FinOps

9th February 2022

In the days of data centres with fixed costs and annual budget cycles it was relatively pain free to make a plan. Each year would be the same, the nice “bean counters” in Finance would explain to the quirky “tech heads” what the budget constraints may be based on market forces, budget cuts and corporate strategy. The technology team would then plead for a bigger budget based on increased users, business acquisition and technical debt.

That’s where the fun started!

The conversation would then descend into technicalities. Depreciation and amortisation were countered with virtualisation, de-duplication, and power consumption while neither side fully understood what the other was talking about. This went back and forth until a compromise was agreed, and everyone went back to their specialisms in different floors and offices. Occasionally, we’d bump into one another in the lift but otherwise our paths wouldn’t cross. The techies could then get to business and hook up with Procurement and start spending.

As I said, relatively pain free.

Then along came the cloud and everything changed, the conversations didn’t take place, the planning stopped, and the developers took control of the budget. Finance and procurement were bypassed and consequently, spending went through the roof.

The teenagers had the credit cards, and they were looking to have fun.

You’ve probably read the stats that sound more like horror stories with 80% of organisations overshooting their IaaS budget because they don’t have the right governance in place. In our experience 100% of organisations overshoot and are not aware of it until the invoice arrives, the money’s been spent, and the bills are still mounting.

Many organisations start their cloud journey with a ring-fenced team of technologists building out a centre of excellence for cloud with a focus on how to get stuff spun up quickly. Some concentrate on how to do it safely but rarely are the Finance teams involved from the outset. The centre of excellence often turns out to be a big hit with the business as they see productivity increase and faster time to market, to the extent that the cloud becomes the answer to everything.

Cloud first they demand!

Work operations and teamwork productivity with control tiny person concept. Business project workflow as gear cogwheel mechanism vector illustration. Process automation with effective monitoring.

However, it’s not that simple, the complexity of the cloud costs can quickly become unmanageable, accountability is lost as million-line cloud bills arrive alongside 10-line invoices for the finance team to unpick. Don’t believe the line that you only pay for the capacity that you need, you pay for the capacity you turn on whether you need it or whether you use it.

Additionally public cloud has driven a change from Capex to Opex, and often no one has considered how this effects the organisation’s business model.

At some point in 2019 we started hearing the word FinOps being mentioned, great another buzzword ending with Ops. However, we looked a little deeper into what the buzz was and where it was coming from. Turns out to be a useful framework for managing cloud spend, a journey to a better place where budgeting, accounting, and forecasting are considered and managed alongside provisioning, availability zones and spot instances. Utilising FinOps can help to keep track of the credit card bill, untangle the complexity of the invoicing, and bring back accountability.

Nevertheless, it takes continual effort and collaboration to do it well. Successful implementation of FinOps requires Finance, Procurement and the Technology to come together frequently to understand each other’s viewpoint and to converse in a common language. FinOps provides the guidelines to kick start this coordinated effort. It empowers new ways of managing and optimising spend including rightsizing, reserved instances and pre-paid discount programmes to deliver results quickly.

FinOps isn’t just about saving money, it’s about managing spend, tying into the wider Technology Business Management to provide a genuine TCO for your cloud costs and ensuring that money is spent wisely.

We can help you build out and deliver your FinOps capability, gain visibility, restore accountability and optimise the use of the many opportunities that utilising the cloud can bring to your organisation.

Chris Northrop
Article by
Chris Northrop
Director

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