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Image: The practical FinOps roadmap series: Starting your FinOps journey at the Inform phase (2/4)

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The FinOps Framework by the FinOps Foundation is an operational framework and cultural practice which helps organizations maximize the business value of their cloud and technology investments. This framework helps organizations build and mature their FinOps practices through three iterative phases: Inform, Optimize and Operate.

To help your organization effectively adopt FinOps, we developed this practical FinOps roadmap blog series based on these FinOps Framework phases. Our blog series provides real-world implementation advice for getting started with the most critical capabilities at each phase in your FinOps adoption journey.

In Part 1 of this series, we detailed the steps you need to take before you even begin practicing FinOps.

In this Part 2 blog, we’ll explore activities in the Inform phase, focusing on FinOps capabilities associated with providing visibility and performing cost allocation.

Gather cloud billing data

Before beginning the Inform phase, you did your due diligence and selected a FinOps tool that can ingest and normalize the large volume of hourly, granular cloud billing data that your organization will need to analyze, optimize and report on.

Now it’s time to get started. The first step is to identify all the data sources that you need to pull from, and which formats to use.

Using FOCUS billing data

The FinOps industry is standardizing on a single format for all cloud billing data: FOCUS™. The uniform billing format is defined by the FinOps Open Cost and Usage Specification, which is an emerging open specification that defines requirements for billing data generators to produce consistent cost and usage datasets.

All leading cloud service providers generate their billing data in the FOCUS format (in addition to their own proprietary, legacy billing formats). SaaS billing vendors are joining their ranks, and many FinOps tooling vendors are also rolling out support for FOCUS data.

If you are just getting started with FinOps, you have the advantage of utilizing the standardized FOCUS format for all your cloud billing data ingestion and reporting. Using FOCUS has many benefits. This standardized format eliminates the need for you to do the work of normalizing all your cloud billing data from different sources. FOCUS also gives you a defined language to use when communicating optimization opportunities to engineering teams, and reporting savings to finance and business leadership.

Key benefits of using FOCUS-formatting billing data include:

  • Multi-cloud data-driven decision-making
    • FOCUS enables consistent reporting across vendors, enabling leadership to analyze the whole environment instead of looking at each cloud or vendor in a silo
    • With better data, better decisions can be made, and goals can be met faster
  • Reduced complexity of billing files
    • A single set of columns applies across all an organization’s cloud billing data, even in a multi-vendor environment
    • This means FinOps practitioners have a lot less terminology to learn
  • Improved reporting consistency and accuracy
    • Standardizing billing files in a consistent format reduces the chances of inaccurate reporting due to discrepancies in terminology and definitions of columns across external vendors or across internal groups
  • Easier integration of new vendors
    • When a new vendor is added to the cloud ecosystem, the organization already has a defined format to transform the data into
    • No time is spent figuring out what format to transform the data into
  • Increased innovation
    • With better understanding of cloud value, the path is cleared for using cloud offerings to drive innovation and business growth
    • FOCUS accelerates your path to FinOps excellence, ultimately helping to leverage cloud as a strategic asset for innovation
  • Cheaper to process data
    • FOCUS combines actual billed costs and amortized costs into one dataset, drastically reducing the cost of compute and storage needed to process this data
  • Business continuity
    • With FOCUS, practitioners can learn a single process to perform a FinOps activity with less bespoke training
    • New hires that join as FinOps practitioners are already familiar with FOCUS, so organizations don’t have to train them on normalizing billing data
  • Tool flexibility
    • FOCUS provides a single set of columns which are transferable across cloud and third-party tool providers
    • This makes it easy for individuals to adjust to changing providers as organizations adjust their toolkits over time
  • Beyond cloud
    • Over time, FOCUS is expected to include SaaS, PaaS, licensing and software, and on-premises costs in combination with public cloud spend
    • Further increasing in power of having a normalized, single source of truth data set from which to drive value-based decisions
  • Common language with external peers
    • With FOCUS, organizations can discuss FinOps with other organizations which have adopted FOCUS
    • They can use common terms with a common understanding irrespective of different cloud and tooling vendors each organization may be using

You can read more here about getting started with FOCUS billing data adoption.

Export cloud billing data to your FinOps tool

The specific details of how to connect your billing data will vary by cloud and FinOps tool, but the general steps are:

  1. Configure access to the billing data within each provider’s console
  2. Save the data in cloud storage
  3. Import the billing data into your FinOps tool (typically via API)

How to access your billing data

The above tables are handy summaries for where and how you can access your cloud billing data, but here’s a more detailed version of each process along with links to even more resources:

Export additional (non-cloud) cost data

What is the scope of your FinOps practice? Will you be responsible for managing more than just cloud billing data, such as SaaS bills, license costs, sustainability/carbon emissions data and maybe even private cloud or data center costs? The scope of your practice may require that you export billing data from these other sources as well.

Gather historical data

To perform key FinOps capabilities in the inform phase, such as defining budgets, and building forecasts, you’ll need to import historical billing data into your FinOps tool. This will provide the information that the tool needs to predict future activity in your multi-cloud environment.

  • Determine how much historical cloud data you’ll need
    • For quarter-over-quarter reporting, one year of historical data may be enough
    • For year-over-year reporting, you may want multiple years of history so the tool can pick up trends that may recur at certain times of the year (e.g., increases in usage during annual promotions)
    • For some providers (e.g., AWS), you may need to request access to historical data via a support ticket
    • Depending on the volume of data, allow time for the current and historical billing data to be ingested and processed

Validate the data

  • Once you have connected your cloud bills and data is flowing, check the data against your cloud cost dashboards or your existing data pipeline.
  • Changes to data sources could mean different outputs in reporting, so be prepared to answer questions about why numbers may have changed from previous reports.

Allocate costs

Allocation is a fundamental FinOps capability. Granular cost allocation not only provides visibility into what resources, workloads or applications are driving costs, but this visibility in turn creates accountability for optimizing costs and justifying resource usage.

  • Define an allocation strategy
  • Document a tagging strategy
    • Identify which dimensions are available in the cloud billing data (e.g., cloud account number, cloud service), which will need to be added from resource metadata and which must be added from business context (e.g., costs center, application, environment)
    • Determine who owns tagging
      • The strategy and implementation are commonly owned by a Cloud Center of Excellence (CCOE), Cloud Platform team, or DevOps team
    • Create policies to automate resource tagging based on the categories and hierarchies that you define
      • In blog 1, we talked about making sure that your FinOps tool can support this kind of automation
    • Use automated governance to uncover and issue alerts on untagged resources
    • Choose KPIs to measure tagging compliance, such as percentage of costs that are tagging policy compliant
  • Improve allocation over time
    • Identify allocation gaps and determine the sources of unallocated spend
      • Common sources of unallocated spend include new accounts, shared accounts and untagged resources
    • As you mature in this capability, aim to allocate a higher percentage of your total cloud costs incrementally
    • See the allocation maturity assessment:
      • At a Crawl level of maturity, allocation might amount to implementing a tagging strategy, and effectively allocating 50% of total cloud costs
      • At a Walk level of maturity, allocation may involve having all resources properly tagged and being able to allocate all dedicated (non-shared) costs without manual adjustment
      • At a Run level of maturity, allocation likely involves automatically allocating 100% of all costs, including shared costs, and using metering to proportionally allocate spend based on usage

Implement reporting

Establishing reporting and analytics in collaboration with key stakeholders creates the connective tissue that ensures your cloud decisions are aligned with the business’s broader goals and objectives. It also provides finance teams with the data they need for invoicing and chargeback.

Here’s a handy summary of the five steps you’ll need to take to implement cloud reporting and analytics.

Implementing cloud reporting and analytics

Here’s a more detailed breakdown of the first 3 steps:

  • Determine stakeholder needs
    • Collaborate with core personas, such as leadership, finance and engineering, to determine what they need visibility into
    • Discuss key metrics they need to see and what language they’ll be looking for in their reports
      • Leadership will be looking for information tied to business value, while engineering will want a detailed look at the workloads they manage
    • Ask how they want to receive their reports
      • Leadership may ask for data to be delivered in polished charts and dashboards to their email, while cloud operations teams may prefer direct access to FinOps tooling
  • Enable granular reporting per required grouping
    • Use your FinOps tools to enable the slicing and dicing of cloud costs by a variety of cross-cloud dimensions
    • Examples include:
      • Cloud provider
      • Cloud account
      • Business unit
      • Application
      • Environment (dev, test, production)
      • Cloud service type (compute, storage, database)
  • Establish a reporting cadence
    • Ask each team how often they need reporting
    • Deliver data daily or weekly to cloud operations and engineering teams so they can act on recommendations quickly
    • Finance and business leadership will need reports (at a minimum) monthly or quarterly
    • Schedule regular reviews to discuss results and identify needed actions

Moving to the Optimize phase

The Inform phase of a FinOps practice lifecycle is critical for organizations getting started on their FinOps journey. While this stage may seem like a lot of preparation and little implementation, it’s necessary to lay the groundwork for a smooth transition into the Optimize phase where you’ll fully realize the power of rate and usage optimization to drive business value.

Ready for the next steps in your FinOps practice?

By taking these steps, you’ll be well-prepared to navigate the complexities of cloud cost management and set your organization on a path to sustainable and profitable cloud usage.

How can Flexera help?

Flexera offers a comprehensive set of FinOps solutions that can help you migrate, track, govern, and forecast your cloud spend. Identified as a leader in both the Gartner® Magic Quadrant™ for Cloud Financial Management Tools and the Forrester Wave™ for Cloud Cost Management and Optimization, Flexera provides solutions that you need to use cloud services efficiently and cost-effectively.

See Flexera FinOps solutions in action

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