Within FinOps Academy we don’t believe in FinOps in the cloud, but that FinOps is an operating model for the whole IT landscape. That means that on-premises discussions, licensing questions, and possibilities in the Cloud infrastructure are within the same framework. Due to this comprehensive suite of different actors, getting a grip and control over big IT budgets is even more important. As organizations you’ll want to keep innovation high, collaboration between different teams efficient, and escalating issues directly.
We believe that FinOps by Design can help organizations enable business value, optimize costs, and streamline operational processes so that organizations shift from reactive to proactive. This article explores how implementing FinOps Principles from the ground up can help organizations gain better control over their IT spending.
Shifting Accountability to Engineers
One of FinOps by Design’s core principles is empowering engineers with financial responsibility. This shift in accountability ensures that cost considerations are integrated into the development process from the outset.
To implement cost awareness among engineering teams:
- Provide real-time cost visibility tools: Equip developers with dashboards and alerts that show the immediate financial impact of their resource usage and code deployments. This transparency helps them make cost-conscious decisions in real time.
A tool can be helpful in getting this quickly up and running. For example Infracost can be utilized to get these insights clear. A nice benefit is that Security and Compliance can be added to! - Establish cost-based performance metrics: Incorporate financial efficiency into the evaluation of project success.
For example, measure the cost per transaction or the resource utilization efficiency alongside traditional performance metrics.
More KPIs on how you can measure cost-based performance metrics can be found through the FinOps Foundation. Use for the FinOps Foundation Github: GitHub – finopsfoundation/kpis - Encourage a culture of cost optimization: Foster an environment where engineers are rewarded for finding innovative ways to reduce costs without sacrificing performance. This could include regular cost optimization challenges or recognition for significant savings achieved.
Use gamification or retrospectives to uncover the hidden buttons of the engineering teams. This helps encourage the engineers in their collaboration.
By making engineers accountable for the financial impact of their decisions, organizations can prevent unnecessary spending before it occurs and create a more cost-efficient development process. This exemplifies the ‘shifting left,’ from reactive top-down motivation to button-up proactive solutions from the people you want to help you out.
Collaborative Approach to IT Spending
To achieve a balanced approach to IT spending, it’s crucial to involve financial controllers and business teams early in the process. This collaboration ensures that financial considerations are adequately addressed throughout the development lifecycle and that IT initiatives align with business objectives.
Financial Controller Integration
Finance and Control are – as the name says – controlling factions of the organization. This means the IT teams need to explain very clearly the investments and the business value the development has. This also means that Finance and Control needs to be interested in what those teams do and check in with them. At the FinOps Academy, we have a couple of best practices for getting these done:
- Schedule regular meetings: Set up recurring sessions where finance and IT teams can discuss budget trends, upcoming projects, and potential cost optimizations.
An example of this is to invite the controllers with the product owners every month to discuss the upcoming projects and how the cost breakdown is. By doing this, the engineering teams can work with their backlog, while the product owner takes the perspective of costs into consideration.
A second example is to do a Financial Monthly. Hereby the engineers present their solution with a cost breakdown analysis every month where the controllers can ask the questions they want so they have an understanding of the business value and costs. - Develop standardized cost assessment templates: Create easy-to-use forms that help project teams estimate and justify costs consistently across different initiatives.
Use this easy-to-follow, 2-minute form that can be filled out, while deploying the code. This way there is a need for a quick check that has been done and that can be reviewed during the – earlier mentioned – PO and Controller meeting. - Implement financial review gates: Establish checkpoints in the development process where financial controllers review and approve budgets before projects proceed to the next stage.
This can be done inside the Cloud Providers suite of possibilities. Controllers are in contact with the POs during those meetings and engineers during the Finance Monthly and can change the budgets accordingly.
Every example of the integration of Financial Controllers can lead to a more open, transparent, and accountable department within the organization. It’s also the stepping stone to implementing a proactive FinOps culture which everyone can benefit from.
Business Team Involvement
Business teams want to focus on the solution and not always on how it’s been delivered. We believe in a joint venture between IT and Business with Finance in a checking way. That said, the following best practices can help bring those departments together:
Conduct joint planning sessions: Bring IT, finance, and business teams together to align technology investments with strategic business goals.
Due to these planning sessions once a quarter or bi-annually. This gives engineering teams a position to work iteratively on the wishlist of the business but also takes into account to bigger picture of what is talked about during these joint planning sessions.
Define clear business outcomes: For each IT project, articulate specific, measurable business objectives that justify the investment.
During these joint-planning sessions, clear business outcomes are necessary. This means that the why is clear and the IT teams can work on the how so the What becomes clear.
Note that the business outcomes can change, when that happens it is needed to do the refinement on these wishes and change accordingly.
Implement value-tracking mechanisms: Develop systems to measure and report on the ROI of IT initiatives, ensuring that investments deliver tangible business value.
The first two points from the business teams are really important and can’t operate without the other. Clear business outcomes during Joint Planning Sessions need to be combined into one.
Smart Strategies and Tooling
FinOps by Design can be forced from the top down, but when an organization doesn’t have tools or review gates where they can be compliant with the policies stated by the organization. By embedding those tools on the forefront, you can embed and implement a FinOps by Design practice and be proactive! Some things that are good to consider are:
GitHub Integration
- Utilize GitHub Actions: Automate cost checks during the CI/CD process to catch potential budget overruns before they occur.
Implement pre-commit hooks: Set up automated checks that flag potential cost issues before code is even pushed to the repository, allowing developers to address concerns early.
AI-Powered Tools
There is also a possibility to leverage AI or 3rd party tooling to help you with it:
- Leverage AI for cost prediction: Use machine learning algorithms to forecast cloud spending based on historical data and project plans.
- Implement anomaly detection: Employ AI to identify unusual spending patterns or resource usage, enabling quick responses to potential issues.
We earlier said that Infracosts is a key contender for the integration of tooling and becoming proactive. This gives you – as an organization – the possibility to enforce security and compliance policies (for example, storage terms, and security features) on to the developed workload.
Cloud Providers Own Solution
Of course, the Cloud Providers can help you in getting things clear. But be sure you’ll know what they can do and how it helps your organization. Of course, this is just a piece of the pie, but it helps to get cloud costs under control. Three examples that can help organizations:
- On AWS organizations can turn towards AWS Amplify. Organizations can take advantage of Amplify’s built-in cost estimation features to predict and manage expenses for AWS-based projects.
- With Azure, organizations have a comprehensive suite of cost analysis and budgeting tools to optimize spending across the Azure Cloud Spend.
- Google is big on its AI-powered recommendations and usage optimization tools. This gives organizations leverage to be efficient on their Google Cloud resources.
Improving Current Practices
The current way of working is most of the time optimized through the ‘old way’ of thinking. Of course, that way of thinking isn’t wrong, but the rhythm of this is not optimized for the volatile and dynamic spending curve in the cloud. That means that it’s time to evolve the current modus operandi. Here are some key steps that can be taken to change this:
- Establish a FinOps Center of Excellence: Create a dedicated team to oversee FinOps implementation, develop best practices, and provide training and support to other teams.
This gives organizations a central team of experts whom everyone can turn to.
If the organizations are really big, you can change this up to the hub-and-spoke model. - Implement Continuous Cost Optimization: Conduct regular audits of cloud resources and usage, and set up automated systems to detect and eliminate idle or underutilized resources.
An example of this is that it’s a returning task on the backlog. This can be named ‘FinOps Friday’, or ‘Weekend Waste Wiper’. This way you incorporate optimization opportunities in the way of working. - Adopt a Cloud Financial Management Platform: Implement a comprehensive solution that provides visibility into costs, helps with allocation, and suggests optimizations across your entire cloud infrastructure.
This can be done through third-party tooling, such as Cloud Ability, Wiv.ai, Harness, and FinOut.
But this can also be built through PowerBI or other dashboarding. This all depends on the different wishes and needs of all various stakeholders within the organization. - Foster a Cost-Conscious Culture: Gamify cost-saving initiatives, recognize teams for successful optimizations and share success stories to encourage organization-wide engagement in FinOps practices.
We already shared some examples earlier in the article. This can help with the embedding of a cost-conscious culture.
Benefits for Stakeholders
FinOps by Design offers significant benefits to various stakeholders within the organization:
- Engineers gain greater autonomy in decision-making and develop a deeper understanding of the financial impact of their technical choices.
- Financial controllers enjoy enhanced visibility into IT spending and can produce more accurate forecasts and budgets.
- Business teams see better alignment between IT initiatives and business objectives, resulting in improved ROI on technology investments.
- Executives gain increased control over IT budgets and can make more informed strategic technology decisions.
Conclusion
By adopting FInOps by Design, organizations can grow from a reactive way of working towards a proactive way of working where financial accountability is being nurtured, autonomy is being given back to the developments which also results in innovation while the Finance and Control keep tabs on if everything is being reviewed with the use of the tollgates.
In short, it gives organizations the following:
- Engineers are getting autonomy in their development but with a deeper understanding of the financial impact of their design/developmental choices;
- Financial Controllers enjoy the visibility and talk about IT spending and accurate forecasts by the teams or POs
- Business Teams see that IT aligns with their goals and see also improvements in – for example – the margin on their already marketed products.
Last but not least executives get control over their rising budgets, gain insights into the more accurate forecast, and therefore are more stable in their ROI’s. This results in more informed strategic decisions on all levels within the organization.
As said, this proactive approach to overall IT Financial Management will become the most crucial thing to maintain competitiveness, relevance, and financial health for a sustainable future.
Call to Action
Don’t be shocked when your IT costs are rising, but take control when you see that happening! Take the first step in implementing FinOps by design today:
- Assess your current IT practices and identity areas for improvement
For example, our Benchmark or Assessment is ideal for this phase! - Start small by implementing one or two FinOps strategies in a pilot project
For example use the joint sessions, or FinOps Friday in the Engineering teams - Engage your key stakeholders to get buy-in on different levels of the organizations for the broader FinOps initiative.
Management buy-in is – in our experience – mandatory to get FinOps growing within the culture. - Evaluate your current tools that are being used and explore gaps. Say goodbye to the tools that don’t work and welcome those that will
- Commit to fostering those cost-conscious meetings and culture by educating, evangelizing, and celebrating early adopters!
By taking action now, you’ll have the toolkit that helps you navigate the complexities while managing multiple different actors in IT spending while driving the organization towards greater financial efficiency and technological innovation. The future of your IT budget starts with shifting left, towards being proactive; FinOps by Design