FinOps, or Cloud FinOps, is a combination of the terms Finance and Development Operations (DevOps) and provides a framework for managing operational costs in companies. The FinOps concept emerged in the context of cloud computing. The approach aims to involve various company departments to maximize business value and ensure financial accountability, particularly for cloud services.
Goals and Principles
The primary goal of FinOps is not cost savings, but the optimization of technology investments through collaboration between different teams. This includes the performance, quality, and costs of technology decisions, especially in the area of cloud computing. Companies should not simply make the most cost-effective investment decisions, but the strategically best ones.
Background
The digital age has turned data processing into a new kind of production asset: Traditional physical manufacturing facilities of the past have been replaced by computers and data centers today. Traditional cost efficiency methods from the industrial age no longer fit and had to be transferred to data centers and IT infrastructure in the digital age.
With the advent of cloud computing in the 21st century, companies could quickly access infrastructure and services from third-party providers (such as AWS or Azure) as needed. As a result, procurement was no longer a central area in the company, but rather fragmented. Financial accountability was no longer seamless and clear, and cloud pricing structures were often complex and opaque. Consequently, financial waste due to redundant or unnecessary cloud computing usage easily occurred.
FinOps Best Practices
The best practices were developed by the FinOps Foundation established by the Linux Foundation and include:
- Collaboration: Engineering, finance, business, and technology teams must overcome traditional silos and work together to efficiently use cloud resources.
- (Self-)Accountability: Each workload owner or department is responsible for their share of cloud usage and associated costs.
- Centralization: A central FinOps team negotiates discounts and manages resources to optimize costs.
- Reporting: Accurate and timely reporting is crucial for making quick, informed decisions. It also allows for visualizing trends and creating more precise forecasts.
- Business Value: Decisions are based on the business value of the cloud, not just costs. Cost-benefit analysis of cloud usage is important.
- Variable Cost Models: FinOps teams use the flexibility of the cloud to optimally scale instances and services and compare prices to reduce costs.
Implementation
A FinOps team consists of experts who manage central cloud resources and cost elements. They negotiate prices, manage discounts, and ensure that cloud resources are used efficiently and cost-effectively. This includes:
- Evaluating workload requirements
- Developing efficient cloud architectures
- Conducting central price negotiations
- Using cloud resources from a common pool
- Applying best practices for budgeting, procurement, reporting, monitoring, and management.
Vorteile
Through FinOps, companies can reduce costs by using cloud resources more efficiently and thus avoiding unnecessary expenses. They also promote collaboration and communication between different departments, which facilitates coordination. Companies can maximize their business value as FinOps supports strategic investments in technologies that provide the greatest benefit to the company. Finally, transparency also increases by promoting clear visibility of cloud costs and responsibilities within the company.
Relationship between FinOps and DevOps
Both FinOps and DevOps aim to increase business efficiency. While DevOps seeks to accelerate software development and deliver higher quality to users, FinOps promotes cross-departmental collaboration to achieve an optimal balance between performance, quality, and costs for enterprise workloads and services.
Although DevOps and FinOps have different focus areas, they share many business-friendly characteristics. Both concepts aim to reduce time to market, control costs, improve quality and performance, and reduce problems. Both approaches are highly collaborative. While DevOps targets internal software development and its traditional deployment in local data centers or the cloud, FinOps focuses on the efficient use of cloud resources and their cost management.
Conclusion
FinOps thus provides a structured approach to efficiently manage the financial and operational aspects of cloud computing and maximize business benefits.
