Watch out for that Cloud spend!
5 steps to establish a FinOps practice
FinOps, short for Financial Operations, is an emerging practice that combines financial management and cloud operations to enable organizations to optimize their cloud spending. Cloud computing has revolutionized the way businesses operate, providing scalability, reliability, and agility. However, the cost of cloud computing can quickly add up, especially as organizations scale. That’s where FinOps comes in, providing a set of practices and tools to help organizations optimize their cloud spending.
In this article, we’ll explore the best way to create a FinOps practice, including the key steps, best practices, and tools to help you optimize your cloud spending.
Step 1: Set up a FinOps team
The first step in creating a FinOps practice is to set up a FinOps team. This team should consist of cross-functional members, including finance, operations, and IT. The FinOps team should have a clear mandate, budget, and support from senior management to implement FinOps practices effectively.
The FinOps team’s primary responsibility is to drive the optimization of cloud costs by establishing cost governance, monitoring cloud usage, identifying cost-saving opportunities, and recommending actions to optimize cloud spend. This team should also be responsible for communicating cloud costs to stakeholders and identifying ways to improve cloud cost visibility.
Step 2: Establish cost governance
Establishing cost governance is a critical step in creating a FinOps practice. Cost governance is the process of defining and enforcing policies and controls that govern cloud costs. These policies should align with the organization’s business objectives, including cost optimization, security, and compliance.
The FinOps team should work with the finance department to establish a cost center for cloud spending. The cost center should capture all the cloud costs and provide visibility into cloud spending across the organization. This cost center should also help the organization understand which departments or teams are responsible for the cloud costs and help allocate cloud costs to specific projects or applications.
Step 3: Monitor cloud usage
Monitoring cloud usage is an essential step in creating a FinOps practice. The FinOps team should use cloud usage analytics tools to track cloud usage and identify usage patterns. These tools can provide insights into how cloud resources are being used and help identify areas of overspending.
Cloud usage analytics tools can also help the organization identify unused or underutilized resources. These resources can be rightsized or decommissioned, resulting in significant cost savings. The FinOps team should work with the operations team to establish monitoring and alerting mechanisms to detect anomalies and potential cost overruns.
Step 4: Identify cost-saving opportunities
Identifying cost-saving opportunities is a crucial step in creating a FinOps practice. The FinOps team should use cost optimization tools and techniques to identify cost-saving opportunities. These tools can help the organization identify opportunities to reduce costs, such as using reserved instances, implementing auto-scaling, or leveraging spot instances.
The FinOps team should also work with the operations team to identify opportunities to optimize cloud architecture, such as moving to a serverless architecture or optimizing database usage. The FinOps team should use a data-driven approach to identify cost-saving opportunities, leveraging cloud usage analytics, cost reports, and monitoring data.
Step 5: Recommend actions to optimize cloud spend
Once the cost-saving opportunities are identified, the FinOps team should recommend actions to optimize cloud spending. These actions may include modifying cloud usage patterns, adopting new cloud services, using committed use discounts or optimizing cloud architecture. A majority of Cloud providers will also provide enterprise discounts if you agree to a longer term agreement. The FinOps team should work with the operations team to implement these recommendations and track their effectiveness.
The FinOps team should also establish a process for continuous optimization. This process should involve ongoing monitoring of cloud usage and costs, identifying new cost-saving opportunities, and recommending new actions to optimize cloud spending.
Best practices for creating a FinOps practice
Here are some best practices for creating a successful FinOps practice:
Foster a culture of cost optimization
Fostering a culture of cost optimization is critical to the success of a FinOps practice. The FinOps team should work with the organization’s leadership to communicate the importance of cost optimization and make it a part of the organization’s culture.
Implement cost allocation and chargeback
Implementing cost allocation and chargeback is an effective way to improve cost visibility and accountability. Cost allocation involves assigning cloud costs to specific departments or projects, while chargeback involves billing those departments or projects for their cloud usage. This approach can help incentivize departments to optimize their cloud usage and reduce costs.
Leverage automation
Leveraging automation can help organizations optimize cloud spending by reducing manual processes and human error. Automation can help with cost optimization tasks such as scheduling shutdowns, rightsizing resources, and automating scaling policies. Terraform can also assist with tagging assets with billing labels
Choose the right tools
Choosing the right tools is critical to the success of a FinOps practice. The FinOps team should evaluate cloud cost management tools and choose the ones that best fit the organization’s needs. AS an example tool Google Cloud Billing has this built into the Google platform and you can extend the analysis further by exporting the data to Big Query and using Looker Studio
Establish a feedback loop
Establishing a feedback loop is essential to continuously improving cloud cost optimization. The FinOps team should regularly review cloud usage and cost reports, identify areas for improvement, and incorporate feedback from stakeholders.
Creating a successful FinOps practice requires a cross-functional team, cost governance, monitoring, identification of cost-saving opportunities, and continuous optimization. By implementing best practices and using the right tools, organizations can optimize their cloud spending, improve cost visibility, and foster a culture of cost optimization. As cloud computing becomes more prevalent, FinOps will become increasingly important, and organizations that embrace this practice will have a significant competitive advantage.
