October 23, 2024
Decoding the FinOps Framework
10 min read
The cloud is a powerful tool that can quickly turn into a double-edged sword, where one minute you're using what you need, and the next, you're paying for unseen resources.
However, with FinOps, you can better understand infrastructure usage to ensure that every dollar spent delivers value.
FinOps creates visibility, accountability, and collaboration between teams. So you’re not left puzzled and wondering, "Where did all the money go?" Instead, you'll be asking, "How do we get even more value from our cloud spend?" Sounds like a win-win, right? Let’s demystify the FinOps framework and see how it can make cloud cost management easier and smarter for you.
An Overview of FinOps
FinOps, short for Financial Operations, is a cloud cost management framework designed to help businesses gain better control over their cloud spending. As businesses ramp up their cloud usage, keeping tabs on costs across teams, environments, and providers can quickly get out of hand. FinOps introduces structure, strategy, and savings to this chaos.
The FinOps Foundation, co-founded by industry visionary JR Storment, is on a mission to transform cloud cost management into a strategic advantage by promoting collaboration and best practices. The idea is to empower organizations to harness the full potential of FinOps.
And while we’re at it, think of FinOps as the bridge between finance, engineering, and business teams. Its core belief is to have all of these teams work together seamlessly, understanding cloud costs and optimizing them in real time. Yet, according to a CloudBolt survey, only 9% of respondents believe that cloud cost management is truly a shared responsibility across all involved teams. This highlights the need for a stronger, more unified approach to managing cloud expenses.
With FinOps, the goal isn’t just focusing on cutting down costs but also on making sure every dollar spent is generating maximum business value. As the cloud operates on a pay-as-you-go model, it can be flexible and dynamic. Thus, it also makes predicting costs a lot harder without proper visibility and collaboration.
FinOps helps overcome these hurdles by:
Establishing clear ownership of cloud usage and expenses
Fostering collaboration between different departments
Providing timely insights and reports into cloud spending
FinOps Framework
By adopting the FinOps Framework by the FinOps Foundation, businesses can tackle the complexities of cloud management in a structured way. Without this framework in place, businesses often face challenges like a lack of accountability, overspending on overprovisioned resources, and a complete disconnect between technical and financial teams.
The framework is made up of several key elements:
Principles that guide how teams should operate.
Personas representing the key players involved.
Phases that define the journey of cloud cost management.
Maturity levels show the growth of FinOps practices.
Domains and capabilities that highlight specific areas of expertise.
FinOps Principles
FinOps principles serve as a guiding framework for effectively laying out the best cloud usage practices. They aren’t ranked in importance but should be followed collectively to ensure maximum value.
Collaboration Between Teams
Cloud financial management isn’t a solo task.
FinOps encourages a collaborative culture where finance, engineering, product, and business teams come together regularly to manage cloud costs in near real-time.
Since cloud costs are highly dynamic and can change per second or per resource, these teams need to continuously engage in decision-making to drive efficiency and innovation.
By introducing a culture of collaboration, teams gain a comprehensive view of cloud costs and come up with faster, smarter decisions that balance the needs of the business with the budget.
Business-Value-Driven Decisions
A staggering 85% of companies are still grappling with a limited grasp of cloud unit economics.
Without a clear understanding of how cloud consumption directly ties to the business value it generates, many companies miss opportunities to optimize their cloud spending.
FinOps promotes decision-making based on unit economics and value-based metrics, which offer a more detailed and meaningful understanding of the return on investment (ROI).
This approach shifts the conversation from:
How much are we spending? → What value are we getting from this cloud expenditure?
It empowers teams to make conscious trade-offs between cost, quality, and speed. This turns the cloud into a true driver of innovation rather than a mere cost center.
Ownership of Cloud Usage
In a traditional model, only the finance or operations team might be responsible for cloud costs.
However, with FinOps, ownership is decentralized, meaning the responsibilities for cloud usage and costs are pushed to the people actually using the cloud – engineers, product teams, and individual contributors.
This clearly implies that everyone from development teams to product managers must take ownership of their cloud expenses.
Distributed accountability promotes more mindful usage of cloud resources and encourages teams to think critically about building cost-effective architecture and resource optimization right from the planning stages.
Real-Time Data Accessibility
Real-time visibility into cloud costs is of the utmost importance when it comes to quickly evolving cloud computing environments.
FinOps promotes the immediate processing and sharing of cost data as soon as it’s available. This way organizations can act in a jiffy to make more effective adjustments.
With real-time data, teams can autonomously optimize cloud utilization, identify wasteful spending patterns, and refine cloud usage in minutes.
Fast feedback loops are another important piece of this puzzle. By receiving timely updates on cloud usage and costs, teams can respond swiftly.
Additionally, FinOps encourages benchmarking both within the company and against industry peers. Internally, it helps teams set standards, celebrate wins, and improve. Externally, it provides a measure of how well your cloud strategy performs compared to others in the industry, offering valuable insights into areas for further optimization.
Centralized FinOps Team
While responsibility for cloud spending is decentralized, a central FinOps team plays an essential role in driving the adoption of best practices and maintaining accountability across the organization.
This team serves as a hub for cloud cost oversight, much like how security teams work in an organization—everyone is responsible for it, but the central team guides, educates, and standardizes FinOps processes.
The centralized FinOps team also takes on the task of rate and discount optimization, using economies of scale to negotiate better pricing and make sure everyone is getting the most value for their money.
By handling financial negotiations, this team allows engineers and product teams to focus on building and optimizing cloud usage rather than worrying about vendor rates.
Leveraging the Cloud’s Variable Cost Model
One of the unique aspects of cloud computing is its variable cost model where resources can scale up or down based on demand. Rather than seeing this as a risk, FinOps encourages businesses to see it as an opportunity.
With agile, iterative planning and continuous adjustments to cloud usage, businesses can avoid unnecessary costs and maximize efficiency.
In this sense, FinOps helps companies make the most of the flexibility of the cloud, making quick adjustments as needed instead of relying on long-term, static plans that can result in wasted resources.
FinOps Personas: Who’s Involved?
So far we’ve established that the role of FinOps is all about fostering collaboration across multiple teams within an organization. In FinOps, different stakeholders, or "personas," work together to make it successful.
Anyone involved in managing, using, or tracking cloud resources plays a role and can benefit from adopting the FinOps framework as a collaborative operating model.
Notably, personas don’t represent individual people, but broad groups of stakeholders who need to collaborate. In large organizations, a persona might encompass multiple different roles or job titles while, in smaller ones, one person could wear multiple hats.
There are several key personas that always play a part in FinOps practices, categorized into Core and Allied Personas.
Core Personas
Core personas are key stakeholders within an organization who play essential roles in the success of FinOps practices. Each persona brings distinctive perspectives and responsibilities to lay out the best practices for efficient cloud usage.
The FinOps Practitioner
FinOps practitioners are the bridge between the business, engineering, and finance teams. They bring the FinOps framework to life by providing a culture that focuses on data-driven decision-making to maximize the business value of the cloud.
Their goal is to:
Educate
Standardize
Enable cultural growth and support
Key Responsibilities:
Deep technical knowledge and understanding of the FinOps framework.
Ability to analyze cloud cost data and optimize spending.
Collaborating with various teams to continuously improve cloud usage and efficiency.
Problem-solving and proactively driving changes to keep cloud operations aligned with financial goals.
FinOps practitioners are the go-to resource for translating cloud cost data into actionable insights. They also handle essential central functions within the organization. This can include roles like:
FinOps Team Lead
FinOps Analyst
FinOps Practitioner
Members of the Cloud Center of Excellence (CCOE)
Leadership
Leaders provide the strategic direction and ensure that FinOps initiatives align with business objectives. They enable the organization to prioritize cloud cost management and have the authority to overcome any barriers.
Their goal is to: Ensure cloud usage is in sync with business objectives.
Key Responsibilities:
Strategic oversight and decision-making.
Aligning stakeholders with FinOps goals and initiatives.
Ensuring compliance with financial and governance regulations.
Empowering teams to execute FinOps strategies and drive revenue growth.
Leadership plays a critical role in ensuring that FinOps becomes a priority across the organization by connecting cloud technology with business value. Their roles may look like:
VP/Head of Infrastructure
Head of Cloud Center of Excellence
Chief Technology Officer
Product
Product teams focus on driving business value by aligning cloud decisions with the broader company goals. They define the requirements and prioritize initiatives that will optimize cloud usage and meet FinOps objectives.
Their goal is to: Launch new products and features with accurate pricing strategies.
Key Responsibilities:
Lining up cloud usage with strategic business goals.
Engaging stakeholders to guarantee initiatives deliver value.
Managing change to improve cloud cost efficiency without disrupting services.
Product owners frequently collaborate with engineers to come up with a system to deliver digital value to the cloud. Their roles include:
Business Operations
Product Managers
Program Managers
Systems Analyst
Product Owner
Engineering
The engineers are responsible for designing, maintaining, and optimizing cloud infrastructure. They focus on achieving the best performance at the lowest cost while adhering to security, compliance, and customer expectations.
Their goal is to: Maintain business continuity while delivering swift, high-quality services.
Key Responsibilities:
Managing cloud infrastructure and deploying applications.
Monitoring cloud services for performance and security.
Automating processes and developing tools to streamline operations.
Engineers build a cloud environment that’s cost-effective, sustainable, and scalable. Roles in the engineering persona look like this:
Cloud Architects
Engineering Leads
Programmers
Developers
SREs
DevOps team members
Systems Engineers and more
Finance
Finance personas provide the financial insight needed to reconcile actual cloud costs with expected forecasts and budgets. Working closely with FinOps practitioners, finance teams help ensure cloud spend aligns with business needs.
Their goal is to:
Budget
Forecast
Report
Key Responsibilities:
Budgeting and forecasting cloud expenses.
Analyzing cost allocations and producing financial reports.
Ensuring compliance with financial regulations.
By working with other teams, finance ensures cloud costs are accurately tracked and managed. Some of the finance roles report to the CFO, including:
Corporate Finance
Strategic Planners
Financial Analysts
Budget Analysts
Accounting and more
In some cases:
IT Financial Management roles (reporting to the CIO when working with Engr. teams)
ITFM Persona (in larger organizations)
Procurement
The procurement team handles purchasing cloud services and managing vendor relationships. Their job is to make sure that cloud service agreements contribute to financial goals and compliance requirements.
Their goal is to: Procure cloud services and manage the cloud platform relationship.
Key Responsibilities:
Negotiating vendor contracts and securing discounts.
Managing vendor risk and ensuring compliance engagements.
Monitoring and evaluating cloud service licenses.
The procurement team ensures the business is getting the best possible value from its cloud vendors while staying within budget and compliance guidelines. The roles in the procurement persona may look like:
Procurement Analysts
Sourcing analysts
Vendor Management or Director
Allied Personas
In addition to core personas, there are allied personas whose roles intersect with FinOps practitioners. While they aren’t directly involved in managing cloud costs, their work supports the broader FinOps goals.
IT Service Management (ITSM/ITIL)
ITSM focuses on delivering high-quality IT services and promoting operational efficiency. By working with FinOps practitioners, they can balance service reliability and security with cost control.
Key Responsibilities:
Designing and improving IT services.
Monitoring and managing service levels.
Managing changes in IT infrastructure.
Collaborating on cost optimization and analysis.
Documenting service operations and financial reporting.
IT Asset Management (ITAM)
ITAM ensures that all IT assets, including cloud resources, are well-managed, cost-efficient, and compliant with regulations. Their work supports FinOps goals by aligning asset management with cloud cost efficiency.
Key Responsibilities:
Discovering and managing IT assets.
Auditing and ensuring asset compliance.
Managing licenses and usage.
Optimizing asset-related costs.
Collaborating on financial reporting and asset tracking.
Sustainability
Sustainability teams aim to minimize the environmental impact of cloud usage. By collaborating with FinOps practitioners, they combine sustainability goals with cost efficiency so that cloud operations are both eco-friendly and financially sound.
Key Responsibilities:
Reducing waste in cloud resource usage.
Implementing sustainable cloud practices.
Ensuring compliance with environmental policies.
Analyzing and reporting on sustainability efforts.
Collaborating to align cloud usage with environmental goals.
Security
Security teams work closely with FinOps practitioners to maintain a secure cloud infrastructure without overspending. They ensure the costs of maintaining cloud security are optimized while keeping the infrastructure safe.
Key Responsibilities:
Monitoring and responding to security threats.
Managing identity and access in the cloud.
Ensuring compliance with security policies.
Collaborating on cost-effective security measures.
Documenting security processes and financial impacts.
IT Financial Management (ITFM)
ITFM provides financial oversight for IT and cloud investments. By working with FinOps practitioners, they ensure cloud spending aligns with overall business priorities and delivers measurable value.
Key Responsibilities:
Budgeting and financial planning.
Optimizing IT and cloud-related costs.
Analyzing cloud investments for business value.
Providing financial reporting and analysis.
Supporting continuous improvements in financial processes.
FinOps Phases
FinOps operates through three key phases: Inform, Optimize, and Operate. These phases are iterative, which ideally means the teams work through them repeatedly to improve cloud cost management. Each phase has a specific focus that helps organizations get the most value out of their cloud spend.
Inform: Understanding Your Cloud Costs
The Inform phase is all about visibility and understanding. It’s where teams start by gathering data about how much they’re spending on cloud services, what’s being used, and how efficiently those services are being utilized.
What happens in this phase?
Collect cloud cost, usage, and efficiency data.
Allocate costs accurately to teams, products, or departments based on specific rules or tags.
Create reports to help teams monitor budgets and track if spending aligns with forecasts.
Develop key performance indicators (KPIs) and metrics to see if cloud investments are providing real business value.
Benchmark performance to compare cloud efficiency either within the company or against other businesses.
The goal of this phase is to:
Make cloud spending visible to everyone involved
Giving teams the data they need to make informed decisions
Optimize: Making Smart Cloud Choices
Once you understand your cloud costs, the next step is the Optimize phase. This phase focuses on finding ways to improve efficiency and reduce waste.
What happens in this phase?
Look for opportunities to rightsize resources – meaning adjusting cloud services so that you’re using exactly what you need and not paying for unused capacity.
Use advanced options like modern cloud architectures and automated tools to improve how resources are managed.
Take advantage of cloud provider discounts, such as Reserved Instances (RIs), Savings Plans (SPs), and Committed Use Discounts (CUDs), which offer lower rates for long-term commitments.
Collaborate across teams to ensure that cloud performance is on par with the company goals.
The goal of this phase is to:
Maximize value – using less, saving more
Ensuring the cloud resources in use are getting the most bang for the buck
Operate: Keeping the Momentum Going
The Operate phase is where FinOps really takes root in the organization. This phase involves putting systems in place so the lessons from the Inform and Optimize phases become part of daily operations.
What happens in this phase?
Implement governance policies to keep cloud spending in check.
Monitor compliance to ensure cloud use follows company rules.
Train employees on cloud cost management best practices.
Automate processes to make cloud management easier, smoother, and more efficient.
Foster a culture where all teams (engineering, finance, and business) collaborate regularly to review data, take action, and continuously improve cloud efficiency.
The goal of this phase is to:
Create a culture of accountability
Everyone is aligned on the organization’s cloud cost strategy
Everyone takes part in continuous improvement
FinOps Maturity Model
The FinOps Maturity Model helps organizations grow and improve how they work around cloud costs over time. Think of it like a journey that happens in stages: Crawl, Walk, and Run. Each stage represents a different level of expertise and maturity in managing cloud financial operations.
The maturity model isn’t about rushing to the “Run” stage for everything but it’s about improving gradually based on what would deliver the most value to your business.
It’s okay for different parts of your cloud management to be at different stages of the maturity model, as long as they’re meeting your organization’s goals.
Here’s a breakdown of each maturity stage:
Crawl: Starting Small
Crawl is the entry-level stage where the organization is just beginning to implement FinOps. There’s not a lot of advanced tooling or reporting in place and the focus is on building a basic understanding of cloud costs.
Characteristics of the Crawl stage:
Basic reports and tools are used to get a sense of cloud costs.
Teams have a rough idea of how cloud spending is divided but it’s not fully detailed.
Only a few key performance indicators (KPIs) are set up to measure success.
Basic processes are in place but not all teams are consistently following them.
Walk: Building Efficiency
In the Walk stage, the organization has a better grasp of its cloud usage and costs. Processes are more standardized, and teams are working together to manage cloud spend more effectively. Some automation tools might be in place but there’s still plenty of room for improvement.
Characteristics of the Walk stage:
Cloud cost management is more consistent and most teams are following the same processes.
Automation or semi-automated tools are helping with tasks like tagging cloud resources or generating cost reports.
Complex issues (like unpredictable cost spikes) are identified but the organization may not address them right away unless they pose a significant risk.
More advanced KPIs are in place and teams are better at predicting and tracking cloud costs.
Run: Full Optimization
The Run stage represents a high level of cloud cost management maturity. All teams in the organization are aligned, processes are fully automated where possible, and advanced tools are in place to track and optimize cloud costs in real-time.
Characteristics of the Run stage:
All teams understand cloud cost management and actively participate in FinOps practices.
Automation is used wherever possible to streamline cloud cost monitoring, tagging, and optimization.
Difficult issues like small inefficiencies or spikes in cost are addressed as part of daily operations.
Highly-detailed KPIs are tracked and the organization has a high level of confidence in its cost forecasting and budgeting.
FinOps Domains
FinOps Domains define the core business outcome(s) that organizations aim to achieve through FinOps. These domains help businesses better control their cloud costs, understand the value they get from the cloud, and continuously improve their FinOps practices. Let’s go over each domain in simple terms:
Understand Cloud Usage & Cost
This domain is all about knowing exactly how your organization is using cloud services and how much it’s costing you. The key here is gathering all the necessary data to see where the cloud costs are coming from.
What happens in this domain?
Organizations track all costs associated with the cloud from direct cloud bills to hidden costs like maintenance.
They collect data on cloud usage, observability, and sustainability.
Teams set up categories and metadata to organize cloud costs so they can easily allocate expenses to different teams or projects.
Reporting and analytics are built to make this data accessible for everyone involved in FinOps.
Example: Imagine you’re running a business where different teams are using various cloud services. In this domain, you’ll collect all the information about what each team is using and how much it’s costing. You also set up reports so everyone can see how they’re contributing to the overall cloud bill.
Quantify Business Value
This domain focuses on connecting cloud costs to the business value they create. So, it’s about more than just spending money on cloud resources. It’s about understanding if what you're spending is worth it in terms of overall value.
What happens in this domain?
Teams map cloud costs to business outcomes, either a monetary value or benefits like faster delivery or customer satisfaction.
Organizations forecast cloud costs based on past data and future plans.
They set and measure Key Performance Indicators (KPIs) to see how well cloud investments are paying off.
Benchmarking is done to compare performance across teams or even with other organizations.
Example: Let’s say you’re spending a lot on cloud servers for a specific project. In this domain, you’ll ask: "Is this project generating enough value to justify the cost?" You’ll track KPIs and forecast whether cloud costs will go up or down based on upcoming projects.
Optimize Cloud Usage & Cost
This domain ensures you’re only paying for what you really need and getting the best rates for your cloud resources. It’s about being efficient with both your cloud usage and the prices you pay.
What happens in this domain?
Teams find ways to use cloud resources more efficiently and turn them off when not needed.
Organizations purchase cloud services at the best possible rates by incorporating discounts or more efficient plans.
Efficiency is measured not just in dollars but also in other metrics like energy usage (sustainability).
Architecture and systems are modernized to better align with these goals, including the use of subscription-based services or software-as-a-service (SaaS) models.
Example: Suppose your company is running cloud servers 24/7 but some servers are not being used during off-hours. In this domain, you’ll work on turning off those servers when not in use, saving money. You’ll also ensure you’re getting the best possible pricing through discounts like reserved instances or savings plans.
Manage the FinOps Practice
This domain is about making sure that the entire organization is on board with FinOps. It’s a practice that needs ongoing management, education, and improvement to align with company goals.
What happens in this domain?
Teams continuously refine FinOps processes to keep cloud usage in sync with the organization's business goals.
FinOps practices are integrated into all parts of the organization, from finance to IT with proper collaboration across departments.
The goal is to create a culture where everyone is responsible for efficient cloud use, not just the FinOps team.
Training, guidelines, and tools are developed to help everyone better understand and engage with FinOps.
Example: Think of this as making FinOps a company-wide effort. You don’t want just the finance team to manage cloud costs. You want the engineering teams, production team, business units, and leadership all working together to improve cloud usage and create value.
FinOps Capabilities
FinOps Capabilities are the essential building blocks of the FinOps practice. These capabilities guide organizations on how they can manage cloud usage, optimize costs, and sync cloud practices with business goals. Here's a breakdown of each FinOps capability:
Turning FinOps into Action
The FinOps philosophy is simple: reduce cloud costs and make smarter, more strategic business decisions. To truly bring Cloud FinOps to life, you need more than just a set of practices, you need a platform that gives you a complete, real-time granular view of how your organization is using the cloud.
With this visibility, you can align finance, engineering, and business goals so that everyone can collectively focus on optimizing resources, eliminating waste, and driving innovation – all while keeping expenses under control.
So, how confident are you that your cloud spend is aligned with your business goals? Are your teams in sync or do costs seem to appear out of nowhere? It’s high time that you turn these cloud costs from a mystery into an asset you can manage with precision.
Curious to see how FinOps combined with cloud cost observability can make a difference for your business? Try it out with Amnic’s 30-day free trial or request a demo today.
In other news, Amnic will be at FinOps X Europe. Swing by to meet our team, check out our cloud cost observability platform and chat with us about how Amnic can help you manage your cloud costs.
