5. Reduce environmental impact and become more sustainable by reducing resource and power consumption.


Helping the company to embrace FinOps methodologies: Mia‑Platform’s approach

Resorting to FinOps methodologies requires a considerable organizational and cultural effort, even by companies that have already gained some experience with the Cloud ecosystem. This is why, in addition to developing skills and awareness, it is also necessary to be able to rely on tools that can support this transition and simplify governance throughout the whole evolutionary process.

That’s why we developed Mia‑Platform Console, a tool designed, among other things, to integrate the above principles and help any type of business to properly initiate and address each of the phases of the FinOps cycle. Besides helping you save money, it also helps you diminish energy consumption and reduce the environmental impact, thanks to the open‑source project kube‑green natively integrated into the platform. By taking full advantage of the as‑a‑service model and keeping on‑demand resource costs under control, Developers, Architects, and DevOps can use Mia‑Platform Console to simplify their daily work and share complete governance of the Cloud ecosystem with other business teams through FinOps logic.

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What is FinOps? Definition and principles
How FinOps model works
The 6 foundation principles of FinOps
The benefits of FinOps
Helping the company to embrace FinOps methodologies: Mia‑Platform’s approach