What is FinOps

Are your cloud infrastructure costs spiraling out of control?

Do you struggle to forecast your budget requirements?

Hey Pixelers,

What is FinOps?

FinOps, short for cloud financial operations, is a practice that aims to optimize the financial management of cloud services. This is not to be confused with the role of Financial Operations, which exists specifically in the finance world.

Engineers, who were previously mainly concerned with performance in relation to hardware, now need to think about the cost of their infrastructure choices and its impact on the business. Finance teams, who traditionally focused on retroactive reporting, now need to proactively partner with tech and engineering teams to forecast spend and report technology spend to executives and investors.

Over the years, Cloud providers have created more and more complex pricing options for their products. The pay-as-you-go model of cloud services has made it easier for engineers to innovate quickly but has also led to a lack of cost efficiency and difficulty for finance teams to keep track of spending.

With some cloud providers, cost predictions from their cost calculators can be wildly different from the real-world situation. This is less because the cost calculators are incorrect, but more to do with the fact that you may fully understand all the possible services you end up paying for.

The Prius Effect

"Prius Effect" refers to the behavior change observed in drivers of the Toyota Prius hybrid car, who when presented with real-time feedback on their petrol consumption, were found to adjust their driving habits in order to decrease fuel consumption.

This instant feedback loop allows drivers to make conscious decisions on how to conserve energy, something that was previously done subconsciously.

By utilising FinOps we can allow our staff to see through the opaque cost complexity of our cloud platform, and make insightful and deliberate decisions to limit costs.

Cloud FinOps, 2nd Edition

In the book "Cloud FinOps 2nd edition", a firsthand experience is delivered by one of the authors, and I quote:

During a previous visit to one of the world’s largest cloud spenders, I learned that, despite nine figures a year of annual cloud spend, no one was sharing those costs with the engineers who were incurring them. When they did finally reveal those costs to the engineering team, it was typically 30–60 days later, during an aggregate cost center review. They had the raw data available, but because they hadn’t adopted a culture of FinOps, they hadn’t implemented a feedback loop directly to those making decisions about how much cloud to use.

Once they did, the results were immediate and dramatic. One of the first teams provided with this visibility discovered that they had been spending over $200,000 per month running development environments that they really didn’t need. With only three hours of engineering effort, they shut down those unnecessary resources and saved enough money to hire an additional team of engineers.

I have also personally worked on projects with a comparable issue. We had the ability for people to spin up development clusters, initially the thought was people would only use them temporarily, for a few hours max at a time, then spin them down. Sometimes it starts that way, often it ends with a few clusters that far outlive their initial intended lifecycle, and costs balloon and explode uncontrollably. Without a proactive feedback from the financial team, this destructive behaviour can go unchecked for multiple months and cost the company serious money.

Breaking The Barrier

The core concepts of FinOps are similar to the core concepts of DevOps, where the most important aspect is breaking the barrier between your companies departments.

We can break the barrier by:

• Ensuring that everyone becomes responsible for their own cost spending's.
• Ensure that real-time metrics of spending's is visible to everyone.
• Ensure that costs are a part of technical decision-making, at the same extent as other quality attributes.

A wise decision would be to include the finances of a system, as a core component in the same dashboards that convey system uptime and performance. The goal is to avoid concealing the information, and to present it in a way that it becomes an integral part of the engineer's role.

Implementing FinOps should not be delayed until cost reduction is necessary, as it aims to establish a culture of cost-awareness in engineering. Therefore, it is advisable to begin as soon as possible to avoid incurring unnecessary expenses.

Why are we doing this?

Why are we doing this?

It might seem that the purpose of FinOps is primarily to save a company money, potentially at the cost of the amount of fun that engineers can have.

Perhaps, ...But the goal of a company is not necessarily to save money, the ability to redirect more money to scalability and innovation can allow a company to crush their competition in the market, especially when their competition is weighed down by unmanaged costs. The growth of services and tooling's with minimal upfront costs, allows companies to increase their agility and flexibility in the market-place, which is quickly becoming the main component which identifies a company's success. The goal also is not to cut costs at the expense of our IT system, as such a decision could be catastrophic to the success of the organisation. Just like being more conscious when driving an electric car, you can still drive the car to the exact same places you want to go, while having money more left over for other activities. Remember spending is fine, wasting is not.

Insights

I recommend you read up on the State of FinOps report, as it can be quite insightful on the difficulties that companies face when implementing FinOps.

There is substantially more information on this topic, and if you want to learn more, I heavily recommend the Cloud FinOps 2nd Edition book.

Lastly, it is important to recognise that everything I have said in this video is becoming its own entire discipline. On the FinOps website we can see all available vacancies. These positions can pay quite well, as right now there is a shortage of people with these skills and relevant certifications.