Draft:Cloud FinOps

Cloud FinOps, often abbreviated in FinOps, is a discipline born to help the financial, procurement and technical transition to Cloud Computing. Finance and procurement benefit from implementing FinOps practices as they support the changes from a financially predictable and technically unflexible CapEx model to a more financially unpredictable and more technically flexible OpEx one. Technical teams benefit from implementing FinOps practices by helping to move from an environment where computing power is scarce to one where it can be seen as infinite and always available; most non-cloud best practices require an update or a rewrite when moving to the cloud.

Most de-facto standards of FinOps originate from the community around the FinOps Foundation, a not-for-profit that includes the three biggest cloud vendors by market share (AWS, Azure, GCP), three of the Big four accounting firms, and 48 of the Fortune 50 companies.

Definition

"FinOps is an evolving cloud financial management discipline and cultural practice that enables organizations to get maximum business value by helping engineering, finance, technology and business teams to collaborate on data-driven spending decisions."

Other definitions exist:

• AWS uses the term Cloud Financial Management.
• Google Cloud defines FinOps as An operational framework and cultural shift that brings technology, finance, and business together to drive financial accountability and accelerate business value realization through cloud transformation.

Possible confusion with Financial Operations

Cloud FinOps is not Financial Operations, nor is it solely an operating model to cut cloud costs. "FinOps is a portmanteau of “Finance” and “DevOps”, stressing the communications and collaboration between business and engineering teams.

The Financial Operation department, also abbreviated in FinOps, predates Cloud FinOps. When confusiong between the term FinOps exists, using Cloud FinOps, as oppose to simply FinOps, allows for a simple clarification.

The origin of the term FinOps

From the Cloud FinOps book, in the "Where Did FinOps Come From?" section, J.R. Storment first spoke about the concept of FinOps in a DevSecOps talk at an AWS Public Sector Summit in DC in 2016. While there is no actual date that the term was first used, it is said that someone at Spotify coined the term around that same period.

Certifications

There are FinOps certifications for individuals.

• FinOps Certified Practioner.
• FinOps Certified Professional
• FinOps Certified Engineer

Framework

There is an open-source FinOps Framework available on the FinOps Foundation website. The framework is constantly updated from the experience of the community.

The FinOps Framework provides the operating model for how to establish and excel in the practice of FinOps. Like FinOps, the Framework is evolving and informed by community experiences, contributions, and conversations. It’s built by the community, for the community.

Challenges and limitations

Cloud is a profound change from the technology perspective and for procurement and finance departements. Challenges can be data, talent and organisational.

Data challenges

Cloud billing data is extremely transparent; every minute of usage of every system and service can be tracked, yet that transparency means that the amount of data and its complexity are high:

• Billing datasets are complicated. Interpreting a billing dataset requires knowledge of the cloud vendor's billing and technical specificities. So much so that at the moment of writing, only specialised individuals can understand the raw data provided, and only a fraction of knowledge can be transferred between vendors.
• Billing datasets are very large, so large that spreadsheets, the most-used reporting tool, cannot cope with the size of the data, making the understanding of cloud billing information dependent on data analysis methods and tools rarely available to the finance department.

Talent challenges

• FinOps skills can be in short supply. There are a very limited amount of FinOps experts with real experience. Cloud is a recent speciality but can leverage previous technical knowledge, while FinOps is younger and requires a rare mix of financial and technical skills. The speciality has a set of certifications but no university-level courses.
• FinOps teams/functions are often established/started as a reactionary measure to ballooning Cloud costs; the mission given to the FinOps team is reactionary, as opposed to the recommended proactive, controlled, and business focus recommended.

Organisational Challenges

• It requires a change mindset within the organisation in different departments:
  • While variable costs exist in any company, they were so from the start. The change from the fixed cost of buying your own hardware and hosting to a usage-based model means that existing reports and accounting practices must be reviewed.
  • In the same way, procurement approaches, practices and recognition change due to the commodity approach to contracts offered by cloud vendors
  • Developers, architects and other IT personnel who never had to care about cost find that most of their decisions have a cost implication. Cost becomes an additional complex component of IT delivery.