What is FinOps? Core Principles
FinOps is a cultural practice and operational discipline that brings financial accountability to the variable spend model of cloud, enabling organizations to get maximum business value. It’s the way for teams to manage their cloud costs, where everyone takes ownership of their cloud usage supported by a central best-practices group. FinOps is not about saving money per se, but about making money and optimizing spend for business goals.
By combining principles from Finance and DevOps, FinOps helps break down silos between teams. Engineering gains visibility into their cloud spend, Finance gets more predictable cloud bills, and business leaders can make better trade-offs between speed, cost, and quality.
If you're interested in how technology is changing various sectors, consider exploring FinTech innovations which often leverage cloud capabilities managed by FinOps principles.
Core Principles of FinOps
The FinOps Foundation outlines six core principles that guide the practice:
- Teams need to collaborate: Collaboration between engineering, finance, product, and business teams is crucial for effective cloud cost management.
- Everyone takes ownership for their cloud usage: Accountability for cloud spending is distributed to the teams that incur the costs.
- A centralized team drives FinOps: A dedicated FinOps team helps facilitate, educate, and drive best practices across the organization.
- Reports should be accessible and timely: Near real-time visibility into cloud spend empowers teams to make informed decisions quickly.
- Decisions are driven by business value of cloud: Cloud spending decisions should align with business objectives and value creation.
- Take advantage of the variable cost model of the cloud: Leverage the cloud's elasticity and pay-as-you-go pricing to optimize costs.
The FinOps Lifecycle (Phases)
FinOps typically operates in three iterative phases:
1. Inform
This phase is about providing visibility into cloud spending. It involves cost allocation, tagging, showback/chargeback, and benchmarking. Accurate and timely reporting helps teams understand their cloud consumption patterns.
2. Optimize
Once spending is visible and understood, this phase focuses on identifying and implementing cost optimization opportunities. This can include rightsizing resources, leveraging reserved instances or savings plans, and eliminating waste.
3. Operate
This phase is about continuous improvement and aligning cloud operations with business objectives. It involves defining governance policies, tracking KPIs, and automating processes to ensure ongoing cost efficiency and value delivery. This operational excellence is key, similar to how Site Reliability Engineering principles ensure system stability and performance.
The Cultural Shift
Adopting FinOps is more than just implementing tools or processes; it's a significant cultural transformation. It requires a mindset shift towards shared responsibility for cloud costs and a collaborative approach to financial management. It encourages a continuous dialogue between technical and financial teams, fostering a culture of cost-consciousness and value-driven decision-making across the organization.
Ready to explore further? Learn about Cloud Cost Allocation Strategies to understand the first step in the Inform phase.