How the benefits of FinOps go beyond balancing the books for financial services

Clients often take a tactical approach to FinOps, by bringing in consultancies or SWAT teams to deliver quick wins in FinOps, such as identifying significant savings and recommending changes needed. There are certainly initial benefits to be achieved by doing this. Recently, we helped a client reduce their annual cloud spend by £3 million savings within three weeks. Here’s more from Vikram:

“Whilst delivering an immediate benefit, such savings are only sustainable with the creation of a self-sustaining FinOps operating model. It is essential to create one that enables organizations to exert ongoing due diligence on cloud spends, embed a focus on maximizing business value at a unit spend level, and achieve financial accountability and autonomy.”

Thomas Sarrazin, the global FinOps offer leader at Capgemini, emphasizes the need for enterprises to evolve ‘more than just skills, processes, and tools. The FinOps operating model should be underpinned by the right governance, culture shift, and operational efficiencies to build robust foundations for FinOps.’^[3]

One of the big challenges is aligning C-Suite thinking and the organization’s developers – it is important to have everyone pulling in the same direction. Vikram emphasizes the need for an all-encompassing change in culture:

“For the CFO and CIO, cost control and cost optimization are key financial objectives; whereas, developers are often measured on the velocity of their feature development. Therefore, embedding a FinOps culture across the organization’s layers is key. Achieving this cultural shift at the grassroots as well as at a leadership level requires innovative adoption models. Gamification has recently been very effective with our clients; however, we need to define the right adoption model and techniques suited to the organization.”

There is also a required culture shift towards greater financial autonomy at the Product Owner level. FinOps enables accountability of spends at project and team level due to cost allocation agreements and transparent reporting. It thereby encourages the engineers, business and product teams, and finance stakeholders to work as one entity and embed a no-blame culture of overspending. In Ewan’s experience, this is not something that is achieved overnight:

“The complex and hierarchical nature of Financial Services organizations often means it takes a while to foster psychological safety and the one-team mindset.”

Lokesh believes the discipline of looking at both the cloud spend and business value side of the equation together also helps move conversations away from the blame game to discussions about maximizing the “value realization from cloud computing.”

For effective FinOps, organizations require timely decisions made by empowered teams on time-critical activities, such as the right sizing instances. This is something Ewan knows all too well:

“Long tail approval processes can be counterproductive for achieving the desired cost benefits. Therefore, the right governance process based on agile principles needs to be set up early on and fully integrated into the cloud operating model.”

Vikram believes many C-suites make the mistake of being too overbearing, which can stifle the progress developers seek to make:

“When setting up a FinOps governance model, it is important to think about how one can make it easier to do the right things without putting in too many roadblocks and onerous governance. This requires setting up the right guardrails and best practices and then getting out of the way of the developers and letting them get on with the job at hand.”

One common pitfall when setting up a FinOps governance approach is that many organizations fail to create a detailed tagging strategy upfront. According to Lokesh:

“The right set of tags should be created and used for automated actions.”

Our experts also recommend leveraging “compliance as a code” when maturing FinOps governance, whereby some of the guardrails are set up as thresholds in the code.

There is also a consensus amongst this panel of experts that local FinOps functions should be supplemented with a central FinOps governance entity to provide higher-level oversight, coordinate the cloud strategy, monitor alerts, manage escalations, and provide a macro view of cost optimization opportunities. This includes assessing reserved instances across the organization for achieving the discount targets, identifying operational improvements, and so on.

A key and often overlooked aspect of governance is the tracking and management of the implementation of recommended optimization. The right prioritization models and tracking mechanisms need to be put in place to ensure that savings are banked. The KPIs for the FinOps teams and anyone associated with such efforts have to be linked to the actual spend optimisation and not just opportunity discovery. In the absence of such mechanisms and KPIs, recommendations are often moved to the back of the priority list and may never see the light of day.

In Vikram’s experience, a robust FinOps operating model should not overlook the way the organization works with its suppliers.

“An effective incentivization model needs to be in place, one that positively rewards suppliers for cost avoidance and disincentivizes wasted cloud spend.”

This is especially important for banks and insurers that are working in a multi-vendor environment.

As a FinOps practitioner for retail banks, Jack Gardiner knows first-hand that the FinOps journey is not without operational difficulties. He is a strong advocate for investigating automation opportunities in FinOps processes.

“In one of the organizations I recently worked with, we moved the client from manual to an automated Reserved Instance and Savings Plan strategy, and this initiative alone helped them save $0.5 million dollars.”

Thomas reminds us that ‘while automation can help with executing optimization initiatives, it’s important to win the support of the app business owners, app architects, and operations teams to make things happen.’