FinOps: Tools and methods for your company

What is FinOps and why is it important 

FinOps is an approach to managing cloud costs that combines financial responsibility with operational efficiency. The goal of FinOps is to help companies optimise their spending on cloud services while maximising the value they derive from those services. The FinOps Foundation defines FinOps as a culture and practice that empowers teams to collaboratively make data-driven decisions to manage cloud costs. 

A key element of FinOps is close collaboration between finance, engineering and business teams to ensure visibility and control over spend. With an effective FinOps approach, you can better monitor, plan and optimise your cloud costs.

Main tasks and challenges

FinOps is a comprehensive financial management discipline for the cloud. The main tasks include cost monitoring, optimisation and strategic planning. The basis is the detailed monitoring and analysis of cloud costs in order to uncover potential savings, simplify budgeting and create accurate forecasts. Strategic planning and the continuous adjustment of the resources used, known as rightsizing, help to maintain operational efficiency and reduce costs.

The precise cost allocation enables responsible use of resources and promotes cost awareness through showback and chargeback models. Alarm functions for budget overruns ensure proactive financial management and the ability to react quickly to changes. Last but not least, the range of tasks includes the introduction of robust governance, which includes guidelines and controls for monitoring and managing cloud spending.

Challenges when using FinOps include adapting existing processes and ensuring that all relevant departments work together efficiently. The main challenges are: 

• Complexity of allocation: The correct allocation of costs in a complex and often shared cloud infrastructure can be challenging, especially when resources are used in multiple projects or departments.
• Resistance to change: Organisations may face cultural resistance when it comes to shifting responsibilities and getting teams to change their spending and consumption habits.
• Lack of expertise: The lack of qualified professionals can be a hurdle. This necessitates training and continuous skills development.
• Data quality and integration:

Ensuring high-quality data from different sources and integration into existing systems and processes are technological challenges.

• Limited tools: There are few tools available to automate FinOps processes, and they can be expensive and complex.

How efficient cloud cost management works: The 6 principles of the FinOps framework

The FinOps Foundation defines six principles for efficient cloud cost management, which are designed to create a common understanding and responsibility for cloud costs:

1. Collaboration: Teams using resources should actively manage their expenses and reduce costs.
2. Business First: The focus is on maximising business value, not just cost savings
3. Centralised roles: A specialised FinOps team coordinates and promotes best practices within the company.
4. Real-time reporting: Up-to-date data is essential for making informed decisions, so real-time reporting is essential.
5. Individual accountability: Each individual takes responsibility for their cloud usage and costs.
6. Dynamic cost management: The variable nature of the cloud requires constant monitoring and adjustment of resources.

These principles not only help companies to manage costs, but also to establish a proactive and conscious use of the cloud.

Inform, Optimise, Operate: The FinOps lifecycle

The FinOps lifecycle consists of three key phases - Inform, Optimise and Operate - which help companies to systematically manage and optimise their cloud costs:

1. Inform: In this initial phase, the focus is on collecting dataand understanding the current cost situation. The main tasks here are: Setting up dashboards, cost centre accounting and creating awareness of expenditure.

2. Optimise: As soon as transparency is established, optimisation measures are introduced. This includes the rightsizing of cloud resources, the use of savings models and the balancing of performance and costs.

3. Operate: This phase is characterised by the operational implementation and fine-tuning of processes. Important aspects include regular financial controls, updating budgets and maintaining alert systems for cost control.

Strategic measures

In order to be successful in the dynamic cloud economy, companies must define clear strategic measures. These are essential for effective FinOps practice.

The most important FinOps strategies are:

Definition of KPIs and performance indicators: 
At the beginning of FinOps, key performance indicators are defined to measure the financial performance of cloud utilisation. These include cost per customer, resource utilisation efficiency and budget adherence.

Understanding and managing the total cost of ownership (TCO): 
TCO shows the actual total cost of cloud usage. Strategies for reducing TCO include the selection of suitable service models, the management of pending services and the optimisation of existing contracts.

Dynamic cost management:
Companies should use flexible budgets to react quickly to changes in cloud usage.

Governance and compliance:
Strict governance rules and compliance measures ensure that all cloud operations comply with internal company and legal requirements.

Advanced technologies and automation:
The use of AI and automation helps to analyse cost trends, make predictions and simplify repetitive tasks. As a result, strategic decisions can be made based on data and in a time-efficient manner.

These strategic measures are crucial to achieving the goal of FinOps. However, they require a rethink on the part of everyone involved and involve a departure from traditional financial practices.

Technical tools and platforms

Technical tools and platforms are central to FinOps management. They help to gain insight into and optimise cloud costs 

Effective instruments are, for example:

• Native cloud cost management tools (AWS Cost Explorer, Google Cloud Cost Management, Azure Cost Management) make it possible to monitor, analyse and control costs.
• FinOps-centric platforms (e.g. Cloudability, CloudHealth, CloudHealthCenter) enable the management of cloud costs.Cloudability, CloudHealth, Apptio Cloudability) provide deep insights into the cost structure and support budgeting and forecasting.
• Automation and infrastructure management tools such as Terraform, Ansible or CloudFormation are crucial for managing resources and scaling the infrastructure.
• Monitoring tools and alerting systems (such as Datadog, New Relic) provide important performance information and alert on deviations from cost forecasts.
• Business data analytics platforms (e.g. Tableau, Power BI) visualise complex financial data and provide deeper business insights.
• Resource optimisation tools (such as ParkMyCloud, Spot.io) help to identify and deactivate unused resources to save costs.

The skilful combination and use of these tools, tailored to the requirements of your company and the skills of the teams, is crucial for FinOps success.

FinOps best practices

In order to manage cloud costs effectively, specific skills are crucial. The combination of technical know-how, financial understanding and soft skills enables your company to control its cloud spend and create value.

The following best practices have proven successful in the use of FinOps:

• Data analysis and visualisation: Expert use of analysis tools is crucial to derive tangible decisions from financial data.
• Cloud-native knowledge: In-depth understanding of cloud environments and pricing models enables optimised use.
• Communication: The ability to communicate across departments facilitates collaboration between IT, finance and management.
• Budgeting and forecasting: Accuracy in financial planning helps to deal with fluctuations in costs. The more accurate the forecasting is, the more accurately the budget for cloud expenditure can be planned.
• Adaptability: Continuous learning is necessary to keep pace with the rapid changes in cloud technologies. Here it is particularly important to learn from past experiences and look at which expenses can be avoided in the future or what needs to be taken into account in planning.
• Automation: Knowledge of automation and the integration of this into business processes ensures efficiency and consistency in workflows. Standardised processes can save time and money.
• Governance: Enforcement of standards and financial guidelines form an important part of the FinOps framework.

FinOps at Claranet

We use our many years of experience to design our customers' cloud environments efficiently and cost-optimised. To do this, we consistently implement the FinOps principles and measures described above.

The most important components of Claranet's FinOps services are:

Cost Optimisation Recommendations and Actual Savings Tracker
Claranet offers over 60 ready-made recommendations for cost optimisation based on an in-depth analysis of cloud expenditure. The Actual Savings Tracker transparently shows the savings realised and makes it possible to measure the success of the measures in real time.

Detailed cost analyses with virtual tagging & cost allocation
Through virtual tagging and precise cost allocation, Claranet provides deep insights into the spending structure. This enables effective management and allocation of resources to different projects and teams.

Anomaly Detection
The Anomaly Detection feature quickly identifies unusual patterns in spend and enables early response. The root cause analysis helps to continuously improve spend forecasts.

Transparent internal billing through rebilling - billing rules
Claranet simplifies rebilling with an intuitive UI for billing rules and ensures correct cost distribution within the company.

Rightsizing and reservation of resources
The Professional Services include the rightsizing of cloud resources as well as a precise actual and target status analysis of the infrastructure. Claranet also supports strategic decisions relating to the reservation of resources in order to save costs in the long term.

Showback/chargeback as a model for cost accountability
By introducing showback/chargeback models, Claranet promotes transparent and fair cost allocation and billing within the company.

Are you interested in the possibilities of FinOps or planning to introduce FinOps in your company? Feel free to contact us with your questions.