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Understanding FinOps: A Beginner's Guide To Financial Operations

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Last Update: Feb. 2, 2024

Introduction

Have you ever wondered how to optimize your organization's spending while embracing innovation?

In the ever-evolving landscape of modern business, innovative methods are constantly being developed to drive efficiency, value, and savings.

One such approach is FinOps (Financial Operations), a significant and pivotal process in cloud financial management.

With the surge of cloud computing, managing financial operations in this scenario has become more crucial than ever before.

This article dives into the FinOps essentials, giving beginners a comprehensive understanding of this burgeoning business operation strategy and how you can leverage this process with Sanka.

Defining FinOps

FinOps, a fusion of finance and operations, is like the money expert for cloud computing. It's about mixing financial know-how with operational skills.

FinOps comprises three key functions which enable it to effectively manage cloud costs and drive business value.

  1. Inform: This pillar places a heavy emphasis on transparency. It is essential to inform each team about their spending, its drivers, and the impact on the business they are driving.
  2. Optimize: This involves the continuous evaluation of cloud usage. It requires a wise and informed approach to resource allocation that reaps the most value.
  3. Operate: This function focuses on leveraging the right resources to drive business forward. It ensures efficient execution and helps businesses to rapidly adapt to both internal and external changes.

How about the goal? FinOps aims to ensure your business handles cloud costs like a pro, manage resources efficiently, and continue spending in sync with business goals.

McKinsey stated that businesses adopting FinOps methods often see a 30% cut in their cloud-related expenses.

Here are the five main advantages of using FinOps and how they can help your business goals.

#1 Enhanced Cost Visibility and Governance

At the core of FinOps lies an emphasis on creating clear visibility into every part of your cloud costs.

This level of visibility is not just about keeping tabs on expenditures; it's about creating an understanding of every area of your financial landscape within the cloud.

For instance, consider a tech company that has adopted the cloud fully. It sees month-to-month fluctuations in its cloud bill but can't pinpoint the cause.

With FinOps practices in place, the company gains granular insight into every service and can attribute expenses to specific projects or teams, thus identifying inefficiencies and opportunities for cost savings.

#2 Increased Accountability and Ownership

The FinOps principle of distributed ownership revolutionizes how costs are managed.

Traditionally, IT costs were managed centrally, often leading to a disconnect between the spenders (development teams) and the payers (finance).

In a FinOps environment, Development Managers become aware of their spending impact.

For example, they could decide between different database options, choosing one that is cost-effective and supports the need for high availability.

#3 Cost Optimization

Integral to the FinOps philosophy is the proactive management and optimization of cloud expenses.

It goes beyond mere cost-cutting; it's a strategic endeavor to align your cloud expenditures with the overarching objectives of your business.

Picture this as a dynamic process where you're not just keeping costs in check but actively fine-tuning them to achieve optimal efficiency.

A retailer might leverage FinOps to align its cloud usage and expenditures with sales campaigns, ensuring it scales resources up or down as needed, without overcommitting financially.

#4 Business Agility

By tying costs to business value, FinOps empowers organizations to be more agile.

Financial decisions are made faster, and businesses can respond to market conditions effectively.

Imagine a media streaming service that employs FinOps to handle the release of a blockbuster series; they can scale resources up precisely to accommodate the spike in viewers and then scale down post-release, avoiding unnecessary expenditure.

#5 Competitive Advantage

Lastly, businesses adopting FinOps can achieve a sustainable competitive advantage.

The real-time nature of cloud spend analysis enables swift strategic decisions, such as entering new markets or adjusting service offerings in response to competition or customer demands.

The Six Principles of FinOps

For a framework to be successfully adopted, it needs to be underpinned by a strong set of principles.

FinOps is no different. It is based on six fundamental principles that enable an organization to navigate the shift towards better cloud financial management.

Let's delve into each of these principles to gain a better understanding.

1. Team Collaboration

One of the foundational pillars of FinOps is team collaboration. Successful cloud cost management isn't a one-man show, but a team endeavor.

FinOps emphasizes the need for continuous partnership and collaboration between finance, operations, and business teams.

These interdisciplinary groups should work together in a closed-loop cycle - a constant rhythm of planning, monitoring, and optimizing cloud costs, bypassing the traditional silos and encouraging a culture of inclusive decision-making.

2. Ownership

In the FinOps model, cost responsibility isn't confined to a single department such as finance or operations. Instead, it is shared across all the teams using the cloud resources.

This sense of ownership is essential for instilling cost consciousness and encouraging teams to think carefully about how they use cloud resources.

It promotes a sense of accountability, fostering a culture wherein every individual knows that their actions impact the overall financial health of the organization.

3. Central Control

While there is distributed decision-making in the FinOps model, central control ensures that financial decisions align with an organization's strategic goals.

The core FinOps team, comprising professionals from finance, operations, and business teams, sets a framework for spending that aligns with the company's goals and maintains governance over it.

Central control facilitates a more coordinated approach across the different teams, maintaining the balance between agility and cost control.

4. Accessible Reports

Transparency is a fundamental principle of FinOps. All teams should have access to real-time, comprehensive cloud cost and usage reports.

These reports should be easy to understand and include actionable insights that all staff, no matter their role, can act upon.

This helps team members understand the impact of their activities on costs and the value they contribute to the organization.

5. Business-Driven Decisions

Decisions regarding cloud resources and costs should be driven by their impact on business value.

Instead of costs being seen as something to be minimized, they should be seen as an investment in delivering business outcomes.

Business teams should be involved in these decisions, ensuring the value derived from spending is always front and center.

6. Variable Cost Model

FinOps operates using the variable cost model. Unlike traditional IT infrastructures' fixed costs, the cloud operates on a pay-as-you-use basis — a model that is dynamic and scalable.

This agility allows businesses to mirror their spending with real-time business needs and opportunities, making room for efficiency and sustainable growth.

Sanka's Role in the FinOps Journey

Now, enter Sanka – your ally in this FinOps journey.

Sanka seamlessly integrates store management, ads, payments, and social media, offering solutions tailored specifically to Sales, Commerce, Marketing, and Customer Service.

This eCommerce management platform provides robust analytics and marketing automation as well as features such as order management software, CRM, and contact center integration.

With a suite of tools and automated solutions, Sanka simplifies the implementation of FinOps strategies, ensuring you have a seamless budget management plan to drive your efficiency and productivity.

By integrating this automated process, you can redirect your focus to the exciting elements of your business without the stress of budget constraints.

Don't Wait - Start Your Free Trial Now!

Discover the benefits of Sanka for your eCommerce business. Start your free trial today and experience the power of a fully integrated FinOps platform solution that will revolutionize your online presence.

If you have any questions or require further information, contact our team for a customized consultation.

Conclusion

Now, more than ever, it is critical for businesses to understand and leverage FinOps.

With the rapid advancements in technology and the shift towards cloud computing, avoiding the complexities of handling significant cloud expenses can lead to wastage of money and resources.

FinOps is your go-to for managing cloud costs with potential savings of up to 30%.

Think of it as a powerful duo: FinOps brings financial and operational savvy, while Sanka provides the tools and automation. Together, they're your ticket to a more efficient, innovative, and successful future.

Ready to boost your business? Dive into FinOps with Sanka now!

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