Establishing FinOps in the company: A Guide for Finance & IT
Estimated reading time: 8 minutes
Cloud technologies offer flexibility and scalability - but costs often get out of control. This is precisely where FinOps (Financial Operations) comes in, creating transparency, optimizing costs and strengthening collaboration between IT, finance and business. Find out here how you can get your cloud costs under control with FinOps.
What is FinOps? A brief definition
The term FinOps or Cloud FinOps (Cloud Financial Operations) describes a set of practices that help companies manage their cloud computing spend in a transparent, efficient and controlled manner. The term was originally coined by the FinOps Foundation, a global community that develops and shares best practices for the financial management of cloud infrastructures.
FinOps relies on teams from IT, finance and business working closely together and taking joint responsibility for cloud costs. In contrast to traditional IT cost management, which usually involves static budgets and long-term planning, FinOps is dynamic, data-driven and continuous. The aim is to gain real-time insight into cloud expenditure and optimize it using specific KPIs and automated tools.
FinOps on the rise: What is driving the development?
FinOps is becoming increasingly important as part of a sustainable cloud strategy, as it not only enables precise real-time cost transparency, but also creates the basis for continuous reporting, better forecasting and rapid adaptation to changes. Companies benefit directly from greater cost efficiency, optimized use of resources and clear responsibilities - especially in dynamic load situations and globally distributed cloud resources.
MaibornWolff makes your cloud costs transparent!
Together, we optimize your cloud spend with FinOps - efficiently, data-driven and sustainably. Take advantage of the free initial consultation with our FinOps experts.
FinOps principles: Foundations for successful cloud financial management
In order to fully exploit the potential of FinOps, the FinOps Foundation has defined six central principles. These principles form the basis for sustainably managing and continuously optimizing cloud expenditure. Anyone who successfully establishes FinOps in their company is guided by these principles and thus ensures that teams work together efficiently.
Promoting cooperation
Focus on business value
The focus is not only on costs, but above all on the actual business benefits. FinOps promotes targeted investments in cloud resources that demonstrably offer the greatest added value for a company. Decisions are therefore no longer purely cost-driven, but more strongly oriented towards the benefits achieved.
Taking responsibility
In the FinOps approach, teams take responsibility for their cloud costs themselves. Developers and product managers are given transparency about their expenditure, cloud security and compliance requirements for the resources used and thus become active shapers of cost management. This sense of responsibility makes a decisive contribution to cost efficiency and the avoidance of unnecessary expenditure.
Keeping data accessible and up to date
Data availability is a crucial prerequisite for successful FinOps. Teams need quick and easy access to up-to-date cost information in order to make informed decisions. Automated tools and real-time reporting provide the necessary transparency and rapid response times.
Support centrally, implement decentrally
While central governance structures provide orientation and standards, the actual implementation is decentralized within the teams. In this way, specifications and standards are defined uniformly, but at the same time teams can act flexibly and independently and make quick decisions that meet their respective requirements.
Use a flexible cloud cost model
Cloud technologies offer flexible pricing and contract models, such as reserved instances or savings plans. FinOps encourages companies to make consistent use of these options in order to reduce costs and ensure optimized resource utilization in the long term. Continuous monitoring and adaptation of cloud usage can result in significant savings potential.
The three phases of the financial operations life cycle
FinOps is not a one-off action, but a continuous process that typically takes place in three phases: Inform, Optimize and Operate. These phases are interlinked and ensure a continuous improvement process in the management of cloud costs.
1. Inform
The first phase is about gaining clarity about current cloud expenditure and the cost structure. The teams are provided with precise real-time data in order to visualize the actual resource consumption.
Practical example
A company uses dashboards and automated reports to provide IT teams with weekly overviews of cloud expenditure per project. This suddenly makes conspicuous cost structures visible, such as unused resources or oversized instances.
2. Optimize
In the second phase, the focus is on targeted FinOps optimization. Based on the data collected, measures are taken to make the use of resources more efficient and eliminate unnecessary costs.
Practical example
A team recognizes that certain resources are only needed occasionally. By switching to a flexible contract model (e.g. on-demand instances) or by switching off resources at off-peak times, considerable monthly cost savings can be achieved.
3. Operate
In the third phase, what has been achieved is monitored, continuously improved and adapted to changes. Teams take long-term responsibility for their cloud costs and ensure that the FinOps process remains permanently established.
Practical example
A company conducts regular FinOps reviews in which representatives from IT, finance and business jointly assess progress. KPIs are reviewed and new optimization potential is identified so that cloud cost management is continuously improved.
The three phases of the FinOps lifecycle sustainably improve cloud costs.
Implement FinOps successfully: Here's how
For FinOps to function sustainably in a company, organizational structures, technical requirements and control instruments must interact optimally. The most important aspects for successful implementation are presented below.
Creating organizational conditions
As already mentioned, a crucial basis for FinOps is cross-departmental collaboration between IT, finance and business departments. This requires clear responsibilities and a culture in which teams actively live cost awareness.
Important steps:
- Interdisciplinary FinOps team: Create a central FinOps team that includes representatives from Engineering (cloud users), Finance (budget managers) and Product Owner (business managers).
- Appoint a FinOps champion: Designate a responsible person ("FinOps champion") who will act as the central point of contact and driving force.
- Change management and training: Train your teams regularly on cost awareness and new FinOps processes to actively support cultural change.
Targeted use of technologies and tools
Technological support is essential to manage cloud costs efficiently. A combination of cloud-native solutions, specialized FinOps platforms and automation tools enables fast analyses, transparent reports and automated optimizations. When selecting suitable tools, the existing cloud architecture also plays a decisive role in ensuring optimal integration, use and long-term cost efficiency.
Recommended tools:
- Cloud-native solutions: AWS Cost Explorer, Azure Cost Management, GCP Billing
- Specialized FinOps platforms: Apptio Cloudability, CloudHealth by VMware, Kubecost
- Monitoring and observability tools: Datadog , Grafana
- Automation tools: Terraform , Ansible, Cloud Custodian
Integrate FinOps into existing IT and financial structures
To ensure that FinOps can be effectively established in existing IT and financial processes, you should create interfaces to systems already in use, such as ERP or BI solutions. Automated data transfers, regular FinOps reviews and workshops, as well as the integration of FinOps KPIs into existing reports are ideal. This results in seamless integration into the existing infrastructure and a sustainable anchoring of the FinOps approach throughout the company.
Define KPIs and establish controlling
Without clear metrics and continuous controlling, sustainable management is not possible. The following key figures help to make the success of your FinOps initiative measurable:
Important FinOps KPIs at a glance:
| KPI | Unit |
|---|---|
| Cloud costs per team or project | e.g. € per deployment or per service |
| Forecast Accuracy | Deviation between planned budget and actual consumption (%) |
| Savings through optimizations | Cost reductions achieved in € or % |
| Costs for unused resources | Share of unused cloud capacities in total expenditure (%) |
| Share of automated processes | Proportion of automated cost optimization measures (%) |
| Time to cost transparency after deployment | Duration from the provision of a new cloud resource to the initial availability of relevant cost data (e.g. hours or days) |
Regular reviews and forecast workshops, ideally in close coordination between IT and Controlling, ensure that all relevant key figures are always kept in view and that measures can be taken in good time if necessary.
Successfully introduce FinOps - with MaibornWolff!
We help you select the right tools, define your individual KPIs and establish sustainable FinOps processes in your company. Take advantage of our free initial consultation!
Conclusion: Understanding, applying and thinking ahead with FinOps
Those who successfully introduce FinOps benefit directly from improved cost transparency, efficient resource utilization and an optimized cost structure. At the same time, FinOps creates the necessary flexibility to be able to react quickly and agilely to changing business requirements.
A look into the future shows that FinOps will continue to gain in importance - for example through automation using AI, greater integration of sustainable goals ("GreenOps") and new service models ("FinOps-as-a-Service"). If you invest in a professional FinOps culture now, you will secure long-term competitive advantages and be ideally equipped for the dynamic cloud future.
FAQs on the topic of FinOps
What is the difference between FinOps and traditional IT cost management?
In contrast to traditional IT cost management, which is based on fixed budgets and long-term planning, FinOps uses real-time data from the cloud, promotes cross-team responsibility and works dynamically and continuously.
Are there industries for which FinOps is particularly relevant?
FinOps is particularly relevant for technology companies, financial service providers, e-commerce, industry and IoT as well as media and streaming - wherever high scalability, dynamic loads or regulatory requirements play a role.
What advantages does FinOps offer companies?
FinOps ensures transparent cloud costs, greater cost efficiency, improved decision-making, optimized use of resources and better collaboration between IT, finance and business.
What does a typical FinOps team look like?
A FinOps team typically consists of representatives from Engineering/Operations (resource consumption), Finance/Controlling (cost analyses, budgeting) and Product Owners (business benefits). A FinOps practitioner often complements the team as a coordinator.
What challenges often arise when introducing FinOps?
Typical challenges in the introduction of FinOps include a lack of transparency in cloud costs, technological silos between IT and finance, insufficient automation tools, the cultural shift towards greater team ownership and the complexity of the multi-cloud environment.
Maximilian Schaugg has been working on cloud projects at MaibornWolff since July 2018. He specialises in the design, implementation and operation of cloud and container solutions in existing and new IT infrastructures. An important part of his work is focusing on the needs of his customers and taking a holistic approach to successfully completing projects from start to finish. In recent years, he has focused particularly on cloud migration, cloud consulting and cloud platform development, where he has been able to apply and further deepen his in-depth knowledge, especially in the critical areas of security, cost efficiency and governance.