2025 FinOps Readiness: Understanding the Framework, One Term at a Time 

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Predicting what’s next, reacting in real-time, automating with precision…it all starts with cloud. But keeping cloud costs in check? That starts with FinOps. 

FinOps is a strategic framework that brings consistency to cloud cost management. It gives organizations a structured way to track, optimize, and collaborate around cloud spend without slowing innovation or growth – and it works. Enterprises that combine FinOps practices with technology expense management have been shown to double their savings potential, stretching every dollar further when it matters most. 

FinOps is built to simplify, but it opens a world of interconnected phases, domains, and capabilities that can feel overwhelming for practitioners. If you’re already confused, don’t worry. Here we break down the fundamentals and the trickier aspects of the framework so you can start saving with confidence.  

Note: this guide is meant to simplify what feels complex. If you want a more comprehensive overview of FinOps, their website will have everything you need.  

The FinOps Framework 

The standard operating model for organizations practicing FinOps, including three phases and four domains.  

The Three Phases of FinOps 

Teams move through the three phases of FinOps – Inform, Optimize, Operate – repeatedly to stay aligned and in control of cloud costs as usage scales and priorities evolve. 

  • Inform: This is about getting visibility. You figure out who’s spending what, how much, and where it’s going.  
  • Optimize: Now that you can see what’s going on, you find ways to spend smarter. That might mean cleaning up unused resources or locking in discounts. Basically: cut waste, keep what works. 
  • Operate: This is where you build habits. You put tools and processes in place so that staying on top of cloud costs becomes part of the day-to-day – and ultimately, a long-term, sustainable business practice. 

The Four Domains of the FinOps Framework 

Each domain reflects a goal of FinOps, with specific capabilities that show how to achieve it. We’ll break down some of the more complex capabilities later. First, here’s a high-level look at what each domain is all about. 


Domain #1: Understand Cloud Usage & Cost
“What are we using, who’s using it, and how much is it costing us?”

This domain is all about pulling in your cloud usage and billing data, organizing it, and making sense of it: what you’re spending, where it’s going, and who’s responsible for what.  

  • In the Inform phase, this might look like pulling in billing data, tagging resources, and starting basic cost reporting. 
  • In the Optimize phase, you could be fine-tuning allocation, cleaning up tags, or setting up anomaly alerts. 
  • In the Operate phase, this means automating reports and maintaining real-time visibility across teams. 

Domain #2: Quantify Business Value
“Are we spending wisely? What are we getting out of it?” 

This domain is about making sure your cloud investments are delivering value and not just creating more spend. You start forecasting, comparing performance across teams, and calculating things like cost per transaction or cost per customer. 

  • In the Inform phase, this might look like mapping costs to teams or services and running simple forecasts. 
  • In the Optimize phase, you may be refining unit costs, comparing performance, or adjusting plans based on trends. 
  • In the Operate phase, this means using cost-to-value insights in planning, budgeting, and investment decisions. 

Domain #3: Optimize Cloud Usage & Cost
“Where are we overspending and how can we fix it?” 

Now that you can see how cloud spend connects to business goals, it’s time to clean house and optimize usage. The goal is to reduce costs while maintaining performance. 

    • In the Inform phase, this might look like spotting idle resources and flagging overprovisioned services. 
    • In the Optimize phase, you’re rightsizing, applying discounts, and removing underused tools. 
    • In the Operate phase, optimization is ongoing, automated, and scaled across teams. 

    Domain #4: Manage the FinOps Practice
    “How do we make this a sustainable, day-to-day part of how we operate?” 

    This domain is about making sure everything you’ve built sticks. It’s the people, processes, and policies that make FinOps sustainable and scalable across the business.  

      • In the Inform phase, you’re assigning ownership, setting policies, and choosing initial tools. 
      • In the Optimize phase, you may be training teams, refining workflows, or piloting automation. 
      • In the Operate phase, this could mean running maturity checks and embedding FinOps into daily operations. 

      As you can see, each phase and domain play a different role, but they all work together to help you understand your cloud costs, make smarter decisions, and get the most value from your investments. 

      Complex FinOps Capabilities, Cleared Up  

      Some parts of FinOps, like reporting or budgeting, are pretty straightforward. Others? Not so much. Let’s break down a few of the terms that might leave you scratching your head. 

      What is Cloud Allocation?  
      Under Domain 1: Understand Usage and Cost 

      Allocation is the process of identifying which teams or projects used which cloud services and making sure the right costs are assigned to each one accurately. This seems simple, but it can quickly get complex when working with multi-cloud, shared resources, untagged assets, and cross-charging scenarios.  

      What is Cloud Chargeback?  
      Under Domain 4: Manage the FinOps Practice 

      Chargeback is when teams are billed for their cloud usage, usually using internal budgets. Instead of just seeing the cost (which is called “cloud showback”), teams are financially responsible for it. Chargeback creates strong accountability.  

      What is Anomaly Management?  
      Under Domain 1: Understand Cloud Usage & Cost 

      Anomaly management helps teams spot unusual spikes or drops in spending by using automated rules or machine learning to flag anything out of the norm. It’s how you catch issues early, like a misconfigured service or unexpected usage, before they turn into costly issues. Common challenges here: defining what qualifies as an anomaly, setting thresholds, and knowing who’s responsible to act on alerts. 

      What is Cloud Forecasting?  
      Under Domain 2: Quantify Business Value 

      Forecasting works like a GPS for your cloud spend, mapping out where you’re going based on the route you’re on. Teams can predict future cloud costs based on current usage, upcoming projects, and seasonality. The big issue here is data accuracy. Forecasts act on what they’re fed – bad data, bad calls.   

      What is Unit Economics?  
      Under Domain 2: Quantify Business Value 

      Simply put, unit economics is the process of tying cloud spend to business value. That might be the cost to support one customer, run one transaction, or power one feature in your app. This is one of the most complicated FinOps capabilities to act on because many organizations don’t have the data maturity to map cost to outcomes or they don’t know how granular to get. 

      What is Architecting for Cloud?  
      Under Domain 3: Optimize Usage & Cost 

      This capability focuses on designing systems for cost efficiency in cloud-native environments – not just lifting and shifting old systems from on-prem. This is more of an engineering-driven capability, and FinOps or finance teams may not have visibility or influence in how workloads are built.  

      What is Intersecting Disciplines? 
      Under Domain 4: Manage the FinOps Practice 

      This capability is all about cross-functional collaboration: ensuring teams like IT asset management (ITAM), IT Financial Management (ITFM), security, procurement, and others have access to the same data to make aligned decisions around cloud costs. To unpack all of these technology expense management terms, check out Tangoe’s related guide

      Advisory services can really help here to define the strategy and plan – who’s responsible for what, and aligning goals across different functions and priorities – so you can optimize, save, and transform.  

      What is Cloud Sustainability? 
      Under Domain 3: Optimize Usage & Cost 

      This capability is about evaluating cloud decisions based on environmental impact, not just cost. Cloud cost management is no longer just about keeping your budget low, but also your corporate environmental footprint.  

      Learn more about the imperative of GreenOps and how CIOs can lead the way with this guide from Tangoe’s CIO, Mark Troller.  

      What is FinOps Tools & Services?  
      Under Domain 4: Manage the FinOps Practice 

      This capability is about using the right FinOps solutions and partners to lay the groundwork for effective cloud financial management.  

      A FinOps-certified platform is tested and proven to meet the rigorous criteria across the FinOps Framework’s domains and capabilities, but not all certified solutions offer the same level of cloud visibility and control. This is a critical distinction, especially in the face of today’s evolving tech landscape where costs come not just from cloud infrastructure but also from SaaS, licensing, and one of the biggest curveballs hitting budgets today: AI. Over 60% of FinOps teams now manage AI spend, compared to 31% last year. 

      Tangoe One Cloud goes beyond certification by delivering deep visibility into cost and usage across IaaS, SaaS, licensing, and AI – with full support for FOCUS, the open standard that makes cloud cost data easier to understand and compare. Built with AI-driven insights and cutting-edge automation, it helps enterprises move faster, perform smarter, and turn FinOps from a framework into a high-performing, day-to-day operating model. 

      Schedule a demo to see if Tangoe One Cloud is the right for your organization.