As companies migrate their IT and data assets to the cloud, there comes an inflection point where FinOps optimization becomes an immediate priority. Cloud management principles at this stage include:

  1. If you’re new to the cloud and about to migrate or build assets there, you should proactively build FinOps capabilities to get the most of your initial investment.
  2. If you’ve accomplished a move to the cloud without a FinOps-led strategy, building those capabilities takes top priority to reduce overspending quickly.
  3. Building effective FinOps capabilities may mean taking a different approach from other organizations. It’s critical to adopt a FinOps approach, tooling, and skills best suited to your business strategy, teams, and solutions.

The first 2 lessons are now common tenets of cloud strategy. We will now elaborate on the third lesson, as it is short-sighted to think that all organizations can succeed with the same FinOps approach.

Formulating a Cloud FinOps Strategy

Cloud FinOps strategies vary based on an organization’s industry, goals, financial situation, and other factors. Strategies involve optimizing cloud usage and spend to align with financial and operational needs.

Here are several types of FinOps strategy. Choosing which to use and how to deploy these depends on key considerations such as your organization’s cloud objectives, service usage, and resource allocations:

1. Cost Optimization Strategy

  • Who this is for: Organizations looking to reduce operational costs, especially cloud computing or infrastructure expenses. It’s most valuable when cost control is a priority, or when the organization operates on tight margins in a competitive market.Use it when your goal is to cut costs, without compromising performance or scalability, and to regain control over growing cloud bills (i.e., if you executed a mass “Lift n’ Shift” and costs are surprisingly high!).Note that it is intended to solve immediate cost concerns, and may not be the best long-term FinOps strategy.
  • Best practices:
    • Tag infrastructure resources and gather data points to identify idle resources and instances to “right-size”.
    • Develop a business methodology to leverage reserved and spot instances.
    • Implement cost control measures like budget alerts and spending thresholds.

2. Performance Optimization Strategy

  • Who this is for: Organizations prioritizing performance and responsiveness. It applies FinOps practices differently to ensure performance at the best available cost – critical for applications with high user experience objectives (e.g., market-facing services) or resource-intense workloads (e.g., big data/ML/AI processing).Adopt this approach if you’ve mastered cost-optimizing “low-hanging fruit” and your business model is focused on high-performance goals. It is especially beneficial to companies that regularly address high-volume consumer, partner, and/or data requirements.Adopt this approach if you’ve mastered cost-optimizing “low-hanging fruit” and your business model is focused on high-performance goals. It is especially beneficial to companies that regularly address high-volume consumer, partner, and/or data requirements.
  • Best practices:
    • Tag applications, workloads, and services on dashboards and in reports to expose performance misses or opportunities.
    • Optimize resource configurations, select the right instance types, deploy auto-scaling, and leverage cloud-native tools and PaaS services for best performance.

3. Resource Lifecycle Management

  • Who this is for: Organizations in dynamic environments with frequently changing workloads that need to manage temporary or short-lived resources efficiently.Organizations may have innovation or R&D functions constantly spinning up (and down) new ideas and workloads for potential projects or products. Organizations may also have variable service needs based on consumer demand or seasonal activities.
  • Best practices:
    • Automate human-less resource provisioning driven by lifecycle policies.
    • Categorize resources with tags and labels for tracking, policy alignment, monitoring, and lifecycle management. FinOps data and dashboards will expand for new projects (and mute discontinued ones).

4. Elasticity and Business Agility Strategy

  • Who this is for: Organizations needing flexibility to rapidly scale resources up or down in response to changing demands.Resembling a Resource Lifecycle Management Strategy minus the need to decommission resources, it focuses on semi-steady workloads that need to adjust to consumption changes quickly.
  • Best practices:
    • Use auto-scaling, serverless computing, and container orchestration to adapt to workload fluctuations.
    • Leverage cloud-native services to build agile microservice architectures managed at the application- and workload-level rather than infrastructure, driven by FinOps resource tagging, policies, and real-time access to workload owners and automation processes.

5. Cost Transparency and Accountability Strategy

  • Who this is for: Organizations building a culture of cost accountability and awareness among teams and stakeholders.Most FinOps strategies need this at some level, but as a discrete strategy it focuses on optimizing cross-organizational culture, processes, and data sharing.
  • Best practices:
    • Implement cloud cost visibility tools, allocating costs to specific teams, projects, applications, or data domains.
    • Educate teams on the cost implications of their decisions and encourage responsible resource usage.
    • Enforce accountability with a strong cost show-back model that graduates to a charge-back model.

6. Profitability-Focused Strategy

  • Who this is for: Organizations prioritizing profitability over rapid growth. It is especially relevant when maximizing profits with existing products or services in a mature market.
  • Best practices:
    • Establish value streams for each product area with revenue and cost sub-streams.
    • Leverage FinOps data for visibility of how costs or investments impact revenue streams.
    • Maximize profitability with the right cost-investment balance and revenue support per product.
    • Determine the products driving profitability for better cost vs. revenue adjustments.

7. Debt Management Strategy

  • Who this is for: Organizations with a primary focus on managing and reducing significant debt – especially when high interest rates, repayments, or cash flow are major concerns.
  • Best practices:
    • Emphasize technical debt reduction: tag infrastructure resources and gather data points into dashboards and reports to identify assets for replacement or retirement.
    • Develop a business methodology of debt control measures to halt further debt accumulation and eliminate existing debt.

There is no one-size-fits-all FinOps strategy. Many companies employ a combination of these strategies, adapting them as priorities and circumstances change. Consult an expert advisor for guidance on formulating the best strategy that meets your unique cloud enterprise needs.

Stay tuned as we further explore the process of tailoring a FinOps strategy to your organization’s unique operating model needs in our next blog!

Have a question? Just ask.

Talk to a Wavestone expert for guidance defining your FinOps needs and implementing a strategy to answer them effectively.