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What is FinOps and what are its advantages

Is that whole package of contracted computing resources really used? Is the capacity and the right number of servers adequate? For internal use workloads, is it really necessary to pay for periods of use outside of business hours? Is my application taking full advantage of the contracted cloud infrastructure?

If you've already asked questions like these, then you need to know and implement FinOps methodologies in your business. The name is exactly what it seems to be, the junction of Finance (Fin) and Operations (Ops), which aims to allow the IT team the necessary visibility to make decisions between speed, performance and cost, when building solutions in Cloud Computing.

CIOs of medium and large Brazilian companies report that one of the main barriers to a large-scale use of Cloud Computing is budget unpredictability. In addition to technical factors such as additional expenses with data transfer, for example, there are also financial factors, such as exchange rate volatility. 

FinOps methodologies aim to minimize this volatility, allowing CIOs to automate routines to optimize spending on Production systems, as well as make better decisions, from a financial point of view, when publishing systems that are under development. 

>> Learn more about the FinOps methodology here

According to Gartner, medium and large companies with cloud services don't use 30% of what they pay for. That's where FinOps comes in. The practice of managing the expenses that happen in the cloud ensures that at the end of the month, the company is paying for what is really needed. 

If, on the one hand, clouds are a revolution in the market - they have even been compared with the revolution in the automotive industry, led by Henry Ford, which automated several processes and made it possible to produce more cars in less time -, on the other hand, it is essential manage the expenses of this revolution and, in addition to having the company's IT team fully aware of the services contracted in the cloud, also inform the various areas of the business, especially the financial one, about the features and needs of each cloud workload. 

FinOps operations provide visibility into application-related costs for the entire IT team, establishing continuous cycles of financial optimization. The monitoring of these metrics alerts you to costs and needs in real time, and performs benchmarking to understand if that amount of resources is enough or if it is in excess. 

As several managers of companies have already verified, normally, computing resources become idle in specific windows, according to the workload. A simple technique, such as “pausing” computing resources after business hours, for example, can bring double-digit percentage savings on your month-end bill. 

It is from the perception of these excesses that the manager comes into the picture, who optimizes services and, with the help of FinOps, chooses to remove those that are not needed, anticipating the seasonal contracting of software, bandwidth, server capacity, things that are necessary for the service to be performed, ensuring the combination of flexibility with elasticity, speed and reliability, ideal for your company.  

Among the advantages of applying FinOps, such as achieving synergies between the different departments of the companies, it is possible to highlight some other optimizations such as: 

– Accurate view of the cost policy: as it is possible to divide the costs of each of the company's areas, it is easier to allocate expenses so that each one is responsible for what they consume;  

– Consumption based on capacity: almost as a result of the first optimization, from the understanding of expenses by area, it is possible to create a consumption policy X need X capacity;  

– Definition of the best security policy: It is no longer news that security is one of the main investments in companies, especially those making their transition to digital. The FinOps tool follows the best security practices for providers, ensuring protection for the work environment; 

– Facilitates the implementation of IT organization strategies: after going through more obvious cost cuts and planning future activities more accurately, IT professionals start to have a more strategic thinking for the company, such as the possibility of delivering the same with less amount of infrastructure, for example; 

– Analytical opinion of what happens with the environment: FinOps generates detailed reports that provide a highly unified view of the cloud. As a result, it is possible to create dashboards to highlight trends, place tags and various other features that help to forecast the company's overall costs in one place; 

– Helps in the governance of digital processes: make quick decisions and automate processes to solve problems, such as turning off the machine after a certain time when it is not being used, thus reducing the cost of electricity. 

From these optimization examples, it is also worth reflecting that initially, FinOps is associated with cost reduction, but as its practice matures, the result can become an increase in revenue. Once the financial efficiency of the operation is assured, the – predicted – increase in cloud spending may signal the growth of the customer base, greater speed in the launch of products and resources or even the migration of less efficient systems to the cloud.

FinOps Cycle

The first step is to get all the information about workloads and their relationship to business processes. Then the idea is to understand what can be used, discarded or optimized for each of these workloads. Recurring efficiency assessments take place with the FinOps committee, which is made up of teams from the finance, technology and business departments. In the last stage of the cycle, the plans are put into practice and are under the responsibility of the FinOps committee so that the cycle can repeat itself.

The FinOps methodology can be structured with professionals from the company's IT team, or outsourced, through managed Cost Optimization services. At Matrix we offer FinOps in the SaaS model (software as a service), where the FinOps committee can be managed by Matrix or by the customer.

The union of the IT team with the other areas of the companies guarantees a better alignment between all teams and, with FinOps, the possibility to look at the company's present and organize itself financially for the future.

Want to learn more about how Matrix can help you on your journey to the cloud and digital transformation?

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André Tellini
Product manager