What is FinOps?

FinOps arose out of the need to better manage and optimize cloud spend. This is still the definition most sites will offer you. But in many organizations, FinOps has also matured and grown more encompassing. Today, FinOps teams focus on removing blockers, empowering developers to build more powerful tools, enabling domain experts to operate with greater agility, and even equipping the organization to drive more revenue writ large. The intelligence they organize and make actionable also informs financial decision making, such as where the organization should invest, and when. But that’s not all.

• FinOps teams build and oversee an infrastructural, cross-departmental financial machine that serves to equip every function inside the business and provide up-to-date accounting on every “number” associated with the organization.
• They help ensure every bill gets paid and that every cent on every ledger and budget can be explained. FinOps teams also manage systems that help finance teams audit licenses, track spend ongoing, and forecast costs.
• Of course, FinOps’ preeminent priority remains prescribing best practices as they pertain to optimizing cloud spend, getting the most out of the organization’s technological toolset, and reducing manual or redundant work. Really, the goal is to get as much value out of the organization’s SaaS spending as possible. This work has never been more important. In Tonkean’s State of Business Operations 2022 Report, 76% of respondents agreed that their organization still uses too many apps. 95% of respondents said their projects at least occasionally get delayed because of that fact.
• FinOps works to reverse such trends. But that work also comes rife with potential complications and pitfalls, including the creation of more operational debt and further siloing internal departments—which can happen through superfluous spending and app development, for example.

Below you’ll find a few of the more crucial points of improvement to focus on in order to overcome complications common to FinOps, and in turn be the most impactful partner to your organization as possible.

1. Optimizing SaaS Spend Management

Optimizing SaaS spend management is about ensuring you’re getting as much value as possible from what tools and platforms you invest in, and utilizing intelligence gathered internally to discern what SaaS tools you can and should do away with. But this also requires understanding inside and out what sort of SaaS tools and platforms your organization needs. Improving this multi-dimensional practice through iteration and with agility can produce all manner of frontline benefits.

• What does “good” look like? SaaS spend reduced by up to 27%; manual work per employee reduced by 6-10 hours per week; 100% satisfaction among surveyed employees with how easy and seamless it is to make requests for new tools
• What do you need to achieve that? System for gathering requests from all the sources of intake across the organization including forms, emails, chat, and other systems; means of consolidating and processing requests submitted across all methods; a system for identifying and informing the requester of potential overlap with existing tools to prevent purchasing redundant software; means of funneling all work related to fielding, synthesizing, and deciding on requests into one single FinOps tool.

Dive Deeper: Better cloud financial management is perhaps the most important part of FinOps’ work day-to-day. FinOps teams are the frontline workers in this effort to ensure organizations are approaching technological investment from a place of intentionality, and that the organization’s use of SaaS ongoing is as efficient as possible. The benefits of doing all this effectively go beyond reducing overall software costs. Through better SaaS spend management, FinOps can improve the speed and agility with which every component of the organization operates, by helping to ensure said components have precisely the resources they need to do their particular jobs as effectively as possible. But to improve SaaS spend management, FinOps teams need to ensure their own internal operations are adequately efficient and streamlined. They need to be able to manage and iterate upon end-to-end processes that can be used to request, approve, purchase, and track the ongoing use of new software tools and services across departments. Such processes should be heavily automated, but also thoroughly integrated; ideally, employees across departments should be able to submit requests directly to the FinOps team—as well as provide other kinds of updates and data—from within their application of choice. Neither FinOps teams nor any other team should have to learn how to navigate a new system or platform in order to provide each other the information they both need to do their jobs effectively.

2. Guaranteeing the completeness, accuracy, and usefulness of all financial statements used to report cloud spend

FinOps teams are instrumental in ensuring that every financial statement produced by the finance team is accurate, comprehensive, and useful. That means that financial reports, audits, and statements contain all bits of relevant data always, but also that the information is presented in such a way that makes clear crucial insights such as TCO (total cost of ownership) and ROI (return on investment).

This can be trickier than you’d think, especially for large organizations where siloed teams may not be communicating their spending at a granular level. But FinOps teams can help create systems that dismantle those silos, along with processes that automate the ongoing task of collecting financial data.

Finally, they can (and should) conduct their work on platforms that allow them not only to compile and collect financial information in one place, but to analyze that information and present conclusions.

• What does “good” look like? 100% verifiability of all financial statements; 100% accuracy rate of all reports and financial statements; employees report being clear on financial goals, priorities, and the reasoning behind spend-strategies in internal surveys; manual work per procurement manager reduced by 6-10 hours per week; increased cost transparency; information presented in the appropriate business context.
• What do you need to achieve that? The implementation of systems that integrate with whatever applications internal departments prefer spending time in and that automate the process of collecting financial data across apps; means of integrating license reporting into a single tool; process for conducting analysis against KPIs; implementation of an easy tagging strategy and structure for employees documenting spend

Dive Deeper: The sanctity of financial statements is crucial inside any company. Errors and omissions can lead to an improper allocation of resources, which can stunt growth and negatively impact value. Preventing that is paramount. It’s also difficult. Different cloud vendors bill in different ways. Some send a monthly cost and usage report (CUR) with tons of line-items and differing rates. Attributing costs to the correct business units can be hard. Equally important is putting the information collected in financial reports to good use. These reports aren’t truly valuable unless it’s easy to use them to draw astute conclusions from which future decisions can be made and new strategies created. Finally, it’s crucial to be able to collect every bit of relevant data related to spend, technology usage and licensing seamlessly and with fidelity. Here, process automation is very much your friend. When processes that facilitate the collection and compilation of data across stakeholders and systems are automated, not only is lots of manual work and time saved, but the data is more accurate, since, often, the potential for human error is reduced.

3. Using budgets and forecasts to be proactive

FinOps is responsible not only for calculating things like the TCO and ROI of current SaaS investments, but also forecasting future costs against organizational priorities and KPIs. This is crucial; proactive decisions related to how you operate as a business moving forward, what to invest in, and what not to invest in are made based on budgets.

Yet this is also—surprise—difficult. Cost predictions, particularly those made by internal application owners, are often inaccurate. In compiling the budgets and forecasts with which FinOps can strategize and look ahead in their cloud optimization efforts, it pays to take oversight of licensing, vendors, and tracking into their own hands. (At the same time, however, FinOps should never operate in a silo. And so while FinOps needs to maintain governance over the budgeting and forecasting process, it should also remain transparent, and its work should be visible and shared, so that FinOps teams in time effectively enable other departments to start factoring financial impact into their decision making as it relates to cloud spend.)

• What does “good” look like? KPIs are defined internally and used to judge effectiveness and value of SaaS investments; FinOps maintains visibility into 100% of all subscriptions, licenses, and investments ongoing; budgets and forecasts are compiled using a single platform, into which financial data is funneled; budgets and forecasts eventually produced display output from existing resource allocation clearly; budgets are informed by KPIs; internal teams outside of FinOps understand the organization’s budget so well that they can predict what impact their ideas might have, and proactively raise awareness when they anticipate changes coming down the pipe.
• What do you need to achieve “good” here? Systems for ensuring all financial reporting and financial statements—which inform budgets—are accurate, complete, and actionable; means of collecting additional details by following up with the original requestor and for routing the request to the appropriate procurement resource; a platform that provides insight into ongoing initiatives and investments and that simultaneously facilitates budget and forecasting generation.

Dive Deeper: At the end of the day optimizing SaaS spend management is an ongoing project that encompasses many of FinOps’ other responsibilities. To optimize the manner in which you engage with and invest in cloud services, you have to maintain an airtight understanding of what those services cost, how they’re used, and what ROI they have, which will be reflected in financial statements. But so, too, should you have a good idea of how SaaS tools and services fit into your company’s plans even before you begin using them. That’s where budgeting and forecasting come into play. But what goes into effective budgeting and forecasting? For one thing, it requires both total insight into what vendors and services teams are working with internally, as it necessitates intimate familiarity with the organization’s goals (via KPIs for example) overall. This predisposes FinOps teams with a more salient and actionable sense of cause and effect—if system X is invested or divested in, it will have Y impact on the organization’s mission to do Z—which can be used to operate more proactively as a go-to partner for the business. To this end, FinOps should look to automation platforms and process experience tools that come with reporting capabilities, and in turn enable FinOps teams to not only automate processes related to data-capture and verification, but that can use that information to create budgets and reports grounded in the context of the organization’s larger mission and goals.

If you’re ready to learn more about how process experience software, AI, and no-code automation can help Ops teams level up, sign up for a Tonkean trial.

Glossary of terms

• FinOps – Finance Operations
• Spend management – The process of collecting, cleansing, classifying and analyzing expenditure data
• Procurement – The process of finding and agreeing to terms, and acquiring goods, services, or works from an external source
• Cloud – Servers that are accessed over the Internet, and the software and databases that run on those servers.
• SaaS – Software as a service
• ROI – Return on investment
• CUR – Cost and usage report
• TCO – Total cost ownership