You've attended the Cloud Financial Management FinOps webinars. You've downloaded the white papers. You've read up on the FinOps Foundation on FinOps.org.
All that's left is to pitch it to the powers that be so you can secure the funding and support you need to get this practice off the ground.
So, are you ready to get started? (cue Eye of the Tiger)
The goal of this guide is simple – to provide you with the tools you need to create a compelling business case in favor of using FinOps in your organization. You'll still have plenty of work to do to customize this case to your business, of course, but the blueprint below should be an excellent starting point for creating your pitch presentation.
Here are ten steps you can take to build a business case for starting a FinOps practice:
1) Define the goals of your organization
Like nearly all business cases, building it starts with looking at your organization's goals and how FinOps can serve them. Most companies aspire to get the highest amount of value from their investments – and many miss the opportunity to do so in the cloud. Flexera estimates that companies waste more than 30 percent of cloud spend every year. Thirty percent. That statistic indicates a huge opportunity for savings and cloud cost reduction.
Additionally, you can go beyond strictly cost-savings goals and discuss other potential advantages that your company may enjoy. For example, with FinOps in place, forecasting future cloud costs should be far more accurate, allowing for better budgeting and better spending decisions. You may even uncover sufficient funds to support a project you previously didn't have the budget for.
2) Gather information on business units
One of the key benefits of implementing FinOps is getting the various units of your organization on the same page. When building your case, it's important to paint a picture of what teams will be involved and why. Of course, every organization is different, but it's common for Finance, IT, Procurement, Legal, and Operations to all play a role.
As you gather information on these various units, consider the following key questions:
- What are the KPIs for each unit?
- How does each unit use cloud resources?
- What are each units' decision-making processes?
Bringing together as many details as possible on these questions will help you prove this important point: the current system is too varied from unit to unit, and FinOps will help standardize things across the board (especially for those engineers who may be harder to get to take action).
3) Acknowledge the pros & cons of current strategies and potential alternatives
Depending on the size of your organization, it's possible that the CFO is not particularly tuned into the current strategies used to manage details of cloud spending. So another important part of your case is explaining what's currently working and where the company can improve.
As a starting point, you'll want to touch on the tools the company uses now and where those tools may be falling short. Also, this step is another good place to emphasize the difficulty of bringing together all the business units using the current setup. Synchronization across the organization is a big selling point for FinOps, so it's important to drive home that all teams are not currently on the same page.
4) Present your recommended action: Establishing a FinOps practice
This step is where you clearly state your recommendation of using FinOps in your organization. A quick introduction of FinOps is also appropriate here, as is an explanation of the three phases of FinOps:
- Inform: this phase focuses on getting clean data, visibility, and showing the business units how much they truly spend in the cloud.
- Optimize: with information in hand, teams can make accurate decisions to optimize spend and reach new goals.
- Operate: this phase is the long-term path of executing processes and reaching the goals of all various parts of the organization.
Unit economics is one other idea to bring into the discussion at this step. Choosing a "unit" to measure against cloud costs (often, it's simply revenue) creates an easy metric that your company can monitor over the long run. Then, as cloud costs over time shrink when compared to that chosen unit of measure, the value of FinOps will become evident.
5) Connect the FinOps practice with your company's goals
There are two significant ways to get value from every dollar that you spend in the cloud. The first is to consume fewer dollars to get the same results. The other is to spend the same amount of dollars – or even more dollars – in exchange for growth or business value. Both outcomes are desirable, of course, and your organization's focus may change as business initiatives come and go.
It's important to draw the line directly from the implementation of FinOps to the outcome of getting more benefits from cloud dollars. You can do this by explaining the combination of gains that add up to better value, including taking products to market faster, unifying business units, creating more accurate forecasts, getting engineers to take action, and ultimately generating more funds to invest in innovation.
6) Review the expected benefits
An investment in FinOps can pay for itself in the first 30 days. That's a lofty claim, to be sure, but it speaks to how inefficient many organizations are with cloud spending. Laying out the direct benefits of implementing FinOps, especially within the next generation of software asset management (SAM), is another step that could convince management to invest in this initiative.
One tangential benefit to explore in this section is how FinOps can improve employee empowerment. With the information they need to optimize their spending and streamline operations, unit leaders may feel like they finally have a handle on what they're spending in the cloud and how it can be optimized. Unfortunately, cloud spending is a mysterious beast in many organizations, which is why it so often runs out of control. FinOps tames that beast and allows each business unit to hold it accountable.
7) Explain how implementing a FinOps practice leads to expected benefits
It's one thing to touch on what benefits you expect to enjoy from FinOps – it's another to explain how those benefits come to fruition. Understanding how your company will derive value from FinOps ties back to the Inform, Optimize, and Operate phases that we touched on in step four.
It's especially important to emphasize the Inform stage of the FinOps cycle. Even if the CFO isn't versed in FinOps, every business decision-maker understands the value of good information. Companies make solid business decisions on the back of accurate data, so selling quality information as the guiding light to reach the expected benefits is an easy case to make.
8) Explain how results will be measured
You'll need to have specific KPIs in mind for how you'll measure and evaluate your FinOps practice. It might be best to have one central KPI – such as cloud spend as a percentage of overall revenue – and several other metrics that measure different parts of the practice. Evaluating forecasting accuracy and cloud waste reduction are just two of many potential additional KPIs you could choose to incorporate here.
9) Review the costs to implement a FinOps practice
At some point, you'll have to address the elephant in the room – what does all this cost?
Here are a few costs to consider when implementing a FinOps practice:
- Purchasing and implementing a tool that tracks cloud spend; SoftwareOne offers a tool called PyraCloud that ensures continuous cost optimization of your software portfolio.
- The cost of changing the company's culture around cloud spending. These costs could identifying and tapping into user champions to help, training everyone involved in cloud spending, and planning development for each person affected.
- The opportunity cost of pursuing other projects. This cost is more indirect and means comparing the ROI of implementing FinOps to other potential projects.
- Hiring additional FinOps practitioners or consultants.
Another way to look at the total cost of implementing a FinOps practice is through the following equation:
Cloud Usage + Operating Cost = Total Cost of Ownership (TCO)
The concept of Crawl, Walk, Run can help you explain how your company can scale FinOps costs over time. There's no need to go right into a full sprint while allocating significant resources to this initiative. Instead, you can start it slowly, taking baby steps that move the organization closer and closer to the goal of full FinOps implementation.
Also, the potential for an immediate return on the investment will make a big impression on a CFO or someone in a similar position. If getting started with FinOps means immediately cutting back on cloud spend by tracking down some inefficiencies and any hidden costs of cloud computing, it will be a clear win and an easy choice.
10) Review the costs of taking no action
In legal speak, this final step would be your closing argument. What does the organization stand to lose if it takes no action and continues with the status quo? The simple answer is that the company will lose money by dismissing a FinOps practice because cloud spending inefficiencies exist or will soon exist when left unregulated. There are many other downstream points to consider, too, including:
- Missing out on potential growth opportunities
- Inaccurate financial forecasts on cloud costs, leading to missed budgets
- Failing to improve the culture of the organization
- Risking falling behind key competitors who do adopt a FinOps practice
