What Is FinOps and Why Does It Matter?
By Michael Meyer
Published on July 5, 2023
Cloud computing is supposed to be an investment, not a money pit. But what if the solution designed to save (and make) money is actually costing money?
If your monthly cloud fees are unpredictable or threaten to burst your budget, it’s not time to sour on the value of cloud. You just need to start including FinOps.
What is FinOps?
FinOps is a management practice that promotes shared responsibility for an organization's cloud computing infrastructure and costs. It's often used interchangeably with "financial technology" or "fintech," but this isn't entirely accurate because FinOps encompasses more than just technology.
Why is FinOps important?
FinOps aims to improve how companies manage their cloud finances by using data analysis, automation, and other tools previously unavailable or too expensive for most businesses. Today, FinOps is growing in popularity as a path to optimize (and lower) costs associated with cloud computing.
FinOps has been gaining traction over the past few years as more companies have started using it in their daily operations — and for a good reason, as it offers many benefits.
How can FinOps help businesses manage the cloud?
When it comes to the cloud, FinOps helps leaders make cloud usage and costs transparent to the wider team. This, in turn, helps organizations better optimize how finances are managed, automate key processes, and uncover areas for savings. FinOps offers key benefits including:
FinOps does more than react to problems as they’re happening. It’s a collaborative process where stakeholders inform, optimize, and operate to maintain cloud financial management discipline.
How does improved visibility into cloud activity help teams better manage the cloud? There are myriad ways that cloud costs can exceed budgets. Data teams need visibility into unusual cloud activity so they can remedy it quickly (and prevent ballooning costs). Some common examples of unusual activity include:
A bug in a replication tool causes the tool to run unauthorized queries 24 hours a day.
The cloud’s operations are highest outside of normal business hours.
The person in charge of managing the cloud thought it should run all the time.
What’s the role of technology in FinOps?
Technology plays a crucial role in FinOps, which many businesses leverage as a financial operations framework to help manage their cloud spending effectively. FinOps relies heavily on technology to collect, analyze, and interpret data related to cloud costs and usage, and to optimize spending based on that data.
Here are some specific ways technology supports FinOps:
Cloud cost monitoring
Technology tools can collect data on cloud usage and costs, providing visibility into how much is being spent and where. This data is critical to identifying areas where costs can be reduced and providing insights into which cloud resources are being underutilized.
Technology tools can also help allocate cloud costs to specific teams or projects, making it easier to understand who is responsible for which costs.
FinOps also relies on automation to streamline processes and reduce manual labor. Technology tools can automate tasks, such as shutting down unused resources or optimizing reserved instances, reducing the risk of human error and freeing up time for more strategic work.
Cloud optimization is a key FinOps use case, as it can identify opportunities to optimize cloud resources. For example, machine learning algorithms can predict resource usage and suggest opportunities to reduce costs without impacting performance.
Overall, technology is essential to the success of FinOps, providing the data, automation, and optimization capabilities needed to manage cloud spending more effectively.
What’s the impact of FinOps on finance professionals?
As FinOps becomes more mainstream, finance professionals may need to learn new skills to stay competitive – and help their organizations optimize cloud spending. Key FinOps skills for finance professionals include:
Data analysis skills and broad understanding of machine learning techniques
Comprehension of the costs associated with cloud computing and big data storage
A grasp on the basics of blockchain technology and smart contracts
A FinOps culture is collaborative. It encourages cross-functional collaboration and holistic thinking, coupled with an agile mindset, where everyone works together to achieve the best results for the company, reducing its bottom line.
What are the benefits of FinOps for companies?
The benefits of FinOps for companies include:
IT services are often the largest expense for financial institutions, so any savings in this area can have a major impact on profitability. For example, if finance leaders can reduce their data center footprint by 30%, that could translate into millions of dollars saved every year.
Improved efficiency and productivity.
With more automation and fewer manual processes involved in daily tasks like account opening or loan origination, employees can spend more time focusing on high-value activities like customer service or strategic planning while avoiding mundane tasks, which can be automated through technology solutions such as robotic process automation (RPA).
Transparency and shared accountability.
A FinOps dashboard offers visibility to foster collaboration on variables such as speed, cost, and quality. This transparency not only reduces the risk of overruns, it also encourages cloud usage among users worried about costs, because they can see the organization hasn’t yet exceeded budget.
What are the challenges of implementing FinOps?
Implementing FinOps can be challenging and several factors can make this process more difficult. For example:
Organizational Resistance: Many people within organizations have been operating in the same way for decades and may not want to change their existing processes or culture. Contention is especially true if you're trying to introduce new technologies into your organization, which requires training employees on how to use them effectively – and getting everyone on board with using them at all!
Data Quality Issues: Another potential roadblock is data quality issues; if your company doesn't have reliable information about its customers' needs and desires (or worse yet, if some of that information isn't even correct), then any decisions made based off those insights will likely be flawed ones at best and disastrous ones at worst!
What is the future of FinOps?
It’s still early days, but the future of FinOps is bright; however, it will be different than what we see today. The continued automation and integration of financial operations will lead to greater standardization across the industry. Standardization can only mean good things for companies looking to improve their efficiency and reduce costs while increasing productivity.
FinOps is an emerging field that can potentially improve financial operations across the board. The benefits of FinOps can be broken down into three main categories:
Operational efficiency and cost reduction
Improved customer experience
Increased agility and speed
In our next blog, What Is Cloud FinOps? We’ll offer a deeper dive into the impact and value of cloud FinOps, with examples of how companies leverage this valuable technology today.
- What is FinOps?
- Why is FinOps important?
- How can FinOps help businesses manage the cloud?
- What’s the role of technology in FinOps?
- What’s the impact of FinOps on finance professionals?
- What are the benefits of FinOps for companies?
- What are the challenges of implementing FinOps?
- What is the future of FinOps?