Your ultimate guide to Cloud Financial Management

Cloud Financial Management is not solely about reining in costs; it’s a dynamic approach to maximising the value cloud solutions bring to your organisation, embracing the agility, innovation, and scale that cloud solutions offer. Discover the essentials of CFM, exploring how it transforms financial practices to align with the fast-paced landscape of cloud computing.

What is Cloud Financial Management?

Applying conventional, static planning, IT budgeting, and cost assessment models to the dynamic landscape of cloud usage can pose significant risks. This mismatch may lead to inaccurate planning and diminish visibility, ultimately resulting in missed opportunities for effective cost optimisation and control, hindering the realisation of long-term business value. To sidestep these challenges, it’s crucial to actively manage costs throughout the cloud journey, whether you’re building applications natively in the cloud, migrating existing workloads, or expanding your cloud services adoption.

Cloud Financial Management (CFM) solutions play a pivotal role in this transformation, offering tools for enhancing cost transparency, control, forecasting, and optimisation. Beyond that, these solutions contribute to fostering a cost-conscious culture that instils accountability across all teams and functions. By leveraging CFM, finance teams gain insights into cost origins, operate with minimal unexpected expenses, strategise for dynamic cloud usage, and achieve savings on cloud expenses as teams scale their cloud adoption. Sharing this financial context with engineering teams equips them with the necessary insights for intelligent resource selection, utilisation, and optimisation.

What is FinOps?

Fundamentally, FinOps represents a cultural approach to managing cloud costs, emphasising collective ownership of cloud usage within a framework of established best practices overseen by a central group. Collaborative efforts across cross-functional teams encompassing engineering, finance, product, and more are integral. This collective engagement aims to expedite product delivery while concurrently enhancing financial control and predictability. FinOps encompasses Cloud Financial Management.

The FinOps Lifecyle

The FinOps lifecycle consists of three elements; inform, optimise, and operate.

At any given time, a company can find itself in multiple phases, contingent upon the specific business unit, application, or team undergoing its respective journey.

Inform – visibility and allocation

In the inform phase of the FinOps lifecycle, activities revolve around identifying data sources for cloud cost, usage, and efficiency. Utilising this data for allocation, analysis, and reporting empowers teams to excel in budgeting, forecast trends, establish benchmarking KPIs, and unveil the business value of cloud spending. Accurate spend allocation, achieved through tags, accounts, or business rules, ensures precise reporting. As teams benchmark against others and assess operational efficiency, combining cloud cost data with sustainability metrics enables key performance indicator visibility. The dynamic nature of the cloud demands continuous data-driven decisions for optimal business outcomes.

Optimise – rates and usage

During the optimise phase of the FinOps lifecycle, activities focus on leveraging insights gained in the inform phase to enhance cloud efficiency. Cloud providers offer diverse avenues for resource optimisation, including rightsizing underutilised resources, adopting modern architectures, and automating waste elimination. This phase also entails optimising cloud rates through visibility, analysis, and reporting for effective management of commitment discount pricing models. Collaboration across teams ensures streamlined processes aligned with the organisation’s cloud value goals, ultimately maximising value from the cloud investment.

Operate – continuous improvement and usage

Within the operate phase of the FinOps lifecycle, activities revolve around instituting organisational changes to operationalise FinOps, utilising data and capabilities developed in the inform and optimise phases. This encompasses establishing cloud governance policies, monitoring compliance, and empowering individuals through training programs and automation policies aligned with organisational objectives. Success in FinOps requires fostering a culture of accountability, and promoting collaboration among engineering, finance, and business teams for continuous, data-driven action. Throughout this phase, the goal is iterative development, refining workflows, and evolving FinOps operations through ongoing evaluation and adaptation.