FinOps: Maximizing the Business Value of Cloud Infrastructure

Cloud infrastructure and services are now essential investments, and today’s organizations are seeking innovative ways to extract the maximum value from their cloud spend. Financial Operations (FinOps), sometimes referred to as Cloud FinOps, is an emerging practice that improves financial accountability and helps businesses successfully navigate usage-based cloud pricing models. In this article, we’ll explore exactly what FinOps is and show how its practices empower businesses to improve the ROI of their investments in cloud technologies. We’ll share FinOps’ three core principles and discuss how Snowflake’s built-in features help businesses maximize cloud efficiency, trim unnecessary expenses, and allocate their cloud budget for optimal benefit.

What is FinOps?

FinOps is a financial management framework that promotes shared responsibility for managing a business’s cloud infrastructure and its associated costs. Its primary purpose is to ensure that an organization's cloud spend is well aligned with its business objectives. 

FinOps practices encourage close collaboration between DevOps, IT, finance, and purchasing teams within an organization. In the FinOps model, stakeholders work together to control costs and ensure that cloud investments support innovation and growth. As both a cultural practice and discipline, this model encourages smart spending—not necessarily less spending—so businesses can make strategic decisions about where and when to expand or trim back their cloud investments. By integrating management processes, culture shifts, and new technologies, FinOps provides clear visibility into cloud costs and consumption drivers, enabling organizations to proactively optimize usage and spending.

How FinOps practices help organizations optimize cloud spend

Cross-departmental collaboration, shared incentives, and accountability form the foundation of the FinOps framework. Together, these practices impart financial discipline and promote the strategic consumption of cloud assets to create maximum business value.

Improved cost visibility and resource optimization

FinOps helps organizations gain a comprehensive, detailed view of their cloud costs and spending. With actionable data at hand, organizations can accurately measure cost efficiency, optimize their consumption of cloud resources, eliminate waste, and determine when and where increased investment is needed to support business goals.

Increased accountability 

FinOps practices support shared accountability for resource ownership, cloud spending, and budgets. Cross-functional collaboration breaks down departmental silos, making it easier to align cloud usage and business value consistently across the organization. It also helps organizations detect where cloud resource overspending is occurring and implement change when needed.

More accurate forecasting

FinOps relies heavily on analytics, reporting, and forecasting tools to analyze past spending and usage patterns and project future resource requirements. By forecasting future cloud costs with greater precision, businesses can improve their budgeting and capacity planning.

Faster issue resolution

FinOps’ data-centric approach to managing cloud resources helps teams more quickly diagnose inefficiencies and overspend. Detecting and resolving these issues swiftly reduces waste and keeps teams productive.

Catalyst for innovation 

When cloud spending and budgets are fully optimized, organizations can direct their full resources toward cloud investments that support innovation, new product development, and other high-value initiatives.

Three phases of the FinOps framework

The FinOps Foundation organizes the FinOps process into three pillars: inform, optimize, and operate. Together, these three phases form an iterative process. As organizations develop their FinOps maturity, they build on and improve their existing practices contained within each pillar.

Inform

The first phase of the FinOps framework focuses on bringing clarity to the financial and operational aspects of an organization’s cloud deployments. By nature, the cloud’s elastic and on-demand resources, pay-as-you-go pricing, and customized discounts require resource consumption to be carefully tracked. Using accounts, business mapping, and other means, organizations can precisely see chargeback and showback operations, so ROI can be easily demonstrated and spend can remain within budget. Improving visibility into current patterns of resource consumption also helps teams accurately forecast future spend, helping ensure sufficient funds have been allocated to meet future demand.

Optimize

Once organizations have a clear picture of where their current cloud spending is invested, they can focus their attention on optimizing spend and reducing waste. There are a number of practices organizations can use to get the best value from their cloud spend. One involves taking advantage of discounted pricing for reserving cloud resources in advance. Some cloud providers offer advanced tools for detecting and eliminating excessive usage, including more affordable long-term storage for data that will be accessed infrequently.

Operate

The third phase of the FinOps process involves assessing progress toward meeting the business’s strategic objectives, evaluating business metrics such as speed, quality, and cost. Central to this stage is the Cloud Cost Center for Excellence (CCoE), a team within the organization that’s made up of business, financial, and operational stakeholders. This team works together to develop the governance policies and models that ensure cloud usage and performance remain continuously aligned with business needs. 

Optimizing cloud resource allocation with Snowflake

Snowflake supports FinOps practices with features designed to improve efficiency and track consumption. With data-driven insights into storage and compute consumption, organizations can align their Snowflake resourcing with business-critical workflows, improve efficiency, and proactively minimize waste. 

Granular usage data with Account and Organization usage views

Snowflake provides granular usage data via Account and Organization usage views, including data meant for both finance teams and Snowflake practitioners. Organizations can track usage at multiple granularities including organization, account, workloads, warehouses, users, and tasks; and attribute spending to specific teams, customers, or cost centers. This is done with tagging or other cost-attribution features to actualize chargeback or showback scenarios. 

Account-level and custom budgets with automatic alerting

With Budgets, organizations have another tool that supports a robust FinOps practice. Using an account-level budget, teams can set a spending limit for all supported Snowflake objects in the account. This feature will monitor the credit spend for your compute resources, including warehouses, cloud services, and serverless services for the calendar month. If overspend is projected during any day of the month, automated alert notifications keep teams informed. FinOps teams can also create a custom budget by grouping a set of Snowflake objects within an account, corresponding to a department, function, business unit, or workload. The custom budget monitors the credit spend only for the specified resources. 

ROI-based workload segmentation 

Understanding the cost and ROI of workloads enables FinOps teams to make informed decisions about re-architecture, decrease or increase usage, or even retire certain workloads with the goal of ensuring optimal return on spend. Snowflake’s cost visibility features enable teams to understand the level of investment in each workload, and that the return on it is subjective and dependent on the business value of the use case. 

Policy-based resource allocation controls

For larger, more mature FinOps implementations, policies that restrict which users or teams can perform credit-consuming operations (such as warehouse creation, sizing, and scaling limits) can be used to control costs and reduce indeterminacy from unintended spend by additional users. This provides organizations with a valuable tool for realizing a more robust FinOps practice.

Snowflake empowers its customers to effectively manage and optimize their cloud spend. With a range of built-in features for monitoring and controlling how your resources are invested, Snowflake supports FinOps best practices, providing teams with clear visibility into how and where their cloud resources are being spent.

Download our guide to learn five steps to optimize cost and performance for cloud data platforms.