Question: What are the phases of FinOps?

Answer

The FinOps lifecycle is structured around three iterative phases: Inform, Optimize, and Operate. These phases are designed to help organizations manage their cloud costs effectively, ensure financial accountability, and maximize the value of their cloud investments.

Inform Phase

The Inform phase is the foundational step in the FinOps lifecycle. It focuses on providing visibility, allocation, benchmarking, budgeting, and forecasting of cloud costs. Here are the key activities in this phase:

• Visibility: Gaining accurate and timely visibility into cloud usage and expenses. This involves identifying data sources for cloud cost, usage, and efficiency data.
• Allocation: Allocating cloud spend based on tags, accounts, or business mappings to enable accurate chargeback and showback. This helps in delivering proper cost transparency and ensuring that costs are attributed to the correct business units or applications.
• Benchmarking: Developing capabilities in budgeting, forecasting trends, and building KPIs for benchmarking. This helps teams understand how effectively they are operating compared to others or within different teams.
• Budgeting and Forecasting: Ensuring ROI while staying within budget and accurately forecasting spend. This involves using data to make intelligent decisions and avoid surprises in cloud spending.

Optimize Phase

The Optimize phase follows the Inform phase and is centered on optimizing the cloud footprint based on the data and capabilities developed earlier. Here are the key activities:

• Resource Optimization: Identifying opportunities to improve cloud efficiency by rightsizing underutilized resources, taking advantage of modern architectures, and managing workloads. Automation techniques are used to eliminate waste from unused resources.
• Cost Optimization: Utilizing committed-usage discounts such as Reserved Instances (RIs), Savings Plans (SPs), and Committed Use Discounts (CUDs) to reduce costs. This involves visibility, analysis, and reporting capabilities to empower the purchase and management of these pricing models.
• Collaboration: Collaboration across teams to optimize visibility, reporting, and management processes. This ensures that cloud performance aligns with the organization’s cloud value goals.

Operate Phase

The Operate phase is about implementing organizational changes to operationalize FinOps using the data and capabilities developed in the previous phases. Here are the key activities:

• Governance and Compliance: Establishing cloud governance policies, compliance monitoring, and empowering individuals through training programs, team guidelines, and automation policies aligned with organizational objectives.
• Continuous Evaluation: Continuously evaluating business objectives and the metrics they track to ensure alignment with cloud spend. This phase measures business alignment based on speed, quality, and cost.
• Cost Management: Maintaining ongoing cost management to ensure cloud spending remains under control and adapts to changing needs or market conditions. This involves building a Cloud Cost Center of Excellence composed of business, financial, and operational stakeholders.

Iterative Process

The FinOps lifecycle is iterative, meaning organizations may be working in multiple phases simultaneously across different business units, applications, or teams. The goal is to continuously develop strategies, refine workflows, and mature the process to reduce the time required to cycle through these phases.

By cycling through these phases, organizations can achieve financial clarity, maximize the value of their cloud investments, and ensure that cloud spending aligns with business objectives.