The rise of digital financial technology in the recent past has put the traditional players of the financial services industry (FSI) in a highly competitive market space. The aggressive fintech entrants are leaving no stone unturned to meet the expectations of today’s tech-savvy customers.
Add to that the geopolitical tensions and harsh economic conditions pushing the FSI CEOs and CIOs to steer clear of unproven experimentation. However, this pragmatic approach does not stop cloud from continuing to be one of the key foundational pillars of the FSI industry. In fact, IDC predicts an almost 30% rise in public cloud spend by 2024. The use of hybrid and multiple cloud environments are also equally rising as the FSI players are expected to offer a more agnostic experience to their financial consumers.
"The ability to shift cloud spending from CAPEX (capital expenditure) to OPEX (operational expenditure) has proven to be a successful enabler for future cloud investments, scalability, and availability."
~ IDC Financial Insights Asia Pacific
But this shift to cloud strategy during uncertain times is putting the FSI CIOs in the firing line. They are constantly caught in the tug of war between keeping the cloud resources available round-the-clock for uninterrupted innovation yet lowering operating costs any means, be it through cloud cost optimization or reduced cloud consumption. And that's where FinOps comes into the picture.
What is FinOps?
According to FinOps Foundation, "FinOps is an evolving cloud financial management discipline and cultural practice that enables organizations to get maximum business value by helping engineering, finance, technology and business teams to collaborate on data-driven spending decisions."
A portmanteau of ‘Finance’ and ‘DevOps’, the cultural practice of FinOps enables cross-functional teams to take ownership of their respective cloud usage by creating a cost conscious culture and following best practices, which, in turn, paves the way for stronger financial accountability, higher cost visibility, and more accurate cloud spend predictability.
At its core, FinOps bridges the communication and collaboration gap between the two most important teams—business and engineering. FinOps is also often referred to as cloud cost management, cloud financial management, cloud cost optimization, etc.
Why is FinOps important in the new cloud economy?
In the last two years, cloud has emerged as the de facto data center for the majority of industries, including FSI. Different as-a-service models have also gained momentum. Platform as a Service (PaaS) and Infrastructure as a Service (IaaS) are particularly found beneficial for the FSI industry as these models not only bring agility, scalability, or faster time-to-market, but they cater to the evolving needs of the industry, starting from compliance regulations to IT and application modernization, and the opportunity to leverage the latest technologies, such as artificial intelligence, machine learning, advanced analytics to gain intelligent insights and fuel enterprise transformation.
However, without having an adequate tracking mechanism or governance in place, FSI CFOs and finance teams face the most challenging part of cloud services adoption, spiralling costs and complex billing. Comprehending variable spend model, understanding multiple cloud resources cost, breaking down the key cost drivers, or defining cost benefit levers become a daily headache for financial organizations. In short, any wrong decision based on an incorrect understanding of the cost drivers is an FSI CIO’s worst nightmare, cloud sprawl. Add to that the lack of data logistics, security concerns, and data silos in the multi-cloud environment that increase the operational, cyber and financial risks in multifold.
In such situations, FinOps act as a disciplined strategy that organizations can implement from the very first step of their cloud journey. In simpler terms, this means that an organization must gain in-depth knowledge of the financial management of the public, private, or hybrid cloud platform before migrating there, follow the best practices, and align its IT and finance goals before and after the migration journey, in order to have better control over their cloud costs.
An effective FinOps practice can significantly help FSI forecast spend more accurately, chargeback BUs, and enable metrics-driven decision-making. It can help financial services institutions to become iterative than reactive, proactively including cost factors in architecture design and processes. The FinOps maturity model—Crawl, Walk, Run—allows businesses to start small and then scale as they move forward in terms of their cloud cost maturity.
What does cloud FinOps or FinOps on cloud stand for?
Cloud FinOps or FinOps on Cloud stands for the same management practice that organizations follow to optimize the OpEx of their cloud computing infrastructures by aligning cloud spending with their cloud and business objectives.
Latest global FinOps trends to watch out for
The State of FinOps by the FinOps Organization throws light on some of the key FinOps trends worldwide.
- Global 2000 companies continue to adopt FinOps and monitor cloud infrastructures and budgets from the very first day of their pre-crawl or crawl stages.
- FinOps skill building remains a challenge due to constant changes in technologies and practices
- There is a steady growth in FinOps cloud practitioners in this year and beyond
- Executive directive, organic adoption, and grass root initiatives are the three most preferred ways to adopt FinOps
- Financial industry practices FinOps the most as they make up 46% of the respondents
- Majority of the organizations are either in Walk or Crawl stage
- Some of the key FinOps challenges are getting engineers to take proactive cost optimization steps, accurate cloud spend forecasts, organizational adoption, and enabling automation, among others
- Having the right FinOps tools is important to manage cloud costs more effectively
- AWS Cost Explorer, Azure Cost Management, Azure PowerBI Dashboards, Google Cloud Cost Tools, Cloudhealth by VMware, and Cloudability Apptio are some of the most popular FinOps tools for cloud financial management apart from third party tools and other home grown tools
FinOps on Hyperscaler Cloud Platforms
All the major cloud providers and hyperscalers offer a set of FinOps tools to optimize cloud usage, pertaining to the specific services and solutions provided by that particular hyperscaler or CSP. These cloud cost management tools offered by AWS, Azure, Google Cloud or IBM Cloud are leveraged by the financial services providers as well as their enterprise cloud customers to manage cloud spend, drive financial accountability, and gain business value in that specific cloud domain.
AWS FinOps is the set of AWS native tools, best practices, and FinOps solutions offered cost management practices on AWS cloud for businesses. The most prominent AWS tools are AWS cost explorer, AWS Budgets, AWS Recommendation, and AWS Trusted Advisor. These tools are applicable only to AWS Services. Similarly, some of the most preferred Microsoft Azure FinOps cost management tools are Azure Cost Analysis, Azure Budgets, and Azure Advisor Recommendations. Together, they make the best FinOps tools for organizations across industries.
How do you implement FinOps?
Three iterative phases define the steps of FinOps adoption and implementation—Inform, Optimize, and Operate.
Inform: The first phase enables FinOps teams to gain visibility and solve multiple issues, including allocation, budgeting, forecasting, and benchmarking. In this phase, FinOps stakeholders get assured of their ROI sans the unwanted surprises. It helps create a high-functioning team.
Optimize: Phase two of FinOps implementation focuses on optimizing cloud spend by leveraging multiple cost levers offered by cloud providers. Organizations are informed about different pricing models and capacity-based pricing structures, for example, on-demand capacity, reservation planning, long-term commitments, etc., along with the pros and cons of each pricing model. Businesses also learn how to turn off unused resources through rightsizing and automation.
Operate: The third phase prioritizes the practice of continuous evaluation of business objectives against the success metrics and how it is going. Speed, quality and cost are the three key metrics used to determine the success of a FinOps framework. In this phase, building an effective FinOps culture remains one of the key action points for organizations, as without having a cost conscious culture, one cannot implement FinOps principles across the organization.
Why does the Financial Services Industry need FinOps as a Service?
Having said it all, managing FinOps across multiple cloud services can be a tricky task for FSI players. That's why a growing need for managed FinOps services is felt across the financial services continuum. We, at Cloud4C, offers an extensive range of FinOps services as FinOps as a Service.
We enable enterprises innovate and improve their cloud spend and budgets by having the right governance of cloud resource utilization and maintain the quality of services for better user and customer experience with Cloud4C FinOps service. The key benefits of Cloud4C FinOps service are:
- Better financial prediction and bringing accuracy of forecasts to avoid cost leakages & budget overruns
- FinOps Module of our SHOP (Self Healing Operations Platform) based resource utilization monitoring for:
- Granular visibility and insights of resources utilization and cost
- Action oriented multi-cloud / multi-dimensional reports through the FinOps tool
- Integration with customer ITSM tools
- Visibility into compliance and security controls to take proactive steps to avoid any financial & brand impact
- Expertise on tools to drive data-based decision making.
Let's take a look at the FinOps Process Flow we follow at Cloud4C:
Why choose Cloud4C FinOps as a Service?
- Multi-cloud Cost Visibility
- Cost Optimization
- Forecasts & Budget Tracking
- Proactive Cost Control
- Utilization Monitoring
- Show-back, Charge-back capabilities
- Cost Reports
- Cost Saving Recommendations
- Tagging Compliance
- Resource Visibility and insights
- FinOps Maturity Assessment
- Security Parameter Assessment
- Security compliance control recommendation
For the financial services industry, FinOps can be a real game-changer in terms of bringing financial accountability and business value in the table. As cloud will continue to evolve in the coming years, it only makes sense to master the art of keeping your costs in check without disrupting the performance of your cloud infrastructure. But, as finance teams of the financial services industry are already overburdened, implementing FinOps practices will just be an added burden, albeit heavy, on their shoulders.
That's why it's highly recommended to partner with the right managed FinOps services provider to ensure your cloud FinOps financial governance is always right on track, today and tomorrow. Feel free to connect with our experts to know more.