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Cloud financial management as a mixture of technical and financial disciplines

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What is FinOps

Cloud Financial Management, or FinOps, is the operating model for cloud solutions. It combines tools, processes and best practices that enable an organization to better understand, manage and optimize its cloud usage and spending. In addition, cloud financial management fosters collaboration between management, IT, development, finance and procurement departments.

Change of approach to technology consumption with FinOps adoption

Until recent years a certain modus operandi was elaborated and used over the decades. It was based on a cycle that starts when engineering or IT teams request finance teams to procure IT infrastructure and ends when operation teams install it and hand it over to engineers.

This process raises CapEx, takes much time and effort, and increases the cost of failure for organizations due to its sluggishness. It also becomes a limiting factor to experimentation and innovation on behalf of IT teams, who can therefore become even incapacitated by dependencies from other departments. 

In today’s fast-paced world, business leaders seek to innovate, act quickly and with agility; otherwise, they’re destined to lose their digital transformation race and miss out on the competitive edge. 

Luckily, cloud usage approach ensures necessary adjustments that help businesses stay successful  –  cloud adoption has numerous benefits. It encourages technical and financial teams to collaborate in a natural way by providing more flexible access to resources. In this case, IT teams are able to innovate faster due to significantly decreased approval and procurement time. The cost of failure can be virtually equal to zero, since it takes just a couple of clicks to disable cloud resources that turned out to be unnecessary. 

Then, IT teams in this formation become more autonomous: instead of being mere builders, they become true owners of their products since from now on they’re responsible for most of the activities traditionally associated with financial and operational teams, including procurement and deployment. Finally, IT infrastructure costs can be easily managed and taken under control thanks to real-time access to cloud usage data and the possibility to find a perfect balance between the business requirements and their financial capacities.

How organizations should adapt their practices to get the most out of cloud financial management

So the advantages of cloud financial management are not limited to cloud cost optimization and management, and, in fact, they are not the primary objectives for many organizations. Businesses that successfully underwent an IT transformation benefit from a totally new procurement process, but they need to adapt their mindset to a new reality in order to use the cloud to its fullest potential. 

For instance, they need to devise and implement a process that will enable them to track cloud costs and break the costs down by certain teams and projects. Besides, organizations should aim to teach their employees, and primarily IT specialists, how to manage and optimize costs and cloud consumption  –  this way, the application design process becomes more informed and reasonable, and the applications themselves become more optimized and scalable. Cloud costs analysis and forecasting processes should also be rethought and reassigned in order to take full advantage of modern cloud management tools.

The approach to decentralizing cloud cost management will only work if an organization consistently establishes a strong partnership between engineering and financial teams, and invests time and money in human resource training and process development. If a company manages to realize this approach, it will have all what it takes to succeed.

What ultimate advantages cloud financial management brings to businesses

A survey conducted by 451 Research suggests that cloud financial management not only considerably saves money  –  it also helps organizations grow revenue and become more profitable, as well as achieve better overall business risk management, operational resilience, and staff productivity. 

Based on these insights, we can conclude that through helping IT departments play a more significant role in the business development process, CFM provides an invaluable basis and resource for organizations in their entirety. Another important takeaway is that FinOps is not about cutting costs as much as possible  –  it’s all about maximizing the added value while keeping costs as low as they can be.

Nick Smirnov, FinOps and digital transformation enthusiast, CEO at Hystax

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