How FinOps Can Help Optimize Cloud Spending

FinOps is gaining in popularity because optimizing cloud workloads from a cost perspective has become a priority.

Christopher Tozzi, Technology analyst

April 18, 2023

5 Min Read
FinOps concept

Table of Contents
1. What Is FinOps?
2. Why Does FinOps Matter?
3. FinOps Tools and Practices
4. Who Needs FinOps?

You've heard of DevOps, Tips, NetOps, and the various other "flavors of Ops" that the DevOps revolution helped to spawn.

Here's another *Ops to add to your list: FinOps, a term that is becoming increasingly important in conversations related to cloud cost optimization.

Related: 7 Cloud Finance Metrics to Track to Better Control Cloud Costs

Keep reading for a look at what FinOps means, why IT pros care about it today, and how to put FinOps into practice.

What Is FinOps?

FinOps is the pursuit of cost optimization in the cloud.

The term is short for financial operations — which is a little misleading because it doesn't imply that it deals with the cloud specifically. Yet, although you could theoretically apply many FinOps principles to any type of environment, the FinOps concept is almost always associated with cost optimization in the cloud, not other types of environments.

Why Does FinOps Matter?

Businesses have always cared about cost optimization, and many organizations have been using the cloud for well over a decade at this point. It may seem a bit strange, then, that FinOps has become an IT buzzword only in recent years. Didn't anyone care about cloud cost optimization before now?

The answer is that they did, but in many cases, pressure to migrate to the cloud led some organizations to spend less time evaluating cloud costs and looking for savings opportunities than they ideally would have. They were in a rush to get into the cloud, and determining how best to balance cost and performance was an exercise they left for the post-migration period.

Related: Engineering, Finance Teams Struggle to Connect Cloud Costs, Business Value

At the same time, managing cloud costs turned out in many cases to be more complicated than businesses had counted on. Cloud computing services come with totally new, more complex pricing models than those that accompany on-premises infrastructure, making it harder to predict cloud costs.

Recent rumors of looming recession — whether or not they turn out to be true — have also

heightened worries about cloud overspending, although the FinOps conversation dates back to before the current economic turbulence.

Put together, these various challenges explain why there has been a sudden recognition over the past few years that optimizing cloud workloads from a cost perspective needs to be a priority. Getting into the cloud no longer gives businesses a competitive edge because almost everyone is already in the cloud. Going forward, one factor that will distinguish the most competitive companies will be cost-effective use of the cloud, so that they can do more with fewer resources in their cloud environments.

Plus, recent data suggests that no fewer than 94% of enterprises are overspending in the cloud, so there's clearly plenty of room for the typical company to benefit from FinOps.

FinOps Tools and Practices

Like DevOps, FinOps is a concept, not a rigid set of tools or practices. But also like DevOps, FinOps can be enabled by various types of tools and techniques.

Key solutions and practices for implementing FinOps include:

  • Cloud cost visibility tools: Most cloud providers offer tools to help interpret cloud spending, and third-party solutions often provide even more visibility into what you're spending in the cloud. These tools are critical for FinOps because you can't optimize for cost if you don't understand your costs.

  • Workload rightsizing tools: Rightsizing solutions help to ensure that workloads are ideally configured to achieve the best performance-cost balance.

  • Cloud monitoring tools: Among other things, cloud monitoring tools can detect unused or underutilized workloads, so that engineers can turn them off to save money.

  • Cloud pricing negotiations: In many cases, you can obtain discounted cloud services under certain conditions; for example, Amazon offers VM discounts through EC2 Reserved Instances. It's also possible to negotiate across-the-board pricing discounts if you consume cloud services on a large scale.

So, while FinOps isn't something you can simply deploy or turn on, there are a variety of concrete tools to help put FinOps into practice.

The best way to implement FinOps depends on your cloud priorities and cost management challenges. Do you struggle to figure out how your cloud provider arrived at a certain figure when billing you for a cloud service? Cost visibility tools could offer an answer. Did you migrate workloads to the cloud without working hard to achieve the ideal configuration from a cost perspective? Rightsizing tools could help. Are you a large company spending millions of dollars a year on the cloud? Negotiating a pricing discount could cut your costs.

Who Needs FinOps?

If you use the cloud today in any way, there's a good chance that you can benefit from FinOps. Unless you're lucky enough to be among the 6% of businesses that aren't throwing money away in the cloud, FinOps can help you identify opportunities for reducing your spending without compromising on workload performance or reliability.

About the Author(s)

Christopher Tozzi

Technology analyst, Fixate.IO

Christopher Tozzi is a technology analyst with subject matter expertise in cloud computing, application development, open source software, virtualization, containers and more. He also lectures at a major university in the Albany, New York, area. His book, “For Fun and Profit: A History of the Free and Open Source Software Revolution,” was published by MIT Press.

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