Businesses are moving to the cloud to cut down expenses, improve efficiency, and make tools and data accessible to their employees anywhere around the world. FinOps, which stands for Financial Operations, is a cloud management strategy that enables businesses to get maximum value out of cloud services. It is a cohesive approach that allows the finance, IT, and DevOps teams to collaborate and optimize the cloud services expenses.
Role of FinOps in Financial Management
A business’s financial management comprises budgeting, accounting, analyzing, reporting, and forecasting the risks associated with the management and investment of the company’s resources. To perform managerial operations, businesses use cloud services, and these cloud services are expensive depending on the speed, storage space, and quality of the service. On top of that, cloud spending is often inefficient, leading to revenue loss. And that’s where FinOps comes into the equation. FinOps links the finance, marketing, sales, IT, and DevOps departments with each other so that a holistic approach is adopted and the cloud resources are used in the most efficient manner possible.
The FinOps framework follows a three-step process:
- Inform
- Optimize
- Operate
The cross-functional teams analyze their needs and then engage with the other departments to find a balance between the quality and the cost of the services needed. This approach helps businesses achieve three business goals which are: to improve quality, generate revenue, and converse resources. Once the optimization part is complete, the focus is shifted toward maintaining that optimization.
Benefits of Implementing FinOps
Cost management is one of the major challenges for a business. The businesses suffer because of inefficient operations expenditure and communications deficit between the departments; it can all be avoided if FinOps is implemented. Cloud FinOps introduces financial accountability and growth to businesses.
Moreover, it gives access to tools that help the engineering team make dashboards to inform the executives about the status of the business. For example, a dashboard shows real-time numbers on budget and expenditure to all the stakeholders. This gives all the stakeholders visibility into data and equips them better to make all their financial decisions on the go.
Benjamin Franklin once said, “Time is money.” FinOps also allows businesses to become time and resource efficient by automating repetitive business tasks such as reporting and budgeting. It brings different departments together, improving collaboration and promoting a healthy working culture.
Key Technologies and Tools
Cloud cost management platforms are used to monitor the usage and spending of an organization for cloud services. Business users get visibility into underutilized or overburdened cloud units to keep an equilibrium between a service’s utilization and need. High-end tools like Google Cloud Management, AWS Cost Explorer, and Azure Cost Management can help optimize usage and spending.
Automation cloud tools are used to automate repetitive and manual tasks, which saves a lot of hassle and time for the teams across the board and makes operations smooth. A number of tools are used for such operations, but the most common ones are Azure Monitor and AWS Cloudwatch.
Online dashboards and reports are made to keep the stakeholders informed about the financial activities going on in the business. Using automation a system is put in place that keeps updating these dashboards and reports. Microsoft Power BI, Tableau, and Microsoft Excel are the most widely used tools for such tasks.
FinOps needs people from different departments to work together, and communication is the key to working in such a diverse environment. A person’s point of view should be communicated to others in a clear and timely manner, and for that, you need platforms where everyone is accessible, and a record of communication is maintained. For such purposes, a number of tools are used, but the most common ones with advanced features are Microsoft Teams, Google Meet, and Slack.
Challenges and Best Practices
A business faces several issues while trying to implement FinOps. The most common ones are as follows:
- Data Silos: Because of the scale of a business, the data is scattered all over the place. Getting access to data and analyzing it to gain useful insights is an issue businesses face while implementing FinOps. The solution to this problem is to build a data warehouse. It serves as the single source of truth for the organization.
- Decentralization of Purchases: This decentralization of subscription purchases saves time. Simultaneously, this poses a challenge for businesses as the maintenance costs of these services often increase exponentially over time. The solution is to have a mechanism that regulates the purchases.
- Limited Collaboration: When different departments have to work together, schedules are often misaligned, which causes friction. This is a human resource issue, and the HR department should work to make a more hospitable environment.
- Insufficient Data: A business needs complete and comprehensive cost data to recognize and forecast patterns. Insufficient cost data won’t be able to model a solution that optimizes the expenses. The solution is to focus on collecting as much data as a business can and dump it in a data lake. Later on, the data engineers can extract the relevant data and clean it to be ready for analysis.
Future Outlook of FinOps
Artificial Intelligence and Machine learning are widely used to analyze financial data. Therefore making it easier to identify areas for cost savings and improved forecasting. More businesses would migrate to the cloud to optimize their full-spectrum business growth, including financial performance. FinOps is more relevant than ever in the current business atmosphere as it would streamline that migration for businesses. Outsourcing FinOps to specialized providers will become more common. We can expect increased interoperability among FinOps tools. In turn, making it easier to connect different cloud tools and review financial performance.
There are numerous emerging trends in the cloud ecosystem. Check out unite.ai to expand your knowledge about the latest developments related to cloud services.
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