In this article, Ross King, Telefónica Tech’s FinOps Certified expert by the FinOps Foundation, outlines what FinOps is and the 3 compelling reasons to embrace it.

When I tell tech leaders that, on average, 30% of cloud resources are wasted, most sit up and listen.  In the current macroeconomic climate, many businesses looking for ways to reduce spending without reducing the value they are getting from their cloud investments. This is where FinOps comes to the rescue. So, what exactly is FinOps? FinOps, short for Financial Operations, is the practice of bringing financial accountability to the variable spend model of cloud. It’s a cultural shift that enables organisations to get maximum business value by helping engineering, finance, and business teams collaborate on data-driven spending decisions.

The Public Cloud model has introduced a major shift from CAPEX to OPEX, once centrally controlled by Finance and Procurement teams, now involves broader spending responsibilities across different parts of the business. Previously, developers and application owners might say, “Hey – I need some tin to run XYZ application.” Traditionally, we’d turn to procurement, and all spending would be tracked and monitored. But nowadays, that’s shifted to an OPEX model, where control is lacking. Instead of going through procurement to buy new hardware, I can just log on to Azure and purchase resources. OPEX based purchasing certainly allows much more agility and flexibility, but without control, costs can spiral. The FinOps framework addresses this by providing detailed cost allocation, tracking, and analysis, ensuring you know where your money is going. It offers high-quality reporting when needed and governance to prevent unnecessary spending on expensive resources.

1. Understanding Cloud Cost Data

Hourly billing in cloud services adds significant complexity to managing costs. With costs accumulating by the hour, it’s challenging to track and forecast expenses accurately. This dynamic billing model requires continual monitoring, data gathering, correlating and visualisation to help avoid unexpected charges and optimise resource usage effectively.  Data ingestion is a core capability in the FinOps framework, but many organisations struggle at this first hurdle. First-Party toolsets, for example, Azure’s Cost Management and Billing enables visualisation of data, and the ability to export data as a CSV payload, enabling a more granular view of Azure consumption cost, and cost allocation.  This journey gets more complicated with more and more organisations consuming a multi-cloud model. Third-party toolsets such Cloudability become invaluable, offering multi-cloud, real-time data gathering to help you understand, manage and attribute your expenses efficiently.

2. Business Value-Driven Decisions

FinOps helps you prioritise decisions based on the business value and unit economics of cloud services. By aligning cloud spending with business objectives, organisations can ensure that every penny spent contributes to strategic goals. This approach helps you make accounted and informed decisions that drive business value, rather than simply focusing on cost-cutting measures. It ensures that cloud investments are directly tied to achieving business outcomes.

3. Greater Organisational Collaboration

FinOps encourages collaboration among teams for effective cloud management. By fostering a culture of cooperation, FinOps ensures that engineering, finance, and business teams work together to optimise cloud usage and costs. This collaboration is essential for achieving a unified approach to cloud spending, where all departments are aligned on financial objectives and resource allocation.

The latest FinOps Report highlights two priorities for 2024: reducing waste and managing commitment-based discounts. Commitment-based discounts involve making long-term commitments to purchase specific amounts of cloud resources or services in exchange for significant discounts. For example, a company using Azure VMs can analyse its usage patterns, forecast future needs, and purchase Azure Reserved Instances for those VM types, securing discounts of up to 72%. This strategic approach ensures organisations not only save on cloud costs but also optimise their resource usage and improve financial predictability.

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Typically, organisations implement FinOps through a crawl, walk, run journey. Once good FinOps practices are in place, you can attribute costs across the business, showcasing how you’re optimising spending across your cloud estates. Your IT team will be able to report back to the C-Suite, confidently stating that you have managed to cut costs and save substantial amounts on your IT infrastructure bill on an OPEX basis. This marks a significant achievement in your journey toward optimisation, but it doesn’t stop there. It’s important to note that FinOps optimisation isn’t a one-time thing; it’s an ongoing process.

Collaborating with a Managed Services Provider (MSP) offers organisations access to the latest FinOps tools and cost-saving strategies. MSPs provide support across multiple public cloud platforms, ensuring comprehensive assistance tailored to your organisation’s specific needs. By partnering with an MSP, you can accelerate your journey towards FinOps excellence and maximise the return on your cloud investments.

Ready to transform your cloud strategy from waste to wealth? Join our upcoming webinar to explore and learn FinOps best practices. Join your peers and colleagues from the C-suite, finance and technical teams to learn how to collaborate to implement FinOps in your organisation. Don’t miss this opportunity to drive efficiency, save costs, and build a sustainable cloud architecture. In this webinar, we will provide an overview of the FinOps framework, from the understanding of cloud usage and cost, to the optimisation of cloud workloads. During this webinar, we will also relate these domains to a real-world Azure demo environment.