Adopt FinOps on Azure

 

Introduction

FinOps Domains represent spheres of activity or knowledge. Every organisation adopting FinOps engages in activities across all FinOps domains. Each FinOps domain comprises FinOps capabilities, which outline functional activities that can be performed within that domain.

In the image here, you can see how domains and capabilities are grouped:

Understand cloud usage and cost

Understanding cloud usage and costs are important for effective cloud management and optimisation. Gaining this understanding allows organisations to gain insight into how resources are being utilised, identify trends, and make informed decisions to optimise performance and cost efficiency. Data ingestion, allocation, reporting and analysis, and anomaly management play crucial roles in achieving this objective. 

Data ingestion

Objective: Collect, transfer, and normalise data from various sources for analysis, with a focus on understanding the usage and costs associated with an organisation's cloud infrastructure.

Allocation

Objective: Define strategies to assign and split shared cloud costs using accounts, tags, labels, and other metadata, creating accountability among teams and projects within an organisation. 

Reporting + analytics

Objective: Examine and show-back cloud data to gain insights into usage and spend patterns. Identify cost optimisation opportunities, improve cost efficiency, and make informed financial decisions regarding cloud resources.

Anomaly management

Objective: Detect, identify, alert, and manage unexpected cloud cost and usage irregularities in a timely manner to lower risk in cost-effective cloud operations

Quantify business value

Quantifying business value is crucial for organisations to justify their investment in cloud technologies and demonstrate the return on investment(ROI). It enables organisations to understand the impact of their cloud initiatives on business outcomes and make informed decisions about resource allocation and optimisation. Planning & estimating, forecasting, budgeting, benchmarking, and unit economics are essential capabilities that support organisations to quantifying business values.

Forecasting

Objective: Applying statistical methods and forecasting techniques using historical data, current spend patterns, planned changes, and related financial metrics to forecast future cloud costs, plan budgets, and allocate resources efficiently.

Budgeting

Objective: strategic and ongoing process for setting, monitoring, and managing financial plans to manage cloud spending effectively, align it with business objective, and ensure financial accountability throughout the cloud services lifecycle.

Unit economics

Objective: Develop and track unit economic metrics that reveal a quantitative understanding of how an organisation's cloud management practices impact specific business activities, customer segments, or products to drive efficiency and maximise cloud value.

Planning & estimating

Objective: Anticipating fluctuations in cloud spending and demand for resources by using historical data and current spending to estimate future costs and plan investments in an organisation's cloud environment.

Benchmarking

Objective: Use efficiency metrics to evaluate an organisation's cloud performance and financial management against other departments in the business or industry peers to inform decision-making and align FinOps with business objectives.

Optimise cloud usage and cost

Rate optimisation, licensing + SaaS management, workload optimisation, architecting for the cloud, and cloud sustainability are essential capabilities for optimising cloud usage and cost. By implementing best practices and maturing in these capabilities, organisations can maximise the value of their cloud investments, control expenses, and ensure efficient resource utilisation. 

Rate optimisation

Objective: Driving cloud rate efficiency by acquiring and managing a portfolio of commitment discounts (for example, reservations and saving plans) or other rate discounts offered by cloud service providers while meeting the organisation's operational and budgetary objectives.

Workload optimisation

Objective: Analyse and optimise cloud resources to match the specific usage patterns while ensuring that workloads operate efficiently and ensure there's sufficient business value for the cloud costs associated with each type of resource that is consumed. 

Licensing + SaaS

Objective: Mechanisms for understanding and optimising the use of software licenses and SaaS investments that directly impact the cost structure of an organisation's cloud operations. It can require compliance management, vendor specific information, and collaboration with legal team practices.

Architecting for cloud

Objective: Designing solutions with cost-awareness to maximise business value and achieving performance, scalability, and operational objectives, while supporting effective cost management.

Cloud sustainability

Objective: Establishing the strategic and tactical direction, metrics, and criteria for incorporating sustainability goals and targets into other FinOps Capabilities and decision making.

Conduct a FinOps iteration

Completed100 XP

FinOps is an iterative, hierarchical process that requires cross-functional collaboration across business, technology, and finance teams. When you consider the 22 different capabilities, each with their own unique nuances, adopting FinOps can seem like a daunting task. However, in this tutorial, you learn how to take an iterative approach to FinOps adoption where you:

• Define the right scope for your next FinOps investments.
• Identify measurable goals to achieve over the coming weeks or months.
• Select the right actions to get to the next maturity level.
• Review progress at the end of the iteration and identify goals for the next.
• Use this tutorial as a guide when you start each iteration of the FinOps phases.

Before you begin

Consider the stakeholders involved in your iteration. Since FinOps requires collaboration across business, technology, and finance teams, we recommend approaching this tutorial holistically and evaluating each step with everyone in mind. However, there are also times when you may only have a subset of stakeholders. For example, a single engineering team, or just one FinOps practitioner dedicated to setting up the right culture and driving positive change within the organization. Whichever case applies to you in this iteration, keep all stakeholders' experience in mind as you complete this tutorial. Every balanced team has people with a diverse mix of experience levels. Make your best judgment about the team's current state.

Define your scope

Before you start your next iteration, it's important to define the bounds for which you want to focus to ensure your iteration goals are achievable. If it's your first iteration, we recommend selecting three to five FinOps capabilities as a starting point. If you're defining the scope of a later iteration, you may want to keep the same capabilities or add one to two new ones.

Use the following information as a guide to select the right FinOps capabilities based on your role, experience, and current priorities. It isn't an all-inclusive list of considerations. We encourage you to select all from one group or pick and choose across groups based on your current needs. It's merely an aid to help you get started. If you'd like a finer-grained analysis of the areas you should focus on, apply the FinOps review assessment to identify next steps.

• If your team is new to FinOps with little to moderate experience with cost management and optimization, we recommend starting with the basics:

  • Reporting and analytics
  • Forecasting
  • Budgeting
  • Workload optimization
  • Anomaly management
  • FinOps assessment

• If you're building a new FinOps team or interested in driving awareness and adoption of FinOps, start with:

  • FinOps education and enablement
  • FinOps practice operations
  • Onboarding workloads

• If your team has a solid understanding of the basics provided by FinOps tools in Microsoft Cloud and is responsible for managing costs across a broad organization with distributed and sometimes shared ownership, consider:

  • Allocation
  • Chargeback
  • Rate optimization

• If your team needs to build more advanced reporting, like managing costs across clouds or merging with business data, consider:

  • Data ingestion
  • Allocation (especially metadata)
  • Reporting and analytics
  • FinOps tools and services

• If your team has a solid understanding of the basics and wants to focus on deeper optimization or advanced automation, consider:

  • Workload optimization
  • Rate optimization
  • Cloud policy and governance
  • Anomaly management
  • Budgeting
  • Cloud sustainability
  • Architecting for cloud

• If your team has a solid understanding of the basics and needs to map cloud investments back to business value, consider:

  • Unit economics
  • Benchmarking
  • Forecasting
  • Budgeting

Note the capabilities you select for future use.

Identify your goals

Next, you identify specific, measurable goals based on your current experience with the capabilities you selected. Consider the following when you identify goals for this iteration:

• Knowledge - How much do you know about the capability?

  • If you're new to the capability, focus on learning the purpose, intent, and how to implement the basics. Knowledge is often the first step of any capability.

• Process - Is a repeatable process defined, documented, and verified?

  • If you know the basics, but don't have a predefined process, consider spending time documenting a repeatable process. Include how to implement the capability, roles and responsibilities for all stakeholders, and the metrics you use to measure success.

• Metrics - Have success metrics been identified, baselined, and automated?

  • If you're new to the capability, think about success metrics as you learn the basics. For example, cost vs. budget and commitment utilization. They help with future iterations.
  • If you know the basics, but haven't identified success metrics, they're a must-have for your next step. Focus on identifying metrics that are relevant for your business and help you make trade-off decisions for this capability. Build these metrics and decisions into your process to maximize efficiency.
  • If you've identified metrics, focus on getting a baseline for where you're at today. Seek to automate wherever possible, which will save you time in the future. Use tools like Power BI to generate reports you can share with stakeholders and celebrate your collective successes.

• Adoption - How many teams have adopted the defined process and metrics?

  • If you have a process that has only been tested on a small scale, share it with others. Experiment with the process and incorporate a feedback loop for continuous improvement.
  • As your process matures, you notice less input from the feedback loop. Less input is a sign that your process is ready to be scaled out more and potentially be established as an official governance policy for new teams. If you're in a large organization that doesn't have a dedicated FinOps team, you may want to consider establishing one to drive this effort.

 Important

Before establishing a dedicated FinOps team, consider how much time each individual team is spending on FinOps efforts, what the potential business value is with more savings and efficiency (or lost opportunity), and how much a dedicated team can accelerate those goals. A dedicated team isn't for everyone. Ensure you have the right return on investment.

• Automation - Has the capability been automated to minimize manual effort?
  • If you're developing a process, we recommend identifying automation opportunities as you go. You may identify low-hanging fruit that could lead to large efficiency gains at scale or even find partner teams willing to contribute time in those areas and share resources.
  • As you experiment with your process, keep your list of automation opportunities updated and share them with others as part of the feedback loop. Prioritize automating success metrics and look for opportunities to implement the most repeated tasks for maximum efficiency.

In general, we recommend short iterations with targeted goals. Select one to three highly related goals listed previously. Avoid long iterations that cover a broad spectrum of work because they're harder to track, measure, and ultimately deliver.

Put your plan into action

At this point, you have a rough plan of action. You may be new and plan on digging into the capability to learn and implement the basics. Or maybe you're planning to develop or experiment with a process being scaled out to other teams and stakeholders. Or maybe your process is already defined and you're driving full adoption or full automation. Whichever stage you're at, use the FinOps framework to guide your efforts.

Check back later for more targeted guidance aligned with the FinOps Framework.

Review progress

When you started the iteration, you identified three to five capabilities, decided on the areas you wanted to focus on for those capabilities. Were you able to achieve what you set out to do? What went well? What didn't go well? How could you improve the next iteration? Make note of your answers internally and review them at the end of each iteration to ensure you're addressing issues and maturing your process.

After you close out on the iteration, remember that this tutorial can help guide you through each successive iteration through the FinOps phases. Start the tutorial over to prepare for your next iteration.