FinOps 101: Can you? Should you?
FinOps – it’s a hot topic, but it’s not an easy topic to get to grips with. So we’ve brought in the big brains to lend some insight into how it’s developing and how organisations can start to adopt its principles and practices to boost savings and value from cloud.
Enter Max Guhl, Nordcloud’s FinOps Lead. We’ve put him in the hot seat to answer common questions customers and stakeholders are asking about FinOps. Here’s part 1 of the series. (Part 2 is here.)
Q: We’re hearing a lot about FinOps recently. Why has it suddenly become such a hot topic?
Max: I think it’s a cloud spend issue. Organisations are now at a stage of cloud maturity where the scale of spend is on the radar of senior leaders. Before, it simply wasn’t a big enough line item in the budget. Hyperscalers have always recommended using tagging and implementing spend controls and cost allocation early on. But because there was limited business impact in the early days of cloud adoption, people didn’t pay as much attention to it.
Now we’re at the point where enterprise public cloud users are recognising the huge savings potential hiding in their estate. Often, it’s after the first bigger migration project is completed or when the first huge data-driven project goes into production and starts to scale.
Q: What is FinOps anyways? Did that term just evolve over time, is it cloud specific?
Max: FinOps is the short version Financial Operation, it’s the art of managing financials in the public cloud. Here’s the quick definition: Real time reporting + just-in-time processes + teams working together = FinOps.
Q: At what monthly cloud spend should an organisation start thinking about FinOps and cost control at scale?
Max: Historically, I would have said that spend below a few million euros per year meant it wasn’t worth setting up financial controls or related tooling. And that’s because that spend level meant it wasn’t worth finance’s time to get involved to that extent.
Now, so many organisations are spending €10 million plus on cloud annually, and there’s a clear and simple lesson from their experiences: it’s really hard playing catch-up with cloud cost control processes.
This has made me rethink my views on tackling cloud spend and shown the benefits of integrating cost management early on. From the first days of cloud usage, companies should embed a sense of cost ownership and accountability for consumption and spend. It simply doesn’t make sense to think of cloud as an “innovation cost” or “server cost” in some shape or form. That mindset backfires once you dive into the full scale of hyperscaler services.
Q: Who should own FinOps in an organisation? It’s such a buzzword that it can feel like everyone wants to own it.
Max: And that’s great news! It’s great that so many people are enthusiastic about adopting it like other ops trends.
We consider FinOps to be more than just a function or a service – it’s a culture change. And that shift is the important thing to work on. Implementing cost control tools and processes from the top is relatively easy. Getting full buy-in from individual architects and developers – and incentivising them to embed FinOps in their day-to-day work – is much harder.
Q: With more companies adopting cost control and savings efforts, what common challenges are you seeing?
Max: There are 3 main issues we see over and over again: capability, culture and organisation.
The capability bit is the hardest to overcome. You can only optimise costs if people have the right training. This applies to application architecture and engineering, too – if people don’t have sufficient understanding of how Azure, AWS or GCP works, they can’t maximise the benefits or manage the costs.
The second hardest challenge is culture. We need to rewire the brains of IT, developers/engineers and finance teams. Cloud spend is complex, with shared responsibilities all over the place. People need to get off their high horse, move out of their comfort zone and work together to achieve the best possible outcome.
The third common challenge relates to organisational approach. For instance, companies try using a “scale-up” approach to fix performance issues, just like they did on-premises. And that leads to big (and unnecessary) increases in cloud costs.
Q: Are there specific workload types where this “scale-up” organisational approach is common?
Max: A great example of this is databases hosted in the cloud, where people often throw money at them in an effort to fix performance issues rather than looking at what can be done to optimise operations.
Databases are often treated like “traditional servers” – where people essentially bolt on more CPU and RAM to solve a problem. However, looking into performance improvements and optimisation of the DB itself is far more efficient than “patching up the issue with money” (scaling up infra resources). This is true for managed databases / PaaS as well. All this means that it takes cloud skills AND database skills to achieve the aim of cost-efficient cloud usage.
On average, people are leaving 20% of value from the cloud on the table because they’re not keeping on top of their usage and spend consumption.
Check out this FinOps guide for ideas on how to capture that value.
And read part 2 of Max’s FinOps FAQs for more honest answers to burning questions.
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