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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.
The FinOps Framework
Source: FinOps Phases by the FinOps Foundation
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’ll explore the steps you need to take before you even begin practicing FinOps. Your primary focus at this point is to develop your FinOps strategy and gather the right people together for success.
Key considerations for forming your team
When forming your FinOps team, you should first consider:
- Leadership buy-in
- It is critical to gain executive buy-in so that cloud operations and FinOps teams can stay aligned with leadership strategy, ensuring that all technology decisions are helping to achieve business goals.
- FinOps teams tend to report to the executive who is responsible for making cloud adoption successful. The 2023 State of FinOps Report indicated that most FinOps teams report to the CTO. The role of the CIO is reportedly diminishing, while the role of the CFO is increasing.
- Team makeup
- Some FinOps practices get started when a single cloud operations team member or engineer who understands the importance of managing cloud costs encourages others in the organization to pay attention.
- To gain traction with adoption, assemble a group of 2-4 people dedicated to FinOps who have a mix of experience with cloud technology and business finance/accounting. This group typically includes 1-3 FinOps Practitioners and a team leader.
- FinOps practitioners might come from inside your organization, or external hires who have implemented FinOps at other organizations. Consider having at least one FinOps practitioner who has been a cloud engineer, as they bring valuable knowledge of cloud architectures.
- Look for a FinOps team leader who has a proven ability to build relationships, effectively collaborate and navigate the interests of different stakeholders.
- Collaboration
- Your FinOps team will work very closely with other core FinOps personas from product, engineering, finance, procurement and leadership teams. Consider solidifying this group formally as your Cloud Center of Excellence (CCOE).
- In addition to the core personas, your FinOps teams may also collaborate with various allied personas from intersecting disciplines who also have an interest in cloud usage and technology cost management such as Sustainability, ITAM, ITFM/TBM, Security, and ITSM/ITIL teams. This is especially true if your FinOps practice will extend to other scopes of technology costs.
- Technical expertise
- The FinOps Foundation offers training and certification courses that help everyone in your organization learn the language of FinOps and the keys to a successful practice.
- Everyone on your FinOps team should consider the free Introduction to FinOps course and FinOps Certified Practitioner.
- FinOps Practitioners themselves will benefit most from the FinOps Certified Professional course. Practitioners should also consider taking FOCUS training and certification to learn about this rising industry standard for cloud billing data.
- The FinOps Certified Engineer course is designed to help cloud engineers build and run applications with cost in mind. Also valuable for engineers is the FinOps for Containers course.
- The FinOps Foundation offers training and certification courses that help everyone in your organization learn the language of FinOps and the keys to a successful practice.
Create your FinOps charter
Next, you’ll want to develop a FinOps charter that defines your mission, goals, strategies and responsibilities.
As shown in the above graph, the elements of your FinOps charter might include:
- A mission statement
- A succinct mission statement will ensure the FinOps team is aligned with the business objectives that leadership defines. Here are a few examples of mission statements:
- Our mission is to empower our organization to optimize cloud costs, make data-driven decisions, and maximize business value.
- Our FinOps team strives to be the trusted guide for optimizing cloud usage, delivering actionable insights and fostering a cost-conscious culture for our entire organization.
- Our mission is to champion efficient and responsible use of cloud resources that drives continuous cost optimization and business value creation.
- A succinct mission statement will ensure the FinOps team is aligned with the business objectives that leadership defines. Here are a few examples of mission statements:
- Guiding principles
- Identify the principles that govern your FinOps team’s actions. Examples:
- Collaboration and communication
- Data-driven decision-making
- Iterative improvement
- Accountability and transparency
- Identify the principles that govern your FinOps team’s actions. Examples:
- Determine 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 data, and maybe even private cloud or data center costs? The scope of your practice may require that you pull billing data from these other sources as well.
- Engage stakeholders across all scopes so you can collaborate closely with them. Each area of IT spend will have experts who can help you with their unique terminology and data nuances and help set you up for success.
- Team structure/governance and operations
- Outline the FinOps team’s reporting structure and makeup, as described above
- Define reporting cadences and formats
- Outline processes for decision-making and accountability
- Opportunities for optimization
- The FinOps Framework capabilities define activities that your team should perform to optimize the usage of cloud. You should identify which capabilities are most critical for your business. Examples include:
- Cost monitoring and allocation
- Reporting and analytics
- Workload optimization
- Strategy and guidelines for Rate optimization
- Budgeting and forecasting
- Policy development and enforcement
- Stakeholder communication and education
- The FinOps Framework capabilities define activities that your team should perform to optimize the usage of cloud. You should identify which capabilities are most critical for your business. Examples include:
Define critical FinOps capabilities for your organization
Some FinOps capabilities aren’t appropriate for some organizations. Organizations should choose to develop the capabilities that are most critical for themselves right now and re-evaluate those priorities over time as the business’s needs change.
Many organizations start with these four key FinOps capabilities:
Here are a few additional capabilities that many organizations focus on when getting started:
- Data ingestion, allocation, and reporting
- Cost visibility is a foundational capability, often tackled first
- Ensure accurate and comprehensive cloud cost and usage data is available to teams
- Lay the groundwork for invoicing and chargeback efforts
- Forecasting and budgeting
- Exceeding budgets and poor understanding of anticipated spend are common drivers for FinOps adoption
- Prioritize forecasting and budgeting to proactively manage cloud expenditures
- Consider implementing anomaly management to complement these efforts
- Workload optimization and rate optimization
- Optimization efforts reduce costs, providing tangible benefits and momentum for broader FinOps adoption
- Focus on decreasing monthly charges, especially for organizations with rapidly increasing cloud bills
- Education enablement
- Develop a comprehensive training plan for team members to navigate cloud complexities
- Train both internal FinOps team members and other organizational personas involved in FinOps
- Utilize training events (e.g., FinHacks, Lunch & Learns)
- Leverage written publications (e.g., FinOps Friday Blogs, internal knowledge base repositories)
- Use formal organizational training (e.g., internal HR systems)
- Explore CSP training and FinOps Foundation training and certification opportunities
- FinOps tools and services
- Prioritize having meaningful tools available and ensuring relevant data reaches the right stakeholders
- Empower teams to drive meaningful business outcomes
- Choose solutions that align with unique organizational needs and objectives, whether through SaaS products or custom solutions
Choosing those FinOps capabilities for your organization is just the first step. You’ll need to follow through each of the following five steps to mature them:
Define your KPIs and maturity needs for each FinOps capability
Choosing the right key performance indicators (KPIs) can be a challenge, but it’s important to think critically about which metrics indicate success for your organization. KPIs align with different FinOps capabilities, so the KPIs you choose will depend on which capabilities are most critical to your business.
Common KPIs include:
Maturity needs for each FinOps capability
- After defining your critical capabilities and KPIs to measure those capabilities, define iterative goals you want to achieve, both in the short term (3-6 months) and longer-term (1-2 years)
- Use the FinOps Maturity Model to assess what level of maturity (Crawl/Walk/Run) is ideal for your organization for each capability
- Be sure to read the Maturity Assessment section for each FinOps capability that is important to your business
- This will help you understand what that capability looks like at each phase of the FinOps Maturity Model, so you can identify which phase of maturity is ideal for your unique organization
(Hint: the goal is not to get to “Run” for every capability!)
- For example, see the maturity assessment for the workload optimization capability:
- At a Crawl level of maturity, workload optimization might be as simple as addressing low-hanging fruit like eliminating “zombie resources” such as unattached storage volumes, unused IP addresses, idle VMs or orphaned snapshots
- At a Walk level of maturity, workload optimization may amount to being able to estimate the amount of time and effort required to optimize a service, and the impact it will have on performance
- If you’re using a FinOps tool, perhaps Walk maturity means implementing all optimization recommendations with a specified dollar impact
- At a Run level of maturity, workload optimization likely involves a comprehensive strategy that takes business goals into account
- You’ll assess granular cost and usage data to make decisions about cost vs. performance, and likely use automation to implement some optimizations, or receive alerts about opportunities that need investigation
- Key Performance Indicators (KPIs)
- Choosing the right KPIs can be a challenge, but it’s important to think critically about which metrics indicate success for your organization. KPIs align with different FinOps capabilities, so the KPIs you choose will depend on which capabilities are most critical to your business.
- Common KPIs include:
- Maturity needs for each FinOps capability
- After defining your critical capabilities and KPIs to measure those capabilities, define iterative goals you want to achieve, both in the short term (3-6 months) and longer-term (1-2 years).
- Use the FinOps Maturity Model to assess what level of maturity (Crawl/Walk/Run) is ideal for your organization for each capability.
- Be sure to read the Maturity Assessment section for each FinOps capability that is important to your business. This will help you understand what that capability looks like at each phase of the FinOps Maturity Model, so you can identify which phase of maturity is ideal for your unique organization. (Hint: the goal is not to get to “Run” for every capability!)
- For example, see the maturity assessment for the Workload Optimization capability:
- At a Crawl level of maturity, workload optimization might be as simple as addressing low-hanging fruit like eliminating “zombie resources” such as unattached storage volumes, unused IP addresses, idle VMs or orphaned snapshots.
- At a Walk level of maturity, workload optimization may amount to being able to estimate the amount of time and effort required to optimize a service, and the impact it will have on performance. If you’re using a FinOps tool, perhaps Walk maturity means implementing all optimization recommendations with a specified dollar impact.
- At a Run level of maturity, workload optimization likely involves a comprehensive strategy that takes business goals into account. You’ll assess granular cost and usage data to make decisions about cost vs. performance, and likely use automation to implement some optimizations, or receive alerts about opportunities that need investigation.
- For example, see the maturity assessment for the Workload Optimization capability:
- Be sure to read the Maturity Assessment section for each FinOps capability that is important to your business. This will help you understand what that capability looks like at each phase of the FinOps Maturity Model, so you can identify which phase of maturity is ideal for your unique organization. (Hint: the goal is not to get to “Run” for every capability!)
Forecast costs and establish budgets
Forecasting costs and establishing budgets for each team, business unit, or product ensures that DevOps activities don’t lead to outsized cloud bills, and that IT operations are on track to generate revenue.
- Create a forecasting process.
- Set budgets for relevant groupings based on forecasted spend. Consider trends for existing workloads plus any planned new workloads.
- Track and report on budgets vs. actual spend (i.e., variance)
- Set budget alerts that warn cloud users if spend is on track to exceed budgets
- Define processes for business units to explain budget variances and adjust forecasts when needed
Communicate and enable the organization
In FinOps, communication is the key to success. Everyone in the organization must align on new processes and terminology that they may not be familiar with. Technology teams will learn new language about finance and accounting, and Finance teams will learn more than they ever thought they needed to know about cloud operations!
Here are a few tips for establishing a foundation of helpful communication:
- Learn the terminology. Develop your own cheat sheet of terminology using the FinOps Foundation’s terminology as a starting point.
- Develop stakeholder relationships. Interview core personas about needs and challenges. Share your FinOps charter and goals, solicit feedback and gain buy-in.
- Establish broad communications. Choose a regular method for company-wide communication, such as a monthly newsletter or quarterly FinOps town hall. As you mature, consider a FinOps Champion Program for FinOps-adjacent roles.
- Create paths for education. Ensure your central team is FinOps-certified. Offer opportunities for FinOps education to all your stakeholders, as described above.
- Provide enablement materials. Prepare training for your broader set of stakeholders. Start with the basics. What do engineers need to know? Finance team? ITAM/SAM team? Point them to internal and external resources.
Select a FinOps tool
Spreadsheets and native tooling fall short when your organization becomes multi-cloud, or if it has a high number of stakeholders who each have different needs for access/permissions and visibility/reporting. Very quickly, your FinOps team will realize it needs an effective cloud cost management tool.
To start that selection process with confidence, begin with these eight key FinOps tool capabilities in mind:
Now that you have a general sense of what an effective tool should do, it’s time to evaluate your organization and any potential tools in greater detail.
To select the right FinOps tool, you’ll need to:
- Inventory current tooling
- Identify what tools are being used today, including cloud provider cost dashboards. Understand the benefits and challenges of each.
- Assess requirements
- Determine your current requirements and consider how your requirements will evolve over the next few years. Ask these key questions:
- Which clouds do we use? If you use multiple clouds, a multi-cloud FinOps tool will be critical for wholistic visibility and reporting.
- What scopes are important for our organization? Do you expect to manage FinOps scopes beyond public cloud infrastructure, such as SaaS, licenses, private cloud or even data center costs? If so, choose a tool that will manage all your technology billing data.
- Does the tool support FOCUS billing data? The FinOps Open Cost and Usage Specification (FOCUSTM) defines a single format for cloud billing data that is quickly becoming the industry standard. It’s a good idea to check if this tool supports FOCUS data and plans to continue to evolve their FOCUS support in their user interface and reporting engines.
- Will this tool scale to my organization’s needs? If you have many workloads and cloud resources, and numerous stakeholders, make sure your FinOps tool can support your volume of data, and separate visibility of that data as needed.
- Is flexible automation available in this tool? As you mature in your FinOps journey, you will need to leverage automation to continuously optimize and govern your environment. Make sure your tool supports flexible automation and workflow management.
- How have analysts rated this tool? Look for ratings from industry analysts such as the Gartner Magic Quadrant for Cloud Financial Management Tools or the Forrester Wave for Cloud Cost Management and Optimization. These independent third parties can help you narrow your search.
- Is this tool a FinOps-certified platform? Cross-reference analyst ratings with FinOps Certified Platforms. These platforms have been validated by the FinOps Foundation as having support for key FinOps capabilities.
- Determine your current requirements and consider how your requirements will evolve over the next few years. Ask these key questions:
As you’re making these evaluations and looking at your current needs, don’t forget to anticipate how those needs will evolve, especially in the following areas.
As you’re making these evaluations and looking at your current needs, don’t forget to anticipate how those needs will evolve, especially in the following areas.
Moving to the first stage
Starting your FinOps practice can seem daunting, but by completing all the pre-work, you lay a solid foundation for success. Each action is crucial for building in the next phases of your FinOps journey.
Ready to take the first step in your FinOps practice?
- Read the FinOps Foundation’s Adopting FinOps whitepaper for more insights and actionable steps
- Join the FinOps Foundation to connect with peers and gain valuable resources
- Stay tuned for Part 2 of this series, where we’ll dive into the Inform phase and explore how to build on the foundation you’ve established
Together, we can help you navigate the complexities of cloud financial management and drive lasting value for your organization.
