Optimizing Cloud Costs: The Power of Cloud FinOps

By Imran Bashir, Ph.D., Chief Technology Officer, ITC Federal

Historically, computer systems and software engineering have borrowed approaches from other disciplines using isolated teams of analysts, developers, testers, and operators to deliver solutions to customers. In the resulting systems, slipped errors, some more costly than others, forced us to rethink our quality assurance approaches as technology practitioners. Over the years, we have improved systems by smashing silos and encouraging teams to work together to achieve better quality and high-performing products. We asked analysts to work together with designers and developers. We made quality assurance a life cycle activity. We prioritized security as job zero. We paired programmers under Extreme Programming. We brought together business and development teams into Agile disciplines and broke boundaries of development and operations, resulting in a DevOps culture. While all this cross-collaboration was developing, finance teams were never considered a part of the larger team.

The advent of modern-day cloud computing around 2006, and its subsequent adoption, promised significant cost reduction to propel innovation, systems development, and operations. If you have ever seen the detailed billing files and reports of a cloud service provider, you realize the telecom bills of the 1990s are kindergarten play in comparison. We realized the complexity associated with cloud cost and billing early enough to start developing approaches to help customers understand cost at a higher level of abstraction. I remember in 2015 after my team won a large cloud contract, our customer’s CFO asked us to attribute cloud charges to many of their product teams, to improve their cloud spend, and to develop a chargeback mechanism, which proved to be a daunting task 8 years ago. However, we successfully developed a framework for understanding cloud cost, budgeting, continual monitoring, reporting, injecting cost reduction levels, and feeding into the next budget cycle. We named our framework Cloud Cost Optimizer (CCO), with some of the elements of FinOps built right into it.

Over the years, all Cloud Service Providers (CSPs) have made great strides in adding services around cost understanding and management. Still, cloud cost complexity has continued to rise due to changes in service pricing models and modes of cost management. Additionally, many of these services are focused on notifications after the fact and not necessarily proactive in approach. As a result, many third-party vendors have developed wonderful tools for cost insights and management, with customers receiving many benefits overall. Having seen the need at Netflix, one of AWS largest users, J.R. Storment and Mike Fuller, developed the FinOps approach to bring finance teams into the mix with large development and operation teams to manage AWS spending at Netflix. The Cloud FinOps approach has gained significant traction since then, and The Cloud FinOps Foundation was established in 2019 to serve as the central body for FinOps adoption and growth. FinOps is defined officially by the Cloud FinOps Foundation as:

“…an evolving cloud financial management discipline and cultural practice that enables organizations to get maximum business value by helping engineering, finance and business teams to collaborate on data-driven spending decisions.”

Figure 1: FinOps combines Business/Finance, Engineering and Operations teams together to maximize the true benefits of cloud.

FinOps not only breaks the barriers between planning and operations but has also evolved cost management from cost understanding to cost monitoring, to cost reduction, and now to FinOps. One can really expand the FinOps to mean Fin(to)Ops to reflect that this is not just combining the finance and operations teams but inclusive of business, development, security, and quality assurance disciplines (Figure 1). Cloud FinOps allows a team to budget for cloud projects together, develop products in the cloud with cost in mind, and make operations aware of how to monitor and report back for continual improvement. Hence it truly combines business, engineering, and operations together to plan, develop, assess, optimize, and maximize the true benefits of the cloud.

The FinOps Foundation provides a great framework, as shown in Figure 2 below. The FinOps Framework consists of five major tenants.

  1. Principles define the based guidelines that should drive cloud financial management.
  2. Persons identify various roles that serve as stakeholders for successful practice.
  3. Evolving Maturity level that an organization can follow in FinOps Framework adoption.
  4. Phases that outline the cyclic process for continual optimization.
  5. Domains of activity and associated best practices that should be performed.
Diagram of FinOps Framework
Figure 2: FinOps Framework from Bringing Accountability to Cloud Spend from finops.org.

While more details of these tenants are found at the FinOps Foundation site, we want to highlight the importance of FinOps here. Cost reduction has been one of the most acclaimed cloud benefits, which is largely true as long as you can establish proper cloud governance. Gartner has indicated that “cloud always saves cost” as one of the myths in their article on The Top 10 Cloud Myths. Hence it is critical for any organization to incorporate FinOps as a mandatory part of its cloud governance strategy. FinOps offers many benefits for an organization, as shown in Figure 3 below, including:

Figure of benefits to Using the FinOps Framework for Organizations
Figure 3: Benefits to Using the FinOps Framework for Organizations.

FinOps discipline has gained a lot of traction over the last few years. Still, FinOps adoption has a few pitfalls that must be avoided. Stumbling Towards FinOps is a great example with an overview along with strategies to avoid these pitfalls.

At ITC Federal, our talented team of FinOps practitioners has been partnering with our customers to establish many of the FinOps domains to extract the true benefits of the cloud. We follow the FinOps framework to assess cost, identify opportunities, create pilot projects, and partner with customer stakeholders to establish a mature FinOps practice. The framework also aids our customers’ cloud journey towards a mature cloud governance organization so they can meet their mission objectives and goals within budget and leverage these cost reductions for more innovation and increased time to market.