Embarking on FinOps: A Beginner’s Guide

The cloud offers numerous advantages to businesses; however, cloud expenses are unpredictable and can grow substantially if left unchecked.

This is where FinOps comes into the picture. FinOps is a way of maximizing business impact by optimizing cloud spending.

Cloud spend is growing at a tremendous rate. According to Fortune Business Insights, the spending on public cloud services is expected to hit $124 billion by 2025. Also, as per an analysis made by the McKinsey & Company firm, the public cloud sector in the Middle East alone could reach $183 billion by 2030.

Shift Left, DevOps and other agile practices have improved the overall software development lifecycle over the years. FinOps is a team sport that can offer benefits to an entire organization. In “FinOps” practice, the decision-making responsibility is entrusted with the people doing the job towards the edges of the organization.

The limitless advantages of convenience, cost-effectiveness, adaptability, speed, agility, and innovation opportunities in the cloud are evident. However, despite the growing adoption of cloud technologies, not all organizations are equally equipped with the experience and expertise to manage the usage and to implement optimized architectures for their solutions.

As a result, organizations end up bearing the costs of ill-provisioned and unoptimized resources. A Forrester survey conducted in May 2023 by HashiCorp  found that it was easy to see 50% of the resources in the initial stages end up being overprovisioned or underused.

The FinOps framework was created to help address these problems. While many areas of cloud efficiency are still evolving, the swift adoption of the practice has led to a rapidly growing community of practitioners, service providers and experts. This community is poised to assist companies and effectively address these issues.

As practitioners, we have organically embraced FinOps, drawing insights from our own experiences and applying successfully executed strategies to reduce our cloud expenditure across various domains.

Prior to delving into the specifics of the FinOps journey, it is crucial to grasp the fundamental concepts and the phases of FinOps.

FinOps is a mindset that synergizes the technology teams with the financial services and business departments to build an iterative process to inform about, optimize and operate on the opportunities to prevent cloud wastage and maximize cloud usage.

Based on the FinOps Principals, the framework is key in providing core insights on actionable items to the various personas in the cloud using organizations.

There are three phases of FinOps: Inform, Optimize, and Operate.

The first step is to analyze the cloud infrastructure, the types of services utilized, and the associated lines of business to gain insights into the expenditure rationale. This phase, which involves presenting information to cloud users, is known as the Inform phase.

In our experience, we formed a FinOps team tasked with getting insight into growing cloud spend. The team worked with product owners, engineering, and finance and used tooling to gather the invoicing information from the various clouds and analyze the data in a single pane of glass.

It sounds simple, but it was a challenging task. There were different account owners across the organization that needed to give our tooling privileges to access their billing data respecting all security and compliance measures. Working with business leaders, analytics, engineers, and finance teams to earn their trust required time and effort but was a firm step in the right direction.

The inform phase alone gave enough visibility of costs to enable the team to review the cloud spend and decommission the cloud accounts that were no longer used but contained resources, resulting in additional cloud spend. These accounts had no owner and no explanation of usage.

After the inform phase comes optimization. Based on this framework the Optimize phase focuses on pinpointing the opportunities to enhance cloud productivity. This phase gives the users details about unused or ill provisioned resources and other recommendations, increasing the list of KPI’s on the organization that can be tracked. Optimization options may result in competing paths, but the aim is to create a strategy to help organizations use the cloud in an efficient way.

Regarding our experiences, we got insights and recommendations that enlightened us to understand the areas of cloud proficiency in our organization. With the results, we were able to add automation to scale our resources to maximize efficiency, and reconsider models like the Savings Plans, Reserved Instances, and commitment-based discounts. Close collaboration between the personas involved in the process was essential for better optimization. Cooperation between the teams is a salient point of optimization.

Paying attention to budget management is another essential area in promoting the optimization of cloud resource usage in active accounts. Forecasting, show backs, and anomaly detection from the Inform phase should be implemented in the Optimize phase effectively.

The last phase of the framework was operate. The concept is that, following the knowledge gained in the two preceding phases, it is now time to establish policies, implement governance, enhance automation, and educate the teams participating in the process. It is also important in this phase to build a culture of ownership and accountability and iterate acting on the opportunities that were found.

Based on our experience, by gaining access and insights to rich data through the FinOps process, the internal teams felt empowered to make the correct choices to work together and took ownership to use the cloud resources while optimizing the costs. The iterative evolution of finding opportunities to improve upon is organizations like Kyndryl, that embrace FinOps.

Depending on how well equipped and involved they are in the Inform, Optimize, and Operate phases, most organizations using FinOps can be categorized in the Crawl, Walk and Run phases mentioned as the FinOps Maturity Model. A few key points to consider when aiming for success in the FinOps journey are that there should be collaboration in the teams, the business value of the cloud should drive the decisions, and all users should take ownership of their cloud usage. Creating a central team that drives FinOps, provides data in a timely manner and takes advantage of the various cloud models also helps.

We will elaborate on the various FinOps Personas and how to go about implementing FinOps in the next following series of this article.

There is a cultural shift to use the framework, that requires close collaboration between silos within the organization, starting small and celebrating small successes, one at a time.  It is critical for organizations to optimize cloud usage and minimize wastage, this is why embracing FinOps mindset from the beginning is essential.

Fortunately, FinOps has a highly engaged community, with active workgroups and an exceptionally knowledgeable pool of experts spanning various domains. There are numerous internal initiatives on FinOps like FOCUS groups methodologies to standardize the data consumed from the different cloud providers, workgroups dedicated to resolve challenges associated with cloud efficiency and other enhancements.

It is evident that FinOps is not a one-time task but rather an iterative process, where organizations naturally enhance their efficiency as they delve deeper into their FinOps journey. As a result, they can better channel their resources towards innovative market-leading solutions. Additionally, machine learning capabilities and advanced analytics adopting Artificial Intelligence are estimated to unveil fresh opportunities for the FinOps in the forthcoming era. As per the newest State of FinOps Survey, 2024,  reducing waste of unused resources is indeed the topmost priority these days.

If you are considering cloud adoption, we encourage you join the FinOps journey, get introduced to the FinOps Foundation Community and reach out to the experts who are seasoned and certified FinOps Practitioners and FinOps Professionals, FinOps Service Providers and have a Certified FinOps Platform.

Stay informed, get involved, and even become a FinOps Champion. Kyndryl is here to help. Let us foster mutual growth in FinOps for the benefit of the larger community.

(John Sanchez, Lead Architect, and Sonal Garg, Senior Database Architect for Kyndryl Enterprise FinOps contributed to this article)