Cloud financial management

Technology teams therefore become responsible for procuring resources very easily, using the ‘pay as you go’ model, directly from the cloud provider, without the need for the traditional approvals and procurement process that existed in the on-premises model.

However, unstructured use of cloud resources and services can easily lead to problems. Faced with this, some companies may consider limiting the creation of resources as the ideal solution. However, this approach is not the most efficient way to maximise the benefits of the public cloud.

The FinOps concept

To optimise this process, the FinOps concept emerged and has gained prominence in recent years. Some of the main objectives of this model are to maximise the business value of the cloud and to foster collaboration between the different areas that support the cloud ecosystem within an organisation.

In the book ‘Cloud FinOps’, J.R. Storment and Mike Fuller explain that ‘at its core, FinOps is a cultural practice. It is the world’s most efficient way for teams to manage their cloud costs, where everyone takes ownership of their cloud usage with the support of a core group of best practices. Cross-functional teams work together to enable faster delivery while gaining greater financial and operational control.”

To apply FinOps, it is necessary to understand the structure of the framework. This includes the principles, domains, capabilities, maturity levels, phases and the people involved. You can find more details about all this in the FinOps Foundation documentation.

Main Stakeholders of financial management in the Cloud

Adopting FinOps requires cultural and process changes, which involve several areas that need to work together for this flow to work well. Therefore, it is necessary to create an environment where there is a lot of communication and interaction between stakeholders. Thus, this new variable cost management model of cloud computing brings the need for change in organisational culture, with a focus on the business outcome, with new ways of thinking and more efficient processes.

According to the FinOps Foundation, individuals at all levels and in every area of an organisation can play different roles in the implementation of FinOps. Key stakeholders include: Executives, Engineers, FinOps Practitioners, Operations Teams, Finance and Procurement Departments.

Best practices for controlling cloud financing

Each cloud provider typically provides an itemised invoice for each month’s spend and, on this invoice, each item consumed is detailed in a list format. Thus, viewing expenses in this way is not feasible when you control the usage of various services and applications from different cost centres, and therefore, there are several ways that can help to make control more efficient. Some of them are:

• Create budgets and alerts for each project in the cloud, so that if any of them exceeds the set value, you can receive an alert;
• Use tags and labels to identify the resources being provisioned;
• Create reports that have a clear language, as not everyone involved in FinOps is technical and knows the services used in the cloud. You can create these reports using the cloud providers ‘ own billing tools or you can even export them to PowerBI, for example, or use FinOps tools, some of the best known of which are VMware CloudHealth, Cloudability and Apptio;
• Monitor the usage and performance of the resources used, to know if resources need to be scaled up, scaled down or even eliminated;
• Some cloud providers have native tools that give information about the utilisation of their resources, the best known are: Azure Advisor, AWS Trusted Advisor, Oracle Cloud Advisor and Google Cloud Recommendation Hub. Through them, you can see what is being used and, based on that, you can decide to resize the resources on that list.

Identifying Shared Services

There are some elements in the cloud that fall into a category known as shared services, which are nothing more than services that are common to all projects.

Some of the most popular shared services are: Cloud Provider Support, Network Traffic, Centralised Log Storage Services and Security Tools, for example.

The financing of shared services can be divided in different ways. The FinOps Foundation details that there are a few methods such as Even split, Fixed Proportional and Variable Proportional. The choice of the right method depends on the size of the company, as well as other factors such as FinOps maturity level and business model.

For a better understanding of this topic, I recommend reading the material ‘Managing Shared Cloud Costs’, by the FinOps Foundation.

Finally, if you want to deepen your studies on FinOps, I recommend that you follow the initiatives of the