The FinOps journey consists of three iterative phases — Inform, Optimize and Operate.
Any company may be in multiple phases at any time depending on which business unit, application or team is on the journey.
Inform
This is the first phase in the FinOps journey, empowering organizations and teams with visibility, allocation, benchmarking, budgeting, and forecasting. The on-demand and elastic nature of cloud, along with customized pricing and discounts, makes it necessary for accurate and timely visibility for intelligent decisions. Accurate allocation of cloud spend based on tags, accounts, or business mappings enable accurate chargeback and showback. Business and financial stakeholders also want to ensure they are driving ROI while staying within budget and accurately forecasting spend, avoiding surprises. Benchmarking as a cohort and against teams provides organizations with the necessary metrics to develop a high performing team.
Optimize
Once organizations and teams are empowered, they need to optimize their cloud footprint. Cloud providers offer multiple levers to optimize. On-demand capacity is the most expensive. To encourage advanced reservation planning and increased commitment, cloud providers offer discounts for commitments which typically involves complex calculations for making reservations (Reserved Instances (RI) / Committed Use Discounts (CUD – Google Cloud). In addition, teams and organizations can optimize the environment by rightsizing and automating turning off any wasteful use of resources.
Operate
Organizations start to continuously evaluate business objectives and the metrics they are tracking against those objectives, and how they are trending. They measure business alignment based on speed, quality, and cost. Any organizational success is only possible if the organization builds a culture of FinOps which involves a Cloud Cost Center of Excellence built around business, financial, and operational stakeholders who also define the appropriate governance policies and models.