With digital transformation speeding up over the past two and a half years, most companies have stepped up the pace of their migration to the cloud. Shifting to the cloud is a smarter way to access certain IT infrastructure and applications, but forward-thinking organisations understand that the cloud is not just a technology but a whole new business model.

As they accelerate the move to the cloud, enterprises should look at how they can maximise the benefits of shifting away from capital expenditure on technology to an opex model. But their IT finance teams are often not ready for a model based on real-time operational expenditure. This is where FinOps or Cloud Financial Operations can help companies to optimise costs and performance.

The FinOps Foundation defines FinOps as the practice of bringing financial accountability to the variable spend model of the cloud, enabling distributed teams to make business trade-offs between speed, cost, and quality. FinOps follows a three-step process:

• Inform: Getting visibility into cloud spending.
• Optimise: Rightsizing resources, automating, taking advantage of discounts, and other steps to bring down costs.
• Operate: Continuously improving not only to cut costs but also to make room to innovate.

Here are six reasons to embrace FinOps as you accelerate your cloud migration and seek to simplify operations:

1. Optimise your cloud costs

FinOps, executed by a knowledgeable team and underpinned by cutting-edge tools and practices, can help you to bring cloud costs under control and optimise spending. With FinOps, you can avoid falling into the traps of allowing costs to spiral out of control due to wasteful practices such as overprovisioning or underutilization of resources.

FinOps allows you to become smarter about managing costs and optimising usage. It creates an environment where costs and ROI are continuously assessed to ensure the business is getting value for money. It can also guide you towards finding the right services for each business need at the most competitive cost.

2. Allocate costs correctly

One of the challenges many IT teams are wrestling with is the complexity of correctly billing or allocating cloud costs to the right business unit or division. This is complicated by how easy it can be for any development team to spin up resources when they want to. FinOps can simplify cost allocation.

A knowledgeable FinOps team will put the tools and policies in place to ensure that resources consumed from the public cloud are correctly tagged and that the costs are correctly shared or allocated. They can also guide other teams about exactly how much budget they’re using and which resources they’re consuming.

3. Measure what matters

FinOps practices can improve accountability and collaboration by drawing up clear key performance indicators to guide each team or type of user. For some teams, this might be about efficiency; for others, it could be about innovation or speed of delivery. This approach means that an organisation can focus on the value it is getting from the cloud—not just what it costs.

4. Improve accuracy of forecasts

Forecasting and budgeting are complex in the cloud world, existing outside the deliberate nature of the traditional procurement cycle. FinOps tools, policies and practices help you collect the data you need to better forecast and manage consumption through seasonal peaks and troughs. More accurate forecasts enable you to reserve discounted resources for anticipated peaks and turn them off when they’re no longer needed.

5. Become proactive

With FinOps, your business can be proactive about enforcing cloud cost policies continuously and in real-time, rather than reacting once it’s too late. Rather than waiting for a shockingly high bill, you can continuously detect and even prevent cloud cost policy violations (such as running unused instances) in real-time.

6. A structure for governance and knowledge sharing

The FinOps team creates a structure and a discipline around the use of public cloud services, helping to put guidelines and guardrails in place as you accelerate digital transformation. A cross-functional FinOps team can set smarter best practices around basics such as cost management and business KPIs, working closely with the business to drive the best possible outcomes at an optimised cost.