FinOps phases

Different teams in an organization may be in different FinOps phases. FinOps practitioners must continuously monitor cloud resource usage and identify optimization opportunities. They must also empower various roles with effective documents and training to maximize business value.

Teams must establish an efficient cadence, take action regularly, and avoid delaying decisions. It is recommended to start with small pilot projects. As your team gains experience and momentum, you can gradually expand the scope of your actions to achieve better results.

The goal of FinOps is to create strategic plans that continuously improve activity workflows within the framework. These plans also evaluate phase outcomes and implement gradual improvements. This process increases the maturity of your FinOps practice and shortens the time needed for each phase.

Inform

Data visibility and cost allocation

In the Inform phase, FinOps activities focus on identifying sources of cloud cost, usage, and efficiency data. Teams use this data for cost allocation, analysis, and reporting. This improves budgeting, trend prediction, and the creation of benchmark key performance indicators (KPIs). It also helps develop metrics that demonstrate the business value of cloud spending.

Accurate reporting depends on the precise allocation of cloud spending based on tags, accounts, or business rules. Business and finance teams must increase the return on investment within budget, accurately predict spending and carbon costs, and avoid surprises. Internal and external benchmarking against industry standards helps organizations obtain operational metrics. This provides them with a better understanding of their operational efficiency. By combining cloud cost data with data on sustainability, efficiency, utilization, and organizational performance benchmarks, teams can obtain a complete view. This helps them define KPIs and unit metrics related to cloud usage.

Because cloud computing is pay-as-you-go, scalable, and involves complex pricing discounts, organizations must continuously review FinOps activities. These reviews ensure that cloud resource usage data is accurate, timely, and transparent. The resulting data analysis and insights then drive sound decisions that support business goals.

Optimize

Rates and usage

In the Optimize phase, FinOps activities leverage the data and capabilities from the Inform phase to identify opportunities for improving cloud efficiency.

Cloud service providers offer many resource optimization solutions, such as resizing underutilized cloud resources, adopting modern architectures, managing workloads, and automatically releasing idle resources to prevent waste.

Cloud service providers also offer rate optimization solutions. These solutions include visualization, analysis, and reporting tools that help organizations purchase and manage commitment-based discounts and pricing models, such as reserved instances (RIs), Savings Plans (SPs), and committed use discounts (CUDs).

In this phase, if unit metrics indicate that cloud services are not meeting value targets, departments must collaborate to improve data visibility and optimize reporting and management processes.

Different optimization solutions might conflict. However, the main goal remains the same: to identify cost-saving opportunities for the organization and help it obtain more value from its cloud investments.

Operate

Continuous improvement and usage

In the Operate phase, FinOps activities focus on organizational change. This phase uses data and capabilities from the Inform and Optimize phases to integrate FinOps into daily operations. This integration includes creating cloud governance policies, monitoring for compliance, and empowering members. Members are empowered through training, team guidance, and automation strategies that help them meet organizational goals.

FinOps success depends on a culture of accountability where engineering, finance, and business teams collaborate to take proactive, incremental actions based on data from the Inform phase and opportunities from the Optimize phase.

During this phase, the goals of iteration and workflow optimization are paramount. This means constantly returning to the Inform and Optimize phases to refine the framework's activities, evaluate new capabilities, and continuously improve the organization's FinOps operations.