As cloud computing is becoming the backbone of many organizations, managing cloud costs effectively is more critical than ever. This is where FinOps, or Financial Operations, comes into play.
FinOps provides an operational framework that brings financial accountability to the variable spend model of cloud computing, enabling organizations to manage their cloud costs more effectively.
The definition of FinOps is fluid and can vary across different organizations. While traditionally focused on cloud cost management, some people also refer to "FinOps on premises" when discussing IT Financial Management (ITFM) or Technology Business Management.
FinOps is defined as "the practice of bringing financial accountability to the variable spend model of cloud, enabling distributed teams to make business trade-offs between speed, cost, and quality." (Storment/Fuller, Cloud FinOps). It integrates finance, technology, and business teams to work collaboratively, ensuring that cloud investments are optimized and aligned with business objectives.
In addition to traditional cloud cost management, FinOps now extends its collaborative, data-driven practices to intersecting areas of technology spending, such as AI, SaaS, and Data Centers, under the concept of "Cloud+," ensuring comprehensive oversight and optimization across all technology investments.
The FinOps Foundation further defines FinOps with a structure based on Domains and Capabilities. “The Domains of the FinOps Framework describe the fundamental business outcomes organizations should achieve from the FinOps practice. Practicing FinOps will allow organizations to understand their cloud usage and cost, quantify its business value, optimize both usage and rates paid, and manage an effective practice”.
At its core, FinOps aims to create a culture of financial responsibility and cost-awareness within an organization, providing the tools and processes needed to track, analyze, and optimize cloud spending continuously.
The FinOps Framework is organized into four key Domains, each representing essential business outcomes that organizations should strive to achieve through their FinOps practice.
The outcome of this Domain is a better understanding of an organization's use of the cloud. Within this Domain, organizations work to gather all the information required to perform FinOps, including direct and imputed cloud cost, cloud usage, observability, utilization, and sustainability data.
Activities in this Domain also define the organizational metadata to categorize, allocate, and summarize cloud cost and usage, and define the reporting and analytics processes making that data available for use by all FinOps personas.
Included Domain Capabilities:
Data Ingestion: Collect and process data from various cloud services to gain insights into usage patterns.
Allocation: Allocate cloud costs accurately to different departments and projects.
Reporting & Analytics: Generate comprehensive reports and analytics to understand cloud spending.
This Domain emphasizes cloud efficiency, ensuring organizations only use resources when they provide value and that these resources are purchased at the lowest acceptable cost and impact.
Organizations measure efficiency in various ways, including monetary cost, carbon usage, or traditional IT operational efficiency measures.
Capabilities in this Domain allow the organization to manage the types, timing, and amounts of cloud resources used, and the rates paid for those resources.
Included Domain Capabilities:
Licensing & SaaS: Optimize SaaS licensing to reduce costs.
Cloud Sustainability: Implement sustainable cloud practices to save costs and reduce environmental impact.
This Domain focuses on connecting usage and cost data with the business value it creates, ensuring that value is transparent and within expectations.
Organizations map monetary and non-monetary cloud costs to budgets, use historical information and future plans to forecast, establish and measure technical and organizational KPIs, and perform benchmarking across teams, business units, and with other organizations.
Included Domain Capabilities:
Planning & Estimating: Plan and estimate future cloud costs effectively.
Forecasting: Forecast cloud spending to avoid surprises and manage budgets better.
Budgeting: Create and manage cloud budgets to ensure financial discipline.
Benchmarking: Compare cloud spending against industry benchmarks.
Unit Economics: Analyze cost per unit of service to understand financial efficiency.
This Domain enables continuous improvement to change and align the entire organization — its people, processes, and technology — to adopt FinOps and use cloud in ways that create value for the company.
Capabilities here focus on effective FinOps operation, enablement of the whole organization, and improved interaction with all other personas and business functions to support and represent cloud use more effectively.
Included Domain Capabilities:
FinOps Tools & Services: Utilize advanced tools and services to manage FinOps practices effectively.
Invoicing & Chargeback: Streamline invoicing and chargeback processes for better financial governance.
As cloud adoption accelerates, organizations face increasing challenges in managing costs effectively. Traditional IT budgeting methods struggle to keep up with dynamic, consumption-based pricing models, leading to unpredictable expenses. Cloud cost overruns are a major concern, with 58% of organizations considering their cloud costs excessively high (CloudZero, 2024).
FinOps plays a crucial role in addressing these challenges by providing granular visibility into cloud usage, enabling businesses to track, optimize, and allocate costs more effectively. According to Statista, over 50% of businesses identify improved cloud cost visibility as a key strategy for reducing expenses.
With cloud expenditures projected to reach $805 billion in 2024 (IDC), implementing a FinOps framework is essential for businesses to maintain financial control while continuing to innovate.
Imagine this: Your engineering team spins up extra cloud capacity to handle a potential traffic surge. A few weeks go by, the surge never happens, and those extra resources remain—forgotten, running 24/7, silently burning through your budget.
Fast forward three months. Your CFO spots a $100,000 spike in cloud costs. A deep dive reveals the culprit: unused instances, over-provisioned storage, and zombie workloads—things no one even realized were still running.
This isn’t an isolated incident. It happens in every growing company. Why?
Don’t wait for a budget crisis. Adopt FinOps now and start saving →
Serviceware’s IT Financial Management (ITFM) solution with Cloud Cost Management empowers businesses to successfully implement FinOps by providing robust support for each phase of the FinOps lifecycle.
As a member of the FinOps foundation, Serviceware is the trusted partner you need to establish a strong FinOps practice. Our solution, combined with certified experts, ensures that businesses achieve financial clarity, cost efficiency, and cloud spend optimization - making FinOps a true business enabler.
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