Implementing FinOps with a Culture of Accountability

The 5 Cs of FinOps:

A Culture of Accountability

Implementing FinOps with a Culture of Accountability

  • 13 September 2022
  • Dan Ortman
  • 5.0 minutes to read

A cloud financial management or FinOps practice can maximize your value as you migrate more workloads to Amazon Web Services (AWS), Microsoft Azure, or Google Cloud Platform.

Many people think that FinOps is a set of cost optimization tools.

Yes, the data you gain from cost optimization tools can provide critical insights that inform your strategy and decisions. But it’s much more than tools.

FinOps is an operating model that combines systems, best practices, and culture to increase your understanding of your organization’s cloud costs. It is a collaborative discipline where all stakeholders take ownership of their cloud usage with support from a central best practices group..

A strong FinOps practice incorporates the 5 Cs of FinOps to get the most value from your cloud investments.

Let’s talk about the first C of the 5 Cs of FinOps.

FinOps and the Culture of Accountability

FinOps, at its core, is a cultural practice. As indicated in the FinOps State of Cloud report, getting engineers to act is the number one challenge for FinOps practitioners. Without a culture shift, this will continue to be a top concern. This is not because engineers and developers are bad corporate citizens but because their priorities often do not focus on measuring costs.

FinOps culture means that everyone who impacts cloud costs makes decisions as though they are business owners and base their spending on planned cases.

Meanwhile, leadership communicates the importance of FinOps, and people throughout the organization align their business and personal key performance indicators (KPIs). Ideally, chargeback and showback models will help drive change. The reality of getting to this point is iterative and often a crawl/walk/run journey. To illustrate how cloud sprawl or unmanageable spend can occur, consider this:

It's much easier for an engineer to spend $10K in the cloud than buy a $10 mouse

To buy a mouse, an engineer must first get permission from their boss. Then, they buy the item and send the receipt to finance for approval. The engineer will eventually get the $10 reimbursed in their paycheck if the purchase is approved.

Meanwhile, that same individual can log into their cloud account and spend thousands of dollars without anyone asking a single question.

Enterprises often lack purchasing accountability with the cloud, but not necessarily unintentionally. The cloud enables speed, agility, and innovation. These benefits usually outweigh the risk of overspending. Engineers and developers can go online and buy what they need to do their jobs without getting approval from central IT.

Over time, one engineer can easily spend tens or hundreds of thousands of dollars in the cloud. If users across your organization have access to cloud environments, your spending can get out of control quickly.

You may consider asking engineers and developers to use your optimization recommendations to save money. However, changing resources in the environment may not be realistic. Engineers and developers must innovate quickly and ensure that customer-facing systems work. Lower-priced resources may not meet their technical requirements or service level agreements (SLAs).

You might find areas where engineers and developers overspend to enhance performance without increasing business value. For example, an engineer may change an application's servers from four central processing units (CPUs) to eight, doubling its speed to improve the customer experience.

However, this enhanced performance may not be necessary if your customers are already happy, and you are meeting SLAs. The additional resource costs won't translate into business value.

How to get engineers and developers to act on cloud cost management

According to the FinOps Foundation, the number one challenge that FinOps managers face is getting engineers to participate in cloud cost management.

Many engineers won't act upon your recommendations if they don't have time to follow through or if your cost optimization measures don't align with their key performance indicators (KPIs).

Implementing FinOps with a Culture of Accountability
The Top FinOps Challengens, source: FinOps Foundation

Implementing a culture of accountability

A culture of accountability puts structure around your FinOps practices while keeping engineers agile and your services reliable. This culture starts from the top down. After gaining executive sponsorship, you can build a communications strategy that continuously educates engineers and addresses their reluctance.

You can also leverage chargebacks and showbacks to drive accountability. With chargebacks, you invoice business units and development teams for their cloud purchases. That way, they will see exactly how much they buy and if they use all their cloud services.

Some people in your organization may resist a chargeback model, thinking the time spent analyzing the charges will slow engineers' and developers' work. However, chargebacks will drive broader leadership support and KPI alignment.

With this accountability, more teams will see that while speed is often critical, they must also consider costs and waste. Balancing governance with agility will help everyone meet their business goals in a fiscally responsible way without blocking speed or innovation.

Similarly, a showback model allows business units to see how much they spend in the cloud. They can review their specific costs and expenses, such as networking or storage, across the organization.

Showbacks will also let the entire organization see each business unit's expenditures. If one group realizes 50% less cost optimization than every other team, their showbacks may motivate them to make changes. A more mature FinOps practice would align with the economics unit and determine which workloads drive the most value for the organization.

Tagging all your cloud resources will help your FinOps team identify who is accountable for each expense. A tag identifies a cloud resource and consists of a key (or name) and a value (or label associated with that key).

Tag Key Value
Cost center: 1015.25568 Cost center 1015.25568
Application: Customer Portal Application Customer Portal
Environment: DEV Environment DEV

Assigning a tag to each cloud resource helps you quickly and easily showback or chargeback to a workload, business unit, or application. Tagging is critical to your FinOps practice and makes it possible to allocate budget, forecast future cloud spend, and create a culture of accountability.

Setting FinOps KPIs to Drive Accountability

A culture of accountability also requires FinOps teams to set clear KPIs for different user groups. Your KPIs might vary based on each team's goals. Some groups may focus on speed, while others prioritize innovation or performance.

You can leverage the Iron Triangle methodology when selecting KPIs. Engineers and developers are often already familiar with this concept, as it's used in agile and project management to prioritize initiatives.

Establish a FinOps Culture of Accountability with Showback and Chargeback
Cloud Spend & Competing KPIs, source: SoftwareONE

When prioritizing migrations or new application development, consider how one part of the Iron Triangle will impact everything else. If you want higher quality, you'll pay more. If you're focused on speed, you might sacrifice quality.

When done improperly, cost savings can negatively impact quality and speed. A cost-focused approach can leave teams lost in the details rather than looking at the bigger picture.

Getting clearly defined priorities from leadership will help drive your focus. If you have a deadline to be out of an on-premise data center, your initial focus may be speed, not cost. The goals and KPIs for individual teams will align with your deadline. In the next quarter, you may have new KPIs focusing on cost.

Leveraging the Iron Triangle shows everyone where to focus their efforts.

Jumpstart Your FinOps Practice with the 5 Cs of FinOps

Developing a cloud financial management or FinOps practice can bring accountability to cloud spend

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There's More

Be sure to read through the rest of SoftwareONE’s "The 5 Cs of FinOps" series:

  1. Culture of accountability
  2. Communication
  3. Centralized team
  4. Continuous improvement
  5. Collaboration
  • FinOps
  • Cloud Financial Management, Cloud Spend Management, IT Management

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Author

Dan Ortman, Author SoftwareONE Blog

Dan Ortman

Director of FinOps Services

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