Integrating FinOps into the next generation of Software Lifecycle Management

Organizations are undergoing a significant transformation due to the cloud. For Information Technology (IT) teams, this shift is even more pronounced. For decades, IT teams focused on harnessing the power of technology in many ways. They provisioned their IT infrastructure to meet software demands, found ways to reduce licensing costs while minimizing risk, and improved overall business efficiency by ensuring all on-premises systems worked as intended.

Now, there’s a different, cloud-based evolution of IT taking shape. This approach focuses on delivering services – not just technology – that are agile, flexible, scalable, and efficient. This shift is requiring IT teams to focus on additional considerations, such as implementing automated processes, providing support for cloud workloads, and creating business value for the company.

This shift in responsibilities is easier said than done but is necessary to power the technological needs of your organization. Without changing your IT team’s approach to software management to include special cloud considerations, your business is likely to struggle with decentralized purchases, difficulty controlling cloud spend, a lack of transparency over the software estate, and unpredictable costs.

Thankfully, you don’t have to start at square one. By combining the power of your existing SLM team within a proven cloud financial management (FinOps) framework, you’ll be able to enjoy lower costs and greater productivity in the cloud with limited drawbacks. Let’s examine why this is, starting by learning more about FinOps as a concept.

What is FinOps?

FinOps, also known as cloud financial management, is an emerging model that strives to bring together technology, business, and finance professionals in a way that helps them better understand cloud costs and make more informed decisions regarding the cloud -- inherently increasing its business value. The major business outcomes include improving accountability for cloud spend, fostering a culture that examines IT resources through an operational and financial lens, and encouraging data-driven decision-making.

Like SLM, FinOps is an ongoing initiative. However, unlike SLM, FinOps is not the sole responsibility of IT – effective FinOps is a company-wide, cross-departmental model that involves finance, IT, and operations, and further impacts any team that uses a cloud-enabled solution.

To get a better idea of what FinOps is, it’s helpful to examine it as a three-step, repeating lifecycle. Let’s take a closer look:

Step one: Information

The first step - dubbed “Information” - primarily focuses on gaining visibility over cloud costs, helping you determine where costs are originating and why. A FinOps certified platform can help you gain this visibility quickly. Once you have visibility, take benchmarks of how the cloud is affecting finances and operations, and identify areas of weakness. Before you move onto the next step, begin taking inventory of the teams who currently use the cloud, and outline which solutions they use.

Step two: Optimization

During the “Optimization” phase, IT, finance, and operational teams need to work together to create FinOps best practices for every team that uses the cloud. This will vary heavily depending on which solutions a given team uses, and how mature your organization’s overall approach to the cloud currently is. Once you’ve outlined your ideal outcomes, tell every cloud-enabled team which cloud resources they are in control of, then create and distribute actionable recommendations that these teams should complete to optimize their use of the cloud.

Step three: Operation

This phase ensures your guidance is achieving the goals set forth by IT, operations, and finance teams. Using the benchmarks taken in the “Information” stage of FinOps, how did your best practices impact cloud costs and efficiency? Use this information to create processes for cloud governance – if a certain process works well for FinOps, ensure teams are practicing it on a regular basis.

While these processes must involve finance, operations, and IT equally, FinOps does deliver exceptional value to the IT team, as it will further solidify the team as a valuable, service-focused department within your organization.

How does FinOps relate to Software Lifecycle Management?

FinOps is a complex process that requires the involvement of the entire organization, while Software Lifecycle Management (SLM) is thought to be the sole responsibility of IT. However, beneath the surface, these processes are more alike than different.

Traditionally, SLM was a process that combined the power of on-premise software asset management (SAM) processes and digitized procurement to help organizations save money while enhancing the value of their software portfolio. This process began as soon as the organization acquired a technological asset and continued until the assets were retired. The primary goal was to ensure the IT infrastructure was operating in a way that was cost-effective and compliant with vendor regulations.

Now, with the introduction of the cloud, the old SLM model must shift to become more appropriate for the cloud – and the best way to do this is by adapting SLM processes to match the ideal FinOps processes and strategies. To put it simply, your old SLM processes are hardly effective in the cloud due to changes in procurement and pricing. While licenses were previously a one-time or annual investment, they are quickly becoming ongoing costs based on usage since Infrastructure-as-a-Service (IaaS), Platforms-as-a-Service (PaaS) and Software-as-a-Service (SaaS) are quickly becoming the norm.

Your approach to SLM must change to match the demands of the cloud. Now, managing software costs is no longer the sole responsibility of the IT team – rather, it’s the ongoing responsibility of the business end-user. A new, proactive mindset is necessary to help these business users manage the lifecycle of cloud assets. That mindset is FinOps.

Introducing your SLM team to FinOps

SLM teams play a crucial role in cloud financial management. They’re best suited to control the transformation to this new cloud operating model, and already have many of the skills needed to support a FinOps initiative. Think of them as the driver of these initiatives, while operations, finance, and other members of the IT team work together to ensure everyone gets to their desired destination.

Assuming a leading role in FinOps is a simple logical extension of the SLM team’s role. They already have control and visibility over the on-premise software lifecycle, they simply need to add public cloud management into their purview. However, gaining visibility over the cloud will require purpose-built solutions that uncover all cloud instances within the organization and further supply information regarding who owns them. Thankfully, there are FinOps certified platforms on the market today that can give your SLM teams this functionality quickly.

Once your SLM team gains visibility over the cloud assets, they will be well positioned to determine which teams are accountable for certain cloud deployments, providing the starting point for a FinOps strategy. From there, they can work with the finance and operations teams to forecast cloud costs and find ways to reduce said costs through the three-step FinOps lifecycle (Inform, Optimize, Operate).

This is great news for SLM teams, who often have their critical role downplayed. Historically, they were only able to show cost savings on a quarterly or annual basis, in line with license renewals and software audits. Now they can point to every day cloud spend and confidently say they positively impact the business’s bottom line each day through their work. This will solidify their business value within the organization.