What is FinOps? Your cloud cost specialists, explained

Paying for cloud computing is the cost of doing business. On paper, every dollar you spend should be going towards something useful: you pay for what you use, scale things up when you need it, and scale down or shut things off when you don’t. No waste, less spend, right?

In practice, things are a lot more difficult. Nine in ten organizations (91%) struggle with avoidable cloud spend, also known as “cloud waste.” What seems like an easy idea becomes quite expensive in practice. This is the problem FinOps exists to solve. 

What is FinOps?

FinOps is the practice of getting the most business value out of your technology spend, typically with a focus on cloud. It’s not about just spending less, but spending well. For example, you could have cloud costs double but revenue triple, and that’s still a win in FinOps. 

A big focus of FinOps is financial accountability. Normally, a big problem with cloud spend is that there’s a big bill that nobody owns. FinOps is about creating collaboration between engineering, finance, and business teams, so everyone’s staring at the same numbers and knows where spend is taking place.

Important: Cloud ROI is not found in saving costs

When you look at the research, there's a disconnect between how organizations assess cloud success, and the value proposition the cloud actually offers. No wonder so many organizations are often disappointed with what they get when they shift to the cloud!

On the one hand, cost efficiency and savings is the #1 metric for assessing progress against cloud goals, used by 87% of organizations. Despite that, the main benefits of the cloud aren’t found in driving down cost, but in agility, scalability, security, and flexibility. With the cloud, it is possible to do things that are simply not possible by building your own infrastructure. 

Compared to on-site infrastructure, cloud infrastructure can be scaled up and down to meet actual business demand. They are no longer hampered by what hardware your organization has or slow procurement processes. When designed correctly, organizations also have a much stronger security posture and greater redundancy.

While cost reduction is a potential benefit, most organizations spend the same amount to get more. Cloud ROI is found when you achieve your objectives, instead of failing to reach them at the same or cheaper cost. This is a very important concept when it comes to FinOps.

What is a FinOps specialist, and what do they do?

A FinOps Specialist is someone who bridges the gap between engineering, business and finance teams. They have the technical knowledge to understand how cloud costs are generated and billed, the analytical skills of a finance professional, and the ability to change behavior across teams they don’t manage.

Their core responsibilities typically include:

• Making spend visible by ensuring proper tagging is in place, so costs can be attributed properly to teams, products, or departments

• Building different reports, dashboards, and forecasts on spend for the relevant audience.

• Detecting cost anomalies before they become problematic for the business, such as unexpected cost spikes or billing errors

• Recommending ways to optimize said technology costs, working with engineers on things like optimization and rightsizing

• Setting up policies and guardrails to ensure compliance, such as budgets, alerts, thresholds, and so forth.

• Negotiating rates and commitment management, such as looking at discount plans, reserve instances, and saving plans to lower baseline cloud rates

• Educating engineers and leadership on cost awareness and accountability

FinOps teams stay small and nimble by design. Even at large organizations that manage more than US $100 million a year, a FinOps team typically has between eight to ten members, and three to ten contractors. 

What FinOps is not

• Not a cost-cutting device: Cutting cost is one outcome, but not the primary one. FinOps may actually recommend spending more where it helps speed up growth and other forms of ROI.

• Not the owners of spend: Your FinOps team are not responsible for causing or stopping large cloud purchases. This belongs to the team, department, or product that generates it. FinOps only owns the visibility, governance, and framework to help manage it. 

• Not a once-off project: Cloud usage changes all the time, so this is a constant requirement. You may scale attention based on the ROI you get back, though. For example, fixing 2% of wasted cloud spend is going to be less of a benefit for a company that only spends $50k on cloud vs one that spends $5m.

What FinOps delivers for a business

• Forecasts that the business can trust: Generally, the more mature your FinOps function is, the less variance there is in the forecast for future cloud spending.

• Visibility on tech spend, especially cloud: You can’t manage what you can’t see, especially if you don’t know who owns what. FinOps gives you granular metrics on where spend is driving what’s important, which then informs where you assign it moving forward.

• Building a culture of cost ownership: FinOps helps engineers own the costs and think about the impact of spend before they make a decision.

All of this really comes down to better tech spend that drives measurable results.

Training in FinOps and cost management

If you want to learn more about FinOps and cost management, Pluralsight has a dedicated learning path that you can take authored by Kevin James and Mycal Brown. It covers how to analyze cost spend and usage data, map cloud spend to accountable owners, prioritize optimization actions, and more.