Understanding the FinOps Lifecycle: Inform, Optimize, Operate

What Is Cloud Cost Management? 

FinOps is gaining importance as the real-time nature of cloud operations changes how organizations manage their resources. Unlike traditional procurement, where purchasing decisions were made over weeks or months, passing the proposal from one department to another, cloud resources can now be acquired in seconds. This flexibility, while being the biggest advantage of the cloud, has created a gap between finance and operations, leading to inefficiencies in managing cloud costs. To address this, FinOps (Finance+DevOps) was introduced as a framework for better cloud cost management.

According to the State of FinOps ’24, reducing cloud waste was the top priority for FinOps practitioners across all spending tiers, driving the rapid adoption of FinOps practices. However, before you start thinking about saving money, it's crucial to understand what FinOps is and, more importantly, its lifecycle. This blog explores the need of the FinOps lifecycle and its core phases: Inform, Optimize, and Operate. 

The FinOps framework guides organizations in the efficient allocation of cloud resources, balancing cost, performance, and quality requirements.

This is part of an extensive series of guides about IaaS.

What is FinOps? 

FinOps is a framework and cultural practice that maximizes cloud value through data-driven decisions and financial accountability. It encourages collaboration among engineering, finance, and business teams to manage cloud costs effectively. By promoting ownership of cloud usage, FinOps enables faster product delivery and better financial control. It involves making informed trade-offs between speed, cost, and quality, ensuring teams optimize cloud investments for growth rather than just cost savings. For a detailed walkthrough of FinOps, you can explore our guide: What is FinOps?

Why Do We Need Phases in the FinOps Lifecycle?

Why isn't FinOps a straight shot to optimization? Why are phases necessary in the FinOps lifecycle? 

Because the cloud changes in real time, it’s impossible to optimize with a one-time task. Organizations operate in constantly changing cloud environments, requiring them to adapt and refine their practices continuously, making cloud financial management an ongoing, iterative process. 

Here’s why phases of the FinOps lifecycle are crucial:

• Dynamic Cloud Environments: Cloud operations are fluid, with evolving workloads and requirements. The phases—Inform, Optimize, and Operate—help organizations adapt and refine their strategies to match these changes.
• Maturity Models: Within each phase, organizations progress through maturity models known as Crawl, Walk, and Run. This model emphasizes that no organization can jump directly into advanced practices. Instead, they must build foundational skills and processes before moving to more complex activities.
• Iterative Growth: The lifecycle and maturity models support iterative growth. Organizations cycle through phases as they mature, allowing them to tackle new challenges and improve continuously. This iterative process ensures alignment with business goals and maximizes the value derived from cloud investments.
• Tailored Approaches: Different teams or departments may be at varying stages of maturity, even within the same phase. This flexibility allows organizations to focus on areas that need the most attention, ensuring a balanced and effective cloud financial management strategy.

What are the Phases of the FinOps Lifecycle?

Here's an in-depth explanation of the phases of the FinOps lifecycle, along with specific activities carried out in each phase:

Inform

The Inform phase is the foundation of the FinOps lifecycle, where organizations gain visibility into their cloud costs and usage. This phase focuses on collecting and analyzing data to understand spending patterns and resource allocation. 

By establishing clear visibility through detailed reports, teams can make informed decisions, allocate costs accurately, and set the groundwork for optimizing cloud resources. This phase empowers stakeholders with insights into cloud usage, enabling them to identify inefficiencies and prepare for subsequent phases of optimization.

Key Activities can include:

• Collecting and organizing data from various cloud sources to provide a comprehensive view of cloud expenses.
• Assigning cloud costs to specific teams or projects based on tags and accounts.

• Developing key performance indicators to measure cloud efficiency against industry and internal benchmarks.
• Creating budgets and predicting future cloud expenses through detailed forecasts to avoid unexpected costs.
• Providing insightful cloud reports to business units, showing their respective cloud usage and costs.
• Ensuring all stakeholders have access to accurate and timely data to make informed decisions.
• Generating reports that highlight spending trends and potential areas for improvement.

• Using analytics to guide strategic decisions about cloud investments.

Optimize

The Optimize phase builds on the insights gained from the Inform phase by implementing strategies to enhance cloud efficiency and reduce costs. This phase focuses on making proactive adjustments to resource usage and rates, ensuring that cloud spending aligns with business objectives and maximizes value.

This involves right-sizing resources, utilizing discount plans, and automating processes to eliminate waste. By optimizing cloud usage, organizations can ensure that their resources are used efficiently and that spending is minimized without compromising performance. Collaboration across teams is crucial during this phase to ensure that optimization efforts are aligned with the organization’s goals.

Key activities can include:

• Adjusting cloud resources to match actual demand, avoiding over-provisioning and underutilization.
• Taking advantage of cloud provider discounts such as Reserved Instances, Savings Plans, and Committed Use Discounts to reduce costs.
• Implementing automated processes to dynamically adjust resources and eliminate unused instances.
• Adopting modern cloud architectures and practices that enhance efficiency and reduce costs.
• Engaging teams from different departments to align optimization efforts with business goals.
• Continuously analyzing cloud usage patterns to identify inefficiencies and opportunities for improvement.
• Developing and implementing strategies to lower overall cloud spending while maintaining performance.
• Keeping a close watch on cloud performance and cost metrics to ensure alignment with business objectives.

The Operate phase is the action stage of the FinOps lifecycle, where the strategies developed during the Optimize phase are put into practice. This phase is focused on implementing these strategies to achieve the goals set earlier and taking optimization to the next level through advanced automation and process improvements.

At this stage, organizations shift their focus from planning to execution. The emphasis is on embedding FinOps practices into daily operations and creating a culture of accountability where every team member is responsible for their own cloud spending. This involves ensuring that everyone understands the importance of cost management and is equipped with the tools and knowledge to make informed decisions. By encouraging open communication and shared accountability, organizations can drive more effective cloud management and maximize the value derived from their cloud investments.

Key activities can include:

• Utilizing advanced automation tools to streamline processes, reduce manual intervention, and enhance operational efficiency.
• Encouraging individual accountability by providing teams with the tools and data needed to manage their cloud spending responsibly.
• Offering continuous training and education to keep teams updated on best practices, innovative technologies, and new optimization techniques.
• Promoting a culture of collaboration across departments to align cloud operations with business objectives and ensure everyone works towards common goals.
• Conducting regular reviews and feedback sessions to assess the effectiveness of implemented strategies and identify areas for further improvement.
• Leveraging analytics and real-time data to make informed decisions and adapt strategies as business needs evolve.
• Encouraging proactive problem-solving and innovation to continually refine cloud management practices and drive better outcomes.

How Can Finout Help You Implement FinOps?

Finout is the ultimate cloud cost management solution that doesn’t just follow the FinOps framework—it elevates it. Imagine a world where FinOps, DevOps, and Finance teams join forces effortlessly to slash cloud costs and boost profitability, all without using a single line of code or fiddling with your existing tags. Sounds like a dream, right? Well, with Finout, it’s the reality.

Here’s how Finout transforms complex financial operations into a breeze with just four simple steps:

• Visualize Your Spend: Consolidate your cloud spending data and leverage Finout’s advanced analytics and optimization tools to proactively enhance cost efficiency and maximize the ROI of your cloud initiatives.
  
  
• Enrich Your Data Without Code: Integrate with cloud providers and services to get  detailed cost breakdowns for individual resources, providing unparalleled visibility into your cloud spend at a granular level.
  
  
• Allocate 100% of Your Cloud Spend: Streamline cost categorization with virtual tags for precise allocation of expenses to departments, projects, or teams, transparent cost attribution, and effective showback practices.
  
  
• Reduce Costs from Day One: Identify cloud waste and anomalies and provide rightsizing recommendations to optimize your spend across the entire cloud landscape from the very beginning.

Book a demo today to learn more about how Finout can help you implement FinOps.