Whereas the cloud may enable innovation and flexibility, it’s common to lose track of and control over expenses in the process. Finance teams used to work on conventional IT projects may struggle with the cloud platform’s unpredictable expenses, while application teams may be unaware of the finance team’s budgeting and regulatory responsibilities.
How to stay on track and have full control over the cloud financial management process? Well, here comes FinOps with support providing best practices for structured, collaborative, real-time cloud financial operations. But, what is FinOps? And how to become a Qualified FinOps Practitioner?
What is the problem?
Cloud financial management may be challenging to implement without compromising innovation and sacrificing a significant portion of the business value provided by the cloud. It may result in a blame-and-shame mentality rather than addressing the issues. In the worst-case scenario, it may devastate the whole cloud approach. Fortunately, assistance is available in the form of mature FinOps solutions, which we will discuss in this article.
Common issues encountered by application teams
The following are the most common issues experienced by application teams:
Cost forecasting on the cloud is challenging
Cloud expenses are notoriously difficult to forecast for any but the simplest applications, even with well-understood consumption patterns. It is all too easy to construct or configure a component of the system in an inefficient manner (from a cost perspective). For instance, teams may be surprised by excessively high variable costs associated with logging, metric collecting, data egress, or per-request billing structures.
Priority is given to innovation
Often, application teams are incentivized to produce new features quickly and to ensure customer success – cloud expenses are not explicitly prioritized unless the leadership team makes a dramatic change in emphasis. Oftentimes, architectures need trade-offs, such as between dependability and cost. Other cost-cutting measures often demand engineering work.
Especially in big organizations, application teams may lack insight into the cloud charges they spend. Insufficient permissions, for example, to visit the billing and cost explorer console. Often, the full cost (i.e., taking reserved instances and reduced prices into consideration) is not revealed. Appropriate cost allocation, particularly for shared services, needs complex show-back or chargeback systems.
Spending that was not necessary
This lack of awareness, paired with a preference for innovation, may result in significant waste. For example, dev/test resources are left running 24 hours a day when they are only required during office hours, or resources are not terminated at the conclusion of a project, or suboptimal decisions are made owing to a lack of awareness about the real cost of a widely-used resource.
Inadequate knowledge of financial operations
Frequently, application teams lack an understanding of how their expenditures are used. For example, most teams are unaware of the finance team’s fiduciary obligations – that the CFO may be dismissed or even imprisoned for failing to properly examine expenses and financial reports.
Common issues encountered by finance teams
The following are the most common issues experienced by finance teams:
Financial procedures are often designed around capital expenditures and predictable operating expenses
With on-demand pay-as-you-go services, cloud adoption transfers spending from Capital Expenditure (CapEx) to Operational Expenditure (OpEx). Budgeting, forecasting, and reporting systems that have been effectively employed for years are often insufficient for this variable expense.
The conventional procurement approach is obsolete
Traditionally, a procurement team would approve items prior to money being spent. The issues of selecting suppliers, obtaining prices, and forecasting were well established. In comparison, development, and operations teams now have the ability to deploy cloud resources on-demand. Budgets are seldom rigidly defined.
It’s difficult to comprehend and anticipate cloud computing expenses
Cloud billing is a maze of complexity. For instance, some businesses get a monthly cost and use report (CUR) that has billions of line items, sometimes with many rows for the same resource with varying prices. Even allocating these charges to the appropriate business divisions might be challenging if a sound account structure and tagging strategy are not in place in advance.
What is FinOps meaning? It stands for “Cloud Financial Operations,” or “Cloud Financial Management,” or “Cloud Cost Management,”. It’s a method of integrating financial responsibility to the cloud’s variable expenditure model, allowing remote teams to make business decisions based on speed, cost, and quality.
FinOps is a set of best practices and tools for cloud financial management that enables organizations to monitor, analyze, and control their cloud spending in which everyone accepts responsibility for their cloud use. As with DevOps, the term reflects the cross-functional nature of cost control and value creation, which involves stakeholders from finance, engineering, operations, and the management team. This approach allows quicker product delivery while increasing financial control and predictability.
Making money is the focus of FinOps. Spending on the cloud may increase income, indicate client base expansion, speed up product and feature releases, and even assist in the shutdown of a data center. FinOps is about getting rid of roadblocks, allowing development teams to provide the best features, applications, quicker migrations, and enabling a cross-functional discussion about how and where to invest. A company may prefer to tighten its belt at times, while at other times it may decide to increase its investment. Teams, on the other hand, now have a better understanding of why they’re making certain decisions.
With FinOps solutions, any operational team has access to the real-time data they need to control their expenditure and make wise decisions, leading to more efficient cloud costs balanced between performance, quality, and availability of services.
Why is FinOps critical now?
Cloud computing expenses have risen significantly
Cloud computing’s growing popularity allows enterprises to boost their investments in this technology. While cloud computing provides organisations with scalable services that maximise their resources, they are often oblivious of their overspending.
According to Gartner, nearly 30% of the increased investment on software and cloud services would go underutilised in any given month until 2022. Thus, businesses may drastically reduce their total expenditures by optimizing their cloud costs.
The availability of the cloud must be checked in real time
Businesses now rely increasingly heavily on cloud services to maintain their databases. However, if the cloud system goes unavailable, firms may suffer significant losses. They may be unable to work during that particular period, resulting in the loss of prospective consumers.
This shortfall might be caused by inadequate cloud capacity, inefficient resource allocation, or technical hardware issues. FinOps technologies may assist businesses in effectively allocating their expenditure and maintaining appropriate cloud capacity at all times.
FinOps Principles are established and refined over time by FinOps Foundation members. These principles were first suggested in September 2019 as a joint AWS announcement at CloudyCon as part of the drafting of the Cloud FinOps book. They currently encompass numerous clouds, and given how cloud services appear to evolve quarterly, they may shift somewhat in time as everyone gains fresh experience.
These principles are not listed in any particular sequence and should be considered as a whole. All of these concepts are important to us, therefore we urge members to learn about them and put them into practice.
Teams must work together
- Finance operates at the same rate and granularity as IT
- Cost is being considered as a new efficiency parameter in engineering
- Improve your practise on a regular basis to increase efficiency and originality
- Define cloud governance and controls
Everyone is fully responsible for their cloud utilization
- Allow feature and product teams to control their own cloud consumption in relation to their budget
- Gain insight into all layers of cloud spending
- Track team-level goals to ensure responsibility
FinOps is driven by a centralised staff
- The centralised discount purchasing approach eliminates pricing discussions from the engineering team’s perspective.
- All expenses, whether direct or indirect, are allocated granularly to the teams and cost centres are accountable for them.
Reports should be easily available and delivered on time
- More efficient behaviour is the outcome of fast feedback loops
- Visibility assists in determining if resources are under – or over
- Continuous improvement is driven by resource automation
The commercial value of the cloud drives decisions
- Trend and variability analysis assist in understanding why expenses have risen
- Internal team benchmarking promotes best practises and recognises accomplishments
- Benchmarking against peers in your industry indicates how well your organisation is doing
Take advantage of the cloud’s variable cost paradigm
- Rightsizing cases and services assists in determining acceptable resource levels
- Pricing comparisons across services and resource kinds lead to smarter selections
- Learn why FinOps is a cultural practise and why the operations strategy is the most effective approach for teams to control cloud expenses
The FinOps process is divided into three main stages: inform, optimize, and operate.
This is the initial stage of the FinOps journey, providing visibility, allocation, benchmarking, budgeting, and forecasting to organizations and teams. Because of the cloud’s on-demand and elastic nature, as well as personalized pricing and discounts, precise and fast visibility is required for sensible choices.
Accurate chargeback and show back are enabled by accurate cloud expenditure allocation based on tags, accounts, or business mappings. Business and financial stakeholders want to know that they are achieving ROI while remaining under budget and precisely estimating the cost to minimize surprises. Benchmarking as a cohort and against teams gives businesses the metrics they need to build a high-performing team.
Organizations and teams must optimize their cloud footprint after they have been enabled. Cloud providers give a variety of optimization levers. The most costly kind of capacity is on-demand capacity.
Cloud providers provide discounts for commitments that generally entail sophisticated calculations for establishing reservations (Reserved Instances (RI) / Committed Use Discounts (CUD – Google Cloud) to promote prior reservation planning and increasing commitment. Furthermore, teams and organizations may improve the environment by rightsizing and automating the turn-off of any unnecessary resource consumption.
Organizations begin to analyze business goals and the metrics they measure against those objectives, as well as how they are trending. They assess business alignment in terms of speed, quality, and cost. Any organizational success is only feasible if the company develops a FinOps culture that includes a Cloud Cost Center of Excellence comprised of business, financial, and operational stakeholders who also design the proper governance rules and models.
When Should You Begin with FinOps?
Many individuals feel that the optimum time to adopt FinOps should be judged by the amount of cloud expenditure because of the overwhelming quantity of blogs, lectures, and sales pitches that concentrate significantly on cost minimization. In some ways, this makes sense. A large cloud spender, for example, may rapidly identify a large number of possible savings. However, history has shown that a single well-managed team spending a fortune on the cloud may gain less from FinOps than a large corporation with several smaller cloud installations.
Profitable FinOps solutions don’t need large cloud installations or a multimillion-dollar cloud bill. Starting FinOps sooner will allow a business to make more informed choices regarding cloud spending, even as its operations increase. As a result, it is critical to comprehend a FinOps concept known as Crawl, Walk, Run.
A common two reasons when FinOps is often implemented
The most prevalent is when things go wrong. In this scenario, expenditure reaches a tipping point when a CEO orders a halt to cloud expansion and requires the implementation of a new management strategy. Despite the fact that it is the most popular motivation, this is not the best method to approach FinOps adoption. During this executive fire drill, innovation and migrations usually stall.
Executives who’ve seen the clouds journey play out using the less common (and smarter) approach, which coincides with the Crawl, Walk, Run paradigm. The practice must evolve at a rate that corresponds to the company’s location in the FinOps solutions maturity cycle. For example, a single person may be tasked to oversee cloud provider obligations. They began by establishing a basic account, label, and tagging hierarchy. As the practice grows in size, each step of the procedure may be ramped up.
But, regardless of how a company decides to use FinOps, the first crucial step is to have visibility in near-real-time, so everyone can see what’s going on and discover cost overruns before they become too significant. While that visibility is being established, the FinOps team begins teaching the whole organization. As cross-functional teams collaborate, finance professionals will learn more about cloud terminology, while engineers will get a better understanding of financial ideas.
The importance of beginning this culture transition as soon as feasible cannot be stressed and the advantages of a FinOps approach may be felt and assessed nearly immediately.
Why cost optimization is critical?
When addressing the question, What is FinOps meaning, it is crucial to emphasize the crucial function of cost optimization, a vital component of the FinOps journey. Simply said, it provides you control over your spiraling cloud spending, allowing your IT, Security, and Finance teams to confidently manage your cloud ecosystem as your cloud use grows.
When done properly, you have comprehensive insight and control over your cloud expenditure, enabling you to manage and allocate expenses, optimize spending, and achieve immediate and significant savings. Optimization can assist you in delivering insight and control throughout your cloud environment, from controlling expenditures to optimizing resources to safeguarding your cloud architecture.
If you’re interested in learning more about how FinOps solutions might benefit your organization, we suggest starting with a trial; we have yet to meet a client who hasn’t saved at least 20% of their cloud expenditure, with some saving up to 80%.
Although FinOps is owned by finance, it affects all areas of a business that share responsibilities — operations, customer service, finance, the executive team, and independent stakeholders such as the Board of Directors and investors. Individuals from many departments and levels all contribute to FinOps’ forecasting, financial reporting, and administration.
In a nutshell, a successful FinOps team is responsible for maintaining an equal degree of efficiency and flexibility in order to update your billing, tracking, and operational tools while also keeping an eye on your business’s condition.
FinOps Practitioner Role
The primary goal of FinOps Practitioner is to implement best practices throughout the company via teaching, standardization, and cheerleading.
- Flag bearer of cultural revolution
- Develop best practises for cloud cost management
- Make benchmarks for teams to utilise
- Increase visibility and transparency of cloud costs
- Create or update cloud budgets and projections
- Budget accuracy
- Forecasting accuracy
- Economics of Unit Price
- Coverage for Discounts and Reservations
- Untagged resources as a percentage
- Opportunity for increased efficiency
- Centralized cloud cost management in a single or multi-cloud environment
- Align responsibility with cloud users
- Increase trust in budgets and projections
- Advance communication within the organisation
Becoming FinOps Certified Practitioner
Individuals in a wide range of cloud, financial, and technology professions may use the FinOps Certified Practitioner course to confirm their FinOps expertise and boost their professional reputation.
The certification covers the principles of FinOps as well as an overview of essential ideas in each of the three stages of the FinOps lifecycle: inform, optimize, and operate. As the competitiveness on the job market increases, the Professional Certification may also be an essential element of FinOps career development.
Who Should take FinOps certification?
The certification is intended for people who plan to work on a FinOps team, support FinOps or cloud financial management, or who work as consultants, suppliers, or trainers for the FinOps team. You will get a grasp of FinOps, its practice areas, and how it is used to increase the business value of cloud spending.
What will you learn?
- How to not only analyse and manage your cloud expenditures, but also earn money with the information gathered.
- Determine which tools are appropriate for usage with major cloud providers.
- How cloud expenditure may increase revenue, indicate client base expansion, allow faster product and feature releases, and even assist in the shutdown of a data centre.
- Understanding Cloud Use and Cost Modeling, as well as Cost Allocation and Resource Planning.
- Understand how the company responds and automates cloud management in the context of other IT Finance operations, and how FinOps capabilities are integrated with current organisational processes, organisational units, and technology.
- Understand how the company defines its price model objectives, utilises past data to modify pricing models by purchasing commitment-based discounts, and manages the pricing elements of the cloud services it employs.
FinOps Training and Certification options
There are three primary paths to boost your FinOps career and become a FinOps Certified Practitioner. If you already have the necessary knowledge and skills but want to prove your credentials via recognized certification, you may take the FinOps Exam alone, which is the most affordable option.
There are two options for those who need further training before taking the certification exam: online Self-Paced or online Live Instructor-Led sessions.
The following are details of each session provided by The Linux Foundation:
Exam for FinOps Certified Practitioner (FOCP)
Through the Linux Foundation, an exam may be taken to attempt the certification. Please keep in mind that the exam does not contain any preparation resources or instructions.
- The exam lasts 60 minutes. The FinOps certification practice test is accessible online for your convenience
- Exam-alone approach is only suggested for people with significant real-world FinOps skills who also have comprehensive understanding of the FinOps lifecycle as spelled out in O’Reilly’s Cloud FinOps book (score of 70 percent)
- There are no study or preparation resources included with the exam purchase
Self Paced FinOps Certification Workshop + FOCP Exam Bundle
Develop a working knowledge of FinOps concepts and prepare for the Linux Foundation’s FinOps Certified Practitioner exam at your own pace.
- This course covers all certification objectives in detail to assist you in preparing for and passing the FOCP exam
- 12 months of online course materials access
- Slides from instructor-led training courses are available online
- For each slide, complete the speaker notes and observations from the trainer deck
- Instructions for gaining access 7-day access to the digital edition of the Cloud FinOps book through O’Reilly Student Handbook PDF, complete with learning outcomes to help you prepare for the test
- Includes an exam code for the Linux Foundation’s FinOps Certified Practitioner exam ($300 value)
Instructor Led FinOps Certification Workshop + FOCP Exam Bundle
Develop a working knowledge of FinOps concepts and prepare for the Linux Foundation’s FinOps Certified Practitioner exam on the live instructor-led session.
- This course covers all of the detailed certification objectives in order to help you prepare for and pass the exam
- 2-day schedulled instructor-led session (10 hrs total)
- The main teacher is a real-world working FinOps leader in their company
- To guarantee participation, the course includes a variety of group discussions and live activities utilising Zoom Breakout Rooms. Please come prepared to share your expertise and ask questions
- Size: Classes are small, with many breakout sessions that are highly engaging, led by a main teacher and 1-2 facilitators
- An exam ticket to take the FinOps Certified Practitioner test at the Linux Foundation, with a free retake option
- Contains all video, and course resources in the self-paced program ($499 value)
With Cloud computing expenses rising significantly, FinOps aims to reduce total expenditures and optimize cloud costs by improving efficiency and management of workflows across the company. However, this process to be successful requires qualified people.
FinOps certification enables professionals working in a wide range of cloud, financial, and technology jobs to confirm their FinOps skills and establish professional credibility.