What are the Three FinOps Phases?

Once you have your FinOps stakeholders selected, it’s time to put them to work. The FinOps framework has three key phases; Inform, Optimize and Operate.

These phases are a continuous cycle that should be worked through as frequently as possible to ensure active, informed and controlled cloud cost optimization. The operating phases should be used in parallel to the FinOps Maturity Levels; Crawl, Walk and Run, and will serve to naturally increase maturity as a process of continuous improvement.

Inform: Visibility & Allocation

The inform stage is around understanding the current state of your cloud environment. For this you need fundamental visibility of cloud, across multiple cloud vendors. Your multi-cloud FinOps solution should provide you with the confidence that:

• All cloud resources are visible
• Cloud costs are captured
• You’re informed on the allocation of resources whether dedicated or shared
• You have information to set budgets & forecast cloud spend
• You are aware of the state of cloud governance
• You are fully informed on cloud cost accountability

The accountability and responsibility for cloud assets is increasingly moving closer to the business function driving the requirement.  FinOps process ensure that cloud resources are correctly inventoried, tagged, allocated and are managed efficiently, informing the appropriate business group as to ‘what’ they’re spending and ‘how’, so that the group is accountable for the ‘why’.

Set Tagging Strategy, Governance & Compliance

To begin understanding cost ownership you must first implement an effective tagging strategy across your cloud estate, as best practice is to apply a cost center tag to all resources. Cloud resources don’t have the usual meta data that you may see from on-premises assets. As FinOps practitioners, you therefore need to ensure tags are applied to resources to inform you of the ‘what’ , ‘who’, and ‘why’ of each resource. A collaborative approach is needed to define standards within your corporate tagging policy, you should then look to implement a FinOps solution to help provide visibility and ensure governance. This will ensure you are always aware of the health and state of your cloud estate.

Align Spend Data to Cost Centers and Allocate Costs

Once effective tagging has been implemented, you should now have a cost center tag applied to your cloud resources. This cost center tag can then be used to allocate costs and provide transparency and accountability for organizational business units where required. This allows individual business units to understand their cloud spend. With costs allocated to each cost center, stakeholders will be more informed to remove resources when no longer needed and manage consumption. Only when spend is allocated can stakeholders begin to act, so it is important to have visibility of all cloud resource spend which is not allocated to a cost center. You should have KPI’s against this number and look to reduce it as maturity increases.

Understating & Allocating Shared Costs

It’s common that at least some portion of any cloud environment costs are shared across multiple business units, projects or applications. It is therefore important to identify and allocate these costs appropriately, to achieve cost accountability.

Provide Timely Data

A key part of FinOps is providing timely, accessible data and passing it through to those who need it to take action. Through a FinOps solution, FinOps professionals, engineers and finance teams should all be working to the same data, with agreement on spend and accountability. Together, strong decisions can be made and inefficient behaviors can change.

Optimize: Right-size, Realign and Review

The second phase is to optimize. In this stage you will identify, define and document optimization opportunities through a collaborative approach with other key stakeholders in the business. There are two main types of optimization in the cloud – Rate and Usage; you should look to utilize both. 

Identifying & Eliminating Non-Utilization 

An essential insight from your FinOps Solution is comprehensive reporting which enables you to quickly identify resources that are not being utilized and through tagging standards, understand who and what these resources are for. The FinOps team can report on this in near real-time, enabling business owners to take fast, appropriate actions and capture cost savings. It is important to ensure you collaborate with stakeholders before removing these resources from your estate, as there may be a reason that these resources are not being used at this time – for example, a payroll system which is only used at the end of the month. 

Right-Size Cloud Resources

Now that you can see your resources it is time to look for optimization opportunities. A FinOps solution will often highlight common areas for optimization, but you may also want to interrogate your provisioned resource and your usage for resources which can be changed. Examples include Hot storage, which has not been accessed in a long time, or, optimizing load balancer by considering Elastic Load Balancers etc. 

Provide Timely, Consistent Spend & Usage Data to all Stakeholders

The key to taking advantage of rightsizing opportunities, is providing consistent and regular reporting to keep stakeholders engaged. Enterprise-level FinOps solutions, such as Vitado by Certero, open-up the visibility of these reports (as well as the underlying data) to stakeholders across the FinOps technical, operational and financial/procurement functions. This will allow you to see the resource usage and associated tags, providing the meta data required to answer fundamental questions such as ‘who owns this resource?’ and ‘What is this resource for?’ etc. This facilitates open and honest conversations between key stakeholders, to determine whether rightsizing these resources is the right decision (Remember the FinOps ‘Iron Triangle’… cost isn’t the only driver to consider when looking at cloud resources). 

Reviewing and Identifying Commitment-Based Discounts 

Constant measurement of your usage and potential purchasing of commitment-based discounts can provide a wealth of cost saving opportunities. Commitment-based discounts allow you to pre-purchase cloud resources at a discounted rate of up to 70%. You should be looking for resources within your estate that are likely to remain there for a prolonged period of time and therefore would benefit from a reserved instance, or a resource type that you are going to continue using and could benefit from a savings plan. Once a commitment-based discount has been purchased, you can continue to optimize your effective savings rate by ensuring that it is being utilized. Identify commitment-based discounts with low utilizations and see if other resources can be put in to its scope. Again, this step needs strong communication. Don’t commit to a commitment-based discount without speaking to the appropriate resource owners, as resources could be due to be decommissioned.

Operate Phase: Take Action

In this phase you will take action and put processes in place to ensure standards are maintained. This allows you to realign your goals to suit business needs and review processes, policies and cloud data to define KPI’s such as savings rates and utilization rates against a benchmark.

Align Teams

A key step in this process is ensuring all teams are collaborating and informed. It is important that everyone has access to data that allows them to make informed business decisions. This may mean you want to ensure all stakeholders have been brought-in to discuss the tagging policy and have had their concerns heard and had their options communicated. Ensure all of your goals are aligned and communicate the plan.

Training & Education

At this stage you will be aware of any new training you will need to provide. For example; do finance need a crash-course in Commitment Based Discounts? or do engineers need educating on BYOL perhaps? Build-out your cloud training plans.

By going through the inform and operate stages you may notice that your tagging strategy is not being adhered to. In the ‘optimize’ phase, you may update tags that might then require some further training on the importance of cloud tags in the ‘operate’ phase. Be sure to add-in some cloud policy violation alerts in to your FinOps solution. 

Evaluate

Once changes have been made, you should evaluate the impact and track against your KPI’s. As this is a cycle, your goals and KPI’s may need to change. This then leads to back to the first stage of ‘inform’. 

How Vitado by Certero Can Help

Good information, when readily available, enables good, safe decision making. Vitado can help to inform FinOps teams on the status and health of multi-Cloud environments through the Vitado by Certero solution.

Vitado does this across multiple Cloud vendors, enabling teams to ‘see’ the full picture through a single FinOps solution and be able to report holistically on cost, efficiency, optimization and governance.

This provides a central platform for all stakeholders, empowering teams to take action.

Cloud is also only one element of total IT and the Certero Unified Platform approach to viewing and managing assets breaks-down frustrating data silos, bringing all your IT asset data and intelligence together into a ‘single source of the truth’, covering full enterprise-wide scope of on-premises hardware, software, devices everywhere, SaaS and, Cloud. All simply unified, giving you the full picture and unity of understanding across operational and leadership teams as everyone can simply work to the same complete information source.