Financial Operations (FinOps) aims to bring cloud financial accountability and cost optimization to enterprises that are struggling with multiple public cloud solutions with little to no visibility of their cloud cost. FinOps tools are available natively in the larger cloud hyperscaler platforms, as well as from third-party software providers.
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What Is FinOps, and Why Does It Matter?
There is no denying the impact of cloud platforms, both public and private, on digital transformation. Public cloud especially, has been growing at a record pace, with enterprises jumping head-first into incorporating public cloud solutions as part of their technology stack. As time goes by, large enterprises find themselves with myriad public cloud solutions, a hefty bill, and little to no transparency on what is in the cloud and how they are being charged.
Financial Operations (FinOps) is a framework or model that helps enterprises manage and optimize investment in public cloud services provided by companies like Amazon Web Services (AWS), Google Cloud, and Microsoft Azure. FinOps solutions are available natively, i.e., AWS Cost Explorer by AWS and Google Cloud Pricing by Google Cloud, as well as from third-party FinOps solution providers, such as Apptio (acquired by IBM in June 2023), Flexera, and SoftwareOne.
Enterprises leverage FinOps for several reasons:
- Cost Control and Optimization: Gain better visibility on current cloud spending, identify areas of inefficiency, and optimize cloud resources to avoid unexpected expenses.
- Governance: Help implement proper cloud policies and ensure regulatory compliance with local data residency laws and frameworks.
- Roadmap Planning: Ability to make strategic decisions based on the financial impact of cloud implementation and make informed decisions on future cloud investments in the long term.
- Transparency and Visibility: Gain a better understanding of the true cost of cloud implementation, align cloud costs with business imperatives, and track cloud Returns on Investment (ROIs).
- Maximize Cloud Value: Ensure enterprises can maximize the value of the cloud by being able to better manage costs, optimize resources, and continuously analyze the financial implications of cloud investments.
Putting the Business Back in Control: The Power of Visibility and Transparency
The emergence of FinOps, particularly third-party FinOps solution providers, brings control and the ability to make better decisions for the end user. Enterprises will now be able to compare the potential cost incurred or Operational Expenditure (OPEX) when deploying certain workloads in the public cloud. By introducing FinOps into their technology stack, enterprises can benchmark multiple cloud platforms, understand the value and suitability of each cloud hyperscaler, and ultimately decide which public cloud platform suits their immediate business needs.
Enterprises are more likely to embark on a multi-cloud journey, backed by the information and transparency provided by FinOps tools. A multi-cloud strategy is important for large organizations as this provides flexibility and scalability for different workloads or projects running on several public cloud platforms. Enterprises can now make an informed judgment on choosing the right cloud hyperscalers to work with, allowing for higher business value realization by not having to stick to just a single public cloud platform.
The growing usage of FinOps tools is also beneficial to cloud hyperscalers. Customers that use FinOps tools gain better visibility and understanding of how their workloads are being processed, how they are being billed, etc. This brings greater customer satisfaction and loyalty as customers can accurately model and budget their cloud costs, ultimately increasing the organization's adoption of public cloud services.
The use of FinOps tools also has a trickle-down effect on on-premises deployments. While an organization might have a public cloud-first strategy in mind, the information gathered by simulating the cost of migrating to a public cloud using FinOps tools might show that public cloud investment might be too high and unrealistic for the business. Enterprises would then have to decide if it is worth increasing the budget for cloud investments or modernizing existing on-premises infrastructure to cater to the new workloads that are going to be processed within an existing data center.
A Win-Win for Businesses and Cloud Hyperscalers
Enterprises that will benefit from FinOps are those with a clear structure and governance when it comes to cloud cost control and optimization, having a dedicated team that can communicate clearly to other business units the virtue of cloud workload visibility and transparency. Hence, typically larger enterprises that are willing to invest and train resources on using FinOps tools stand to benefit from this solution.
For smaller organizations or startups that do not have the luxury of a dedicated Information Technology (IT) team, leveraging native FinOps tools that are available in their preferred public cloud platform will also be beneficial, especially in instances when a project or business critical application needs to spin up, and cost/budget is an issue. Companies like AWS, Microsoft Azure, and Google Cloud offer native tools that help customers model and monitor the cost of public cloud processing.
FinOps tools will change how enterprises approach and consume public cloud services in the long term. While the appetite and demand for public cloud platforms are not expected to decline, more enterprises, especially those that are quite mature in their digital transformation journey, will be looking to incorporate FinOps tools as part of their cloud strategy.
Having said that, implementing a FinOps tool is not a short-term/one-and-done exercise. While FinOps may be useful at the beginning of a cloud implementation exercise, its true value and benefits are in continuous and constant execution. FinOps should be viewed as an integral process of a cloud management process, from the beginning, with consistent reviews to ensure true cloud value is realized, right up until there is a decision to discontinue the workload processing or cloud application.
While the FinOps market looks set to grow in the short term, history has shown that consolidation is bound to happen, and in the case of FinOps tools, it is very likely that third-party FinOps solution providers be the subject of acquisitions from larger, end-to-end cloud software vendors or by Tier Two cloud hyperscalers looking to add cloud management tools to their existing portfolios. In the end, enterprises will stand to benefit as the market matures and high-quality technology applications are offered to ease the challenges of cloud management.