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How FinOps Can Help ITAM Get Its Head in the Cloud

Software Price inflation rates hero image

This article is based on a webinar presented by Anglepoint’s president and ISO’s ITAM standards committee chair, Ron Brill. Please visit this link to watch the full version.

We all know the growth in cloud infrastructure spending is accelerating.  Gartner recently predicted that by 2024 global cloud spend will more than double compared to 2021, reaching a level of spend comparable to that of traditional IT infrastructure. 

The term “Cloud” has been used to refer to a broad range of technologies and platforms. In this article, we will limit the discussion to Cloud Infrastructure & Platform Services, or CIPS, also known as Infrastructure/Platform as-a-Service (IaaS/PaaS). Cloud products provide organizations with numerous benefits. They can significantly shorten time-to-market, allow easy access to advanced technologies, and most importantly, offer instant scalability.

But as any ITAM professional knows, the Cloud also creates a huge challenge for companies when it comes to cost management. Gartner recently noted that for many companies, CIPS costs already exceed those of all software licensing and SaaS combined. Not only do these costs keep going up – but they are also difficult to understand, and even harder to control.

We will discuss the principles of the FinOps approach to cloud financial management, and how ITAM and FinOps can work together to create an effective, future-proof management system.

Managing cloud costs is an enormous challenge. Buying decisions are decentralized and no longer the sole purview of procurement. Cloud monthly bills can have hundreds of millions of lines for subscriptions and services strewn across teams and departments, with prices and options that are constantly changing. So, what are companies doing about it?

Enter FinOps. FinOps, or cloud financial operations, is a practice designed to bridge the worlds of IT/DevOps, finance, and procurement to optimize cloud spend. And it’s proving enormously successful.

FinOps takes an iterative approach made of three phases: inform, optimize, and operate.

Inform: this phase is about visibility. By leveraging tagging and reporting tools, FinOps delivers near real-time cost and usage dashboards and encourages shared accountability by showing teams what they are spending and how they are spending it.

Optimize: this phase is about analysis and action. Now that we have an accurate picture of what we’re spending, how can we optimize consumption of cloud resources to only what we need? How can we optimize the pricing we get from the cloud service provider?

Operate: this phase is about automation and iteration. By setting up ongoing optimization in line with company goals you can focus and scale operations for continual improvement and facilitate informed decision-making in the business.

The key point of this is that FinOps operates as a cycle. It’s always evolving.

But it also represents a cultural shift for many companies. That’s why it’s important for organizations to understand its six guiding principles:

  1. Teams need to collaborate: finance & tech need to work together in real-time to continuously improve.
  2. Business value of cloud drives decisions: decisions should be based on data, including variances, trends, and benchmarks.
  3. Everyone takes ownership of cloud usage: tech teams should be empowered to manage their own use of cloud services against their budgets.
  4. A centralized team drives FinOps: a central team is key to driving pricing optimizations and to enabling tech teams to drive consumption optimizations.
  5. FinOps reports should be accessible & timely: yearly or quarterly reports aren’t going to cut it. Fast feedback loops and visibility help drive better decisions at pace with cloud infrastructure changes.
  6. Take advantage of the variable cost model of the cloud: we don’t always need the same scale of infrastructure. “Lift and Shift” cloud migrations often fail to deliver on the promise of savings because they ignore the variable cost model of the cloud.

(If you want to dig in deeper with FinOps we recommend checking out this book and the FinOps Foundation.)

So how does this relate to ITAM?

Hopefully, by now you can see how closely related FinOps and ITAM are. They share the same core mission: Maximize the return on investments of IT assets. FinOps specializes in costs of cloud infrastructure and platform services providers. But despite the relationship between FinOps and ITAM, many companies struggle to integrate the two.

Typically, if you talk to FinOps teams, they ignore on-prem, software, and SaaS costs.

Meanwhile, most ITAM teams still have very limited visibility into the cloud. This means their software license reconciliation reports may not be complete and accurate.  And with publishers now including specifications about cloud usage in their license agreements, ITAM requires full visibility into the cloud, even if only to continue doing its traditional job as it relates to software publisher licensing.

Sample ITAM & FinOps Integration Roadmap

Bringing ITAM and FinOps together is a tremendous opportunity for businesses. Only by working together will the organization be able to effectively manage all technology providers across all platforms that make up the hybrid infrastructure. ITAM can learn a lot from FinOps. Beyond visibility into the cloud infrastructure, ITAM can transform itself by embracing the FinOps principles, such as those related to business alignment, collaboration, and real-time data. Similarly, FinOps can benefit from ITAM’s coverage of software which is a key cost in the cloud currently overlooked by FinOps in most organizations. Working together, ITAM and FinOps can provide the business with a “single pane of glass” – that is: visibility into, and optimization of, the cost of the overall infrastructure.