6 FinOps Principles and Best Practices

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FinOps holds the idea that businesses can reach their desired peak performances without cloud wastages. Read here to see the principles guiding these ideas. 

FinOps is becoming the backbone controlling the usage and the amount of money an organization spends on cloud resources. This is because it preaches the concept of an organization taking performance and achievements to new peaks while keeping costs low. 

In other words, FinOps is a concept or culture that is aware of all the unnecessary expenses a business covers while operating in the cloud. Below, we will discuss some of the principles and practices that help implement FinOps. 

What is Finops, And How Does it Work? 

Understanding what is FinOps in the cloud can be the gateway that will help a company or an organization to make headway in reducing their cost of operations. FinOps is simply a merge of tech and finance — basically, teams from the tech, IT, and financial sectors coming together to help reduce the cost of operations. In other words, FinOps is also the process of using quality services or operating at the highest level without having to spend a large amount of money. 

This means that every team within an organization comes together to analyze the amount they spend on their work resources. This analysis aims to know where to cut costs without putting the quality of work at risk. 

The fact remains that many organizations pay for many work resources, especially cloud resources, without using them. In other scenarios, they sometimes overpay for a resource they are only going to use for a short period or buy more than they actually need. This leads to wastages that can amount to thousands and, for large organizations, millions of dollars. This is precisely what the idea of FinOps wants to clear up — helping teams in an organization understand they can still operate effectively and efficiently without wasting too many resources. 

The idea of FinOps isn’t a passive one. It needs everyone on board: the engineering team, finance, the executives, associates, etc. It’s not merely cutting costs — for instance, using a FinOps solution like Globaldot helps an organization make more informed and insight-rich decisions. 

6 FinOps Principles and Best Practices 

Below are some of the best principles and practices an organization can apply to reduce costs and improve quality. 

Collaboration From Teams

One of the things that characterizes the traditional methods of optimizing costs is that it is too department-centric. In other words, each department was concerned about reducing their costs in the cloud, often leaving other departments out. One of the basic FinOps principles is collaboration from all the departments or teams in an organization. 

The emphasis of FinOps has always been on all the different teams in an organization coming together to optimize cost and performance. The finance team of an organization is presumed to be more knowledgeable about FinOps. Collaboration among different departments enables more knowledgeable ones to educate the less knowledgeable, such as the engineering or IT department, on reducing cloud costs. 

Transparency and Cost Visibility 

One of the principles of cloud FinOps is that all teams in an organization should be open about the amount they spend and their performance data. One way to uphold organizational transparency is by providing a comprehensive overview of cloud spending. 

Cost visibility digs deep into the spending landscape of an organization for as far back as many years. The primary purpose of cost visibility is to know the spending mistakes of an organization and determine how this can be corrected. 

Centralization and Unified Goal Setting 

Having a centralized, unified goal setting can only come from collaboration between all the teams in the organization. When there’s collaboration between all the teams in the organization, it leads to a unified goal setting. 

This means all the teams in the finance, IT, marketing, and technology departments work together to make goals that will move the organization forward. Having all teams in all departments come together helps everyone to be on the same page. Each goal a team is making compliments that of the other team. 

Governance and Creation of Policies 

One of the principles guiding the FinOps culture in an organization is the set of rules that every team member must abide by. This can only happen through governance. Governance as regards FinOps is the creation of policies that control members’ cloud usage and, subsequently, the organization’s cost savings. 

Tagging and Labeling 

Labelling and tagging cloud resources and services is one of the best FinOps practices that help to ensure visibility and transparency consistently. Tagging is the process of labelling or annotating all the resources in a cloud infrastructure so that each can be read and traced back at any time. 

The tagging of each cloud resource can be according to their costs, the department using them, the specific project they featured in, or even a combination of these three. Ultimately, it provides a holistic form of visibility that allows an organization to know how much they are spending at any moment, trace, and put an end to overspending. 

Budgeting and Forecasting 

Budgeting and forecasting are two principles that are very crucial in FinOps as they are what help guide an organization in the right direction. These two components are primarily concerned with making sure a company’s budget concerning cloud resources is precise and not wasteful. 

Hence, they determine how much an organization can spend on specific cloud resources and services while considering that the organization can scale up at any time. Budgeting is as simple as allocating funds, while forecasting, in this case, makes accurate predictions of how much expandable a business might be or grow within a specific time. 

Wrapping Up 

Above was a discussion of the meaning of FinOps and how it helps an organization balance its performance and cloud costs. However, for FinOps to be fully implemented in any organization, some principles and practices must be in place. 

These principles and practices include collaboration among teams, transparency, and cost visibility. Furthermore, it also includes other things like governance, unified goal setting, tagging & labelling, budgeting & forecasting, etc. Apparently, introducing all these practices and principles will help optimize cloud costs and performance by a wide margin. 

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