It’s natural to be attracted to the shiny new thing, and right now, that new thing is FinOps. As a portmanteau of the words “finance” and “DevOps,” FinOps has exploded on the scene because it puts a formal structure around what companies have been doing for years – optimizing their technology costs. Designed by the FinOps Foundation, the official FinOps Framework standardizes any corporate approach to cloud cost cutting, applying best practices specifically for software as a service (SaaS) and infrastructure as a service (IaaS).
But we all know that not all shiny new things are worthy of an investment. So, how do you know if FinOps is right for you and your organization?
Here are six scenarios that are best suited for applying a FinOps strategy.
FinOps is Right for Your Organization If…
1. You have bill shock and costs plague existing cloud implementations
IT budgets have been hit hard by cloud costs. The rising price of cloud services is known as cloud-flation, and when companies host more assets in the cloud, cost overruns and overspending become commonplace. The irony is that the cloud is the key requirement in building a corporate competitive edge, and yet it’s weighted with cost challenges. Thirty-six percent of organizations cite the need to control cloud costs as an obstacle to their ongoing use of cloud. One CIO.com study explores this “cloud cost quandary,” explaining why investments in the cloud also require investments in cost optimization. This is the issue at the heart of the FinOps strategy. It’s the inspiration behind its cloud cost management framework. One of its core principles is to turn the variable cost model of the cloud from a disadvantage into an advantage – making it an opportunity rather than a risk.
2. You’re concerned about wasting SaaS licenses and IaaS resources
Let’s face it, it’s not easy to estimate every resource a company needs when priorities and projects are constantly shifting. It’s equally difficult to ensure you actually use everything you pay for. These challenges highlight why cloud waste is now a reality; companies waste as much as 29% of their cloud assets.
You’re likely underutilizing the cloud if you’re not actively overseeing service usage and aligning resources to needs using a just-in-time approach. And because the average company has 2-3 public cloud infrastructure services and countless SaaS applications, cloud resource management has only become more complicated. As a financial management discipline, FinOps helps unwind this complexity with one specific domain dedicated entirely to cloud usage optimization.
3. It’s taking too long to recognize the value of your cloud investments
Given the maturity of cloud-based digital transformation initiatives, many leaders are only provided funding if their investments can achieve ROI (return on investment) in one year. IT and finance leaders bear the responsibility of not only fostering innovation but also of being fiscally responsible for making wise tech investments. This entails a strong focus on cloud ROI including the ability to rapidly capitalize on cloud technologies and take full ownership of the cloud’s immediate value and long-term viability.
FinOps helps facilitate the critical tracking needed to verify value and returns on a timely basis, tracing where your cloud money goes, who benefits, and where that money gets repaid back to the business. Key FinOps capabilities foster an accountability structure which includes managing shared costs and handling cloud cost allocations.
4. You’re feeling pressure to stretch your budget
In today’s economic climate, businesses are tightening their belts, which means IT leaders are trying to find ways to be more sparing with the dollars they do have. Roughly 83% of CIOs say despite increasing IT budgets they are under pressure to make their budgets stretch further than ever before—with a key focus on technical debt and cloud costs. They must use the existing budget to create new budget.
Gaining more buying power without more money is possible by getting more out of the services you already purchase and by paying less for the services you use. FinOps is good at both of those things. Thus, it can sustain innovation during times of stagnant growth. The key is to reach the third and most mature stage of FinOps cost optimization — the Run stage. FinOps technology platforms are also used to accelerate that path, advancing through the Crawl and Walk stages faster and more efficiently.
5. You’re struggling to financially manage the cloud
It’s common for IT financial analysts and financial teams to struggle with cloud expenses, cost allocations, contracts, and governance. Invoices can have hundreds and thousands of line items or charge fees to decipher. Meanwhile, many cloud cost management tools don’t work in conjunction with corporate financial systems, so it’s hard to connect the dots between costs or service usage data and the financial budgets that should be controlling them.
Cost-cutting measures can lose their luster quickly when they benefit IT operations but plague financial operations. FinOps is a strategy aimed at overcoming this issue, fostering collaboration at the intersection of IT and finance. Its core principles build the necessary bridges helping stakeholders come together to take responsibility, using data and business value to drive efficiency and savings.
6. You’re facing frequent SaaS contract renewals and you need sharper cloud controls and procurement processes
It’s also common for procurement teams to struggle with cloud contracts, facing renewals almost daily. The cloud is hard to manage operationally, financially, but also from a procurement standpoint, because of the visibility issues making it difficult to see and evaluate SaaS license purchases, knowing who uses what. This in turn makes it hard to manage SaaS, consolidating duplicate tools and driving to the lowest cost for what the company needs. And with IaaS, there are over 1 million ways to purchase one server from Amazon Web Services (AWS) alone; there are 480K unique SKUs for a single hour or partial hour of EC2 services.
FinOps (and the AI platforms powering them) address these issues with advanced analytics and deep observability across multiple cloud infrastructure providers, hundreds of popular cloud software applications, and the dynamic costs of them. This way, decision makers are armed in knowing not just which service offers the best price but also how many Microsoft 365 E3 and E5 licenses are needed, understanding the intimate detail of how many employees use each 365 sub-product and how often.
No one is safe from the issues of SaaS management, not even Tangoe – the leading provider of SaaS management solutions. See how we used our own FinOps solution to shave $347,000 from our SaaS spending.
How Tangoe Supports FinOps – And Does It Better
Cloud expense management platforms are the machine behind FinOps strategies, and the Tangoe One Cloud solution helps companies activate the three Phases of FinOps using advanced software and services supporting the six Domains of the FinOps Framework. Our FinOps solution is layered with AI and 20+ years of experience optimizing costs through data analytics and automation.
Tangoe One Cloud lead the industry with:
- Widest cloud visibility in the industry — our vast ecosystem of IaaS and SaaS integrations means we have multi-cloud compatibility with the widest data ingestion when compared to our competitors
- The smartest AI-powered FinOps solution is honed with patented AI automation accelerating your time to insight, your financial management processes, and your time to savings
- The broadest choice and flexibility in cloud cost management unites customizable software and managed services to optimize IaaS, SaaS, and UCaaS for the needs of both IT and finance teams — it’s a total solution that serves as the central control system for all your cloud needs
- Savings that go beyond the cloud — When you’re ready to simplify, manage, and optimize more than just the cloud, Tangoe optimizes your entire tech landscape, stretching your FinOps strategy and savings further with telecom and mobile expense management
Even if you’re confident in your ability to optimize tech costs, you can use FinOps to “squeeze more juice from the orange.” Clients use Tangoe’s FinOps solution to cut cloud costs 20-40% on average.