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How FinOps can empower financial operations at every level
Posted by Grace Townsley
July 19, 2023
If your company has dabbled in cloud computing — or read more than a couple of business tech articles in the past year — you’ve no doubt come across the new big business tech buzzword: FinOps.
At first glance, FinOps (coming from the words “finance” and “DevOps”) seems to be a cost-saving system to help companies keep their cloud spending low and their efficiency high. But when you break down FinOps, and look closely at how the initiative impacts your teams and departments, it becomes clear: FinOps is about more than cost savings. It’s a game-changing practice that empowers companywide initiatives.
What is FinOps?
FinOps is a unique management approach that enables businesses to achieve a high level of cloud computing cost control, optimize spending and increase the value of their cloud computing infrastructure by giving each cloud team responsibility for their own spending.
With traditional on-premise infrastructure, the finance department is easily able to control costs by approving infrastructure purchase requests that are in budget and denying or delaying requests that are out of budget. The communication is simple. The process is straightforward. Each department understands their budget and has a clear idea of what they can spend.
But cloud computing is different. Cloud solutions typically run on a pay-as-you-go model. Companies are charged for how much cloud storage they use, what cloud systems they leverage, how many users activate cloud services and more. And because each project team with access to the cloud can have the opportunity to purchase new services or leverage more existing cloud services, cloud costs can quickly spiral out of control.
FinOps recognizes this new, cloud-driven way of doing business. Rather than running every purchase through the finance team and leaving most other departments entirely out of the budget conversation, FinOps invites every team — from engineering and IT to finance and business operations — to engage in budgeting, purchasing and cost management.
Beyond cost savings, what is the purpose of FinOps?
The traditional definition of FinOps refers to the system as a financial management discipline and general business practice that encourages multiple teams (often finance, business management, technology and engineering teams) to coordinate their efforts and share responsibility for cloud costs.
FinOps makes every team accountable for their own projects. It gives ownership over decisions to the very departments making them, so they alone are responsible for how they allocate their budget.
Instead of the finance department overseeing the cost-side of every operation, each individual team has the autonomy to plan their initiatives, budget for what they need, execute the plan and fully own the outcome.
How is FinOps empowering the financial operations of everyday businesses?
FinOps has the power to overwhelm a team or empower it. For teams that are poorly prepared to manage their own cloud expenses, or teams that struggle with cost-benefit analyses, successfully deploying a FinOps practice may require additional training and guidance.
But for teams adequately prepared to manage aspects of their own budgets, FinOps can be just the empowering financial operations solution they’ve been looking for.
With on-premise technology solutions, each individual team is simply responsible for their ideation and delivery. But FinOps gives these teams the financial confidence they need to both deliver solutions and optimize each product with consideration for costs. It pushes these project leaders to consider the health of the whole company, the collaboration between every department and their role in the success of the organization — all while taking ownership of what they offer.
Take a look at this example of how optimized financial processes foster company-wide ownership and collaboration:
Imagine a mid-size SaaS company that relies heavily on cloud infrastructure to host and deliver its software solutions. As customer demand and competition increase, the company realizes it needs to better optimize its cloud costs, tighten up financial control and empower each team to deliver more innovative solutions.
The SaaS company gathers its IT, DevOps, and finance teams to collaborate on cloud spending. Together, they agree to four key goals:
1. Shared responsibility.
Each team will recognize their personal cloud budget and plan accordingly.
2. Cost transparency.
Each department will compare and share spending reports, allowing each team to understand the impact of their activities on the whole company. This transparency will foster a sense of ownership and healthy accountability.
3. Collaborative decisions.
Rather than operating in silos, the IT and DevOps teams agree to work closely with the finance department to analyze cost data, revenue trends and ROI. Together, they’ll work to reduce waste and scale back redundant resources.
4. Shared budgeting and forecasting.
Rather than the finance team alone managing budgets and creating forecasts, each department agrees to set realistic budgets together — and monitor their adherence throughout the year. As a collective group, they’ll work to proactively manage costs without sacrificing business objectives.
While the finance department used to independently oversee budgets at this SaaS company, with the FinOps program in place, IT and DevOps are now empowered to purchase the cloud services they need, while monitoring their own budget and spending levels. They’re incentivized to increase their cost-efficiency every month, the finance team feels supported by the collaboration, and the executive team is pleased to see strong ROI from every department.
This fictional example underlines the financial confidence FinOps delivers
Today, FinOps is about more than efficiency. While efficiency is a natural result of collaboration, an empowered company drives stronger results across the board. Because by creating a cooperative environment where your teams are mutually accountable and responsible for the company’s overall results, you can drive stronger profitability and greater innovation at every level.
Want more? In addition to taxes, accounting, bookkeeping and CFO services through its FinOps, Escalon’s Essential Business Services include PeopleOps (HR, benefits, recruiting and payroll) and Risk (business insurance). Talk to an expert today.
This material has been prepared for informational purposes only. Escalon and its affiliates are not providing tax, legal or accounting advice in this article. If you would like to engage with Escalon, please contact ushere.
As a professional copywriter in the finance and B2B space, Grace Townsley offers small business leaders big insights—one precisely chosen word at a time. Let's connect!