FinOps counts. There can be no simpler sentence in cloud computing, even ‘cloud is flexible’ takes three words. As the practice devoted to cloud computing financial management based across cross-functional teams spanning software engineering, finance and business, FinOps borrows its naming convention from the cultural practice of DevOps i.e. a portmanteau of software development (Dev) and programming when aligned more collaboratively with operations (Ops) teams including systems administrators, database management professionals and all other Ops operatives of which there are many.
The FinOps Foundation (a sister practice emanating from the Linux Foundation) has laid down a collection of standards, operating principles and recommendations related to FinOps. This covers how FinOps practices should work in terms of organizational structure, capabilities and benchmarks. It’s all about achieving optimized cloud value at scale, in theory.
Infection, inflation, invasion
With the combined forces of infection, inflation & invasion that every one of us has experienced or understood since the turn of the decade, proponents of FinOps suggest that now is the most opportune moment for this systematic analysis and management approach to flourish. As well as analysis, benchmarking and optimization, really effective FinOps is also typified by a strong degree of negotiation – this element is in place to a) negotiate with Cloud Service Providers (CSPs) and how much an organization pays for its cloud services and also perhaps b) inter- and intra-department negotiation inside a business related to who is using what cloud services when, where and how so that inefficiencies can be identified and rooted out.
According to CloudBolt Software’s The Real State of FinOps report this year, before FinOps was formally introduced, pockets of individuals and teams were attempting to manually implement cloud spend visibility. Using rudimentary tools and a whole lot of spreadsheet work, they attempted to rationalize spending, right-size cloud workloads and apportion costs as best they could.
“Rarely in the history of business has there ever been a new discipline that has emerged and been adopted as rapidly as FinOps,” said Craig Hinkley, CEO of CloudBolt Software. “Our study shows that a massive percentage of companies either have a formal FinOps practice or are planning to implement one. That’s partly due to the work of the FinOps Foundation. But it is also an indication of just how vitally important cloud financial management has become.”
Now that more than four in five enterprise organizations have a FinOps team, department or at least one individual champion (82%, according to Wakefield Research), FinOps should be all set to go mainstream and help control cloud consumption in ways never before possible, right? Yes and no, it is a warmly welcomed development, but there are challenges.
FinOps challenges & paradox
Like cloud itself (remember how security was something of an afterthought initially?), FinOps needs to evolve and grow. Inside many organizations, there are hurdles related to making the mechanics of FinOps flourish. Straightforward actions related to basic visibility and reporting is lacking.
Other challenges include the suggestion that while advanced capabilities like cost allocation, chargeback implementation, automated remediation and anomaly detection etc. are recognized as key issues among the FinOps cogniscenti, many are still struggling to get the foundational components right. Specifically says CloudBolt, half cite commitment purchases (reservations and savings plans) as being one of their highest priorities. Further here, just under half of engineers and developers – people actually applying FinOps to their work – still believe that basic visibility and reporting is lacking. Interestingly, executives rated that capability as their lowest priority.
CloudBolt Software specialises in automating, optimizing and governing hybrid-cloud, multi-tool environments for global enterprises. As such, it has a vested interest in FinOps and wants to see the industry at large get it right. Its study this year (the 10th iteration of this analysis) was based on a survey of 500 executives, engineers and developers at companies with over 5,000 employees in the US, Canada, the UK, and Australia. It was conducted by Wakefield Research in May 2023.
“FinOps has rapidly evolved from a niche concept to a critical discipline embraced by organizations worldwide,” said Kyle Campos, CTO of CloudBolt Software. “While there are challenges to overcome, the growing adoption of FinOps teams and the increasing recognition of its strategic importance demonstrate the market need and potential. By using the right tools and fostering a culture of shared responsibility, companies can accelerate FinOps impact to the business – no one can afford the risk of falling behind while waiting two to three years (or more) to see results. Entropy, waste, friction – these are the default traits of an enterprise (really any organization). The winners forcefully and decisively push against that to create virtuous cycles, efficiency and velocity.”
A promising narrative
Campos and team describe FinOps as a cultural practice that ‘holds a promising narrative’ today. But they say, an additional layer of strategy and capability is needed to quickly overcome the intricacies of rising cloud costs.
Looking at the practicalities of running an effective FinOps practice that is far removed and evolved from any notion of Excel planners (other spreadsheet applications are also available) and old-school finance charts. CloudBolt recommends that, for a swift return on investment, a standalone FinOps program often isn’t enough.
“Integrated automation, combined with advanced cloud financial management capabilities, is the only path to success at scale for FinOps programs. This tech should be readily available and user-friendly, ensuring every team member can harness its power. It’s not just about adopting FinOps; it’s about underpinning it with technology everyone can tap into,” details the company, in its report summary. “FinOps leaders should actively shape policy, governance and control factors for new deployments rather than serve as just number crunchers.”
While it might be tough to wrestle some finance specialists away from the (reactive analytical) activities that they know and love like crafting reports and dissecting cost trends, it feels like really effective FinOps comes from a far more proactive stance. But Hinkley and Campos enthuse over the need to democratize FinOps touchpoints and insist that all business leaders and cost owners should bear responsibility for their individual cloud costs.
In what might be a play on ‘if you break it, you bought it’ signs often displayed in shops sell fragile items, CloudBolt reinvents the term and says, ‘If you touch the cloud, you own the cloud’ today. Let’s take on both pieces of advice and watch FinOps get closer to the cloud cash register. Did you want a bag with that sir/madam?