Part 3: Cultural Shift

This is not a technology solution or a proces that is handed off. Neither of those can have a conversation about the business value of the cloud, or the value of FinOps. This is a cultural shift in how teams work together and make decisions about cloud spending and optimization.

It's the people that make FinOps work.

Reference W. Edward Demings points: https://www.6sigma.us/six-sigma-in-focus/demings-14-points/

Create constancy of purpose toward improvement of product and service, with the aim to become competitive, stay in business, and provide jobs.
Adopt the new philosophy.
Cease dependence on inspection to achieve quality. Eliminate the need for massive inspection by building quality into the product in the first place.
End the practice of awarding business on the basis of price tag.
Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease costs.
Institute training on the job.
Institute leadership. The aim of supervision should be to help people and machines and gadgets to do a better job. Supervision of management is in need of overhaul, as well as supervision of production workers.
Drive out fear, so that everyone may work effectively for the company.
Break down barriers between departments.
Eliminate slogans and exhortations. Slogans without support are demoralzing.
Eliminate numerical quotas for the workforce and numerical goals for management.
Remove barriers that rob people of pride of workmanship. Remove obstacles that prevent people from doing their best.
Education and Self Improvement for everyone.
Put everybody in the company to work to accomplish the transformation. The transformation is everybody's job.

Key principles of FinOps:

continuous improvement
cross-functional collaboration
not targets or numbers, but focus on pride in the work and the value that is being created for the business.
massive training is required to get everyone on the same page and to understand the principles of FinOps and how to apply them in their work.

Note: Servant leadership https://www.linkedin.com/pulse/exploring-servant-leadership-financial-management-imbenzi-9sbvc/ and https://www.finops.org/framework/persona/leadership/

FinOps Teams

The FinOps team must have cloud expertise. A FinOps team with cloud domain expertise builds trust and credibility.
The FinOps team must have financial expertise. A FinOps team with financial domain expertise can understand the financial implications of cloud spending and can communicate effectively with finance teams.
The FinOps team must have executive support. A FinOps team with executive support can drive the cultural shift and can ensure that the necessary resources are allocated to FinOps initiatives.
FinOps doesn't increase conflict between technical and business teams, it creates a shared understanding and a shared language around cloud spending and optimization. It fosters collaboration and alignment between teams, rather than creating silos or barriers.

Responsibility of the FinOps team:

a driver of a cultural mindset, evangelizing best practices, and providing the tools and resources necessary for teams to optimize their cloud spending.
Negotiations with the cloud providers, commitment based discounts, and other financial arrangements with the cloud providers.
Providing visibility and reporting on cloud spending and optimization opportunities to the business and to the teams that are creating the cloud resources.
Driving the feedback loop between the teams that are creating the cloud resources and the teams that are responsible for the financial management of those resources.
Fostering Trust and collaboration between teams, and ensuring that everyone is aligned on the goals and objectives of FinOps initiatives.

Note: The FinOps team is not responsible for managing the day-to-day operations of the cloud resources, but rather for providing the guidance, tools, and resources necessary for teams to optimize their cloud spending and to make informed decisions about their cloud investments.

The cloud expertise of the FinOps team allows the other teams to understand how each specific billable item can be distributed into chargeback and showback.

Why a centralized team?

The unbiased central team, with ties to business leaders, engineering teams, and finance teams, shares objective best practices and recommendations.
The members of this team are never seen as pushing a specific agenda to benefit themselves, which builds more trust in the advice they give.
Critically, they must also work to incorporate business objectives for each cloud workload.

Note: data integrity is critical for the FinOps team to build trust and credibility with the other teams. If the data is inaccurate or incomplete, it can lead to mistrust and skepticism about the value of FinOps initiatives. The FinOps team must ensure that the data they provide is accurate, complete, and timely, and they must also be transparent about any limitations or assumptions in the data to build trust and credibility with the other teams.

Shared Costs

amortized or not amortized
showback or chargeback
custom rates or list rates

The FinOps team doesn't do any FinOps

The FinOps team is not responsible for managing the day-to-day operations of the cloud resources, but rather for providing the guidance, tools, and resources necessary for teams to optimize their cloud spending and to make informed decisions about their cloud investments. The FinOps team is a driver of a cultural mindset, evangelizing best practices, and providing the tools and resources necessary for teams to optimize their cloud spending.

The FinOps team breaks down the complexities of billing data, pricing models, centralized data and reporting and related functions while giving other teams the data to make their own informed decitions.

Responsibility should be pushed to the groups that understand their own infrastructure and their business value the best.

Repeatable patterns should be propagated by the FinOps team, but the actual implementation and management of cloud resources should be done by the teams that are closest to the work and have the most context about their specific workloads and business objectives.

An example, one service may have 50 uniquely different types of charges - Storage might have GRS vs LRS and then the 4-5 tiers along with performance, encryption, ingestion, analytics, etc etc. The cloud has hundreds of these services and thousands of chargeable items, and the FinOps team is responsible for breaking down the complexities of this billing data.

Technical debt is created on the initial move to the cloud. The security team isn't there to handle ALL of the security, but to assist. The FinOps team isn't there to handle ALL of the financial management, but to assist. The teams that are closest to the work and have the most context about their specific workloads and business objectives should be responsible for managing their own cloud spending and optimization, with the FinOps team providing guidance, tools, and resources to support them in this effort.

The Role of Each Team

Executives: The executives are responsible for setting the overall strategy and direction for the organization, and for providing the necessary resources and support for FinOps initiatives. They also play a critical role in driving the cultural shift and in ensuring that everyone is aligned on the goals and objectives of FinOps initiatives.
Engineering Teams: The engineering teams are responsible for creating and managing the cloud resources, and for optimizing their cloud spending based on the guidance and resources provided by the FinOps team. They also play a critical role in providing feedback and insights into the value that cloud resources are providing to the business, which can help inform FinOps initiatives and optimization strategies.
Development teams: The development teams are responsible for building and deploying applications and services on the cloud, and for optimizing their cloud spending based on the guidance and resources provided by the FinOps team. They work with the FinOps teams to deliver optimized solutions that meet their requirements.
Finance Teams: The finance teams are responsible for managing the financial aspects of cloud spending, including budgeting, forecasting, and reporting. They also play a critical role in providing feedback and insights into the financial implications of cloud spending, which can help inform FinOps initiatives and optimization strategies. They also work closely with the FinOps team to ensure that the necessary data and insights are available to support informed decision-making about cloud spending and optimization.
Procurement Teams: The procurement teams are responsible for managing the procurement of cloud resources, including negotiating contracts and pricing with cloud providers.
Product or Business Teams: The product or business teams are responsible for defining the business requirements and objectives for cloud resources, and for optimizing their cloud spending based on the guidance and resources provided by the FinOps team.
FinOps: Centralized heartbeat between all of these teams, providing the data, tools, and resources necessary for teams to optimize their cloud spending and to make informed decisions about their cloud investments. They speak both finance and tech.

Working Together

Finance teams have to think technically, and engineering teams have to think financially. The FinOps team is responsible for bridging the gap between these two teams and for fostering collaboration and alignment between them.

Reporting structure

Technology teams should report to the CTO, and finance teams should report to the CFO. The FinOps team should have a dotted line reporting structure to both the CTO and the CFO, to ensure that they have the necessary support and resources from both sides of the organization. This reporting structure allows the FinOps team to effectively collaborate with both the technology and finance teams, and to drive the cultural shift necessary for successful FinOps initiatives.

Could be the CTO or up to Finance, but what should happen is a strong partnership between the two.
Could be a COO in between.

Understanding motivations.

Engineers

Want to work on hard problems that are meaningful and challenging
Want to deliver software quickly and reliably
Hate inefficiency and want efficient use of resources
Stay up to speed on the latest technology
Are measured by performance, uptime, and resilience
Want to deliver features, fix bugs, and improve performance via CI/CD pipelines and automation

Tip: The FinOps team should lead with a "Let me help you." approach. I’ll take care of all that. Let me standardize and write your storage lifecycle policies so you don’t have to.

Finance

Want to accurately forecast and predict spending
Want to be able to charge back and/or allocate 100% of spending
Seek to amortize costs appropriately to the teams responsible
Want to split out shared costs, like support and shared services
Want to control and reduce costs, but maintain quality/speed
Want to help executives inform cloud strategy
Want to be aware of budget risks ahead of time

Tip: Treat Cloud like a utility bill - usage based, and variable. It’s not a fixed cost, it’s not a capital expenditure, it’s an operational expenditure that can fluctuate based on usage and demand. It’s important to understand the variable nature of cloud costs and to manage them accordingly.

Executives

Want to drive shared accountability to teams
Desire a digital business transformation
Want to shorten time to market for new services
Seek a competitive advantage
Want to establish a successful cloud strategy
Need to define and manage KPIs (key performance indicators)
Must prove the value of tech investments

Tip: For FinOps to work well, leaders and executives must also be aligned with one another—across disciplines and vertically across levels—on the goals of cloud, and the controls they wantto govern its use.

Procurement

Traditionally measured on discounts achieved during negotiations
Wish to ensure spend is in line with vendor agreements
Want to build relationships with strategic vendor-partners
Want to negotiate and renew vendor contracts

Tip: Procurement should work closely with the FinOps team to ensure that vendor contracts align with the organization's cloud strategy and financial goals.

FinOps through the Org

The advantage of the cloud is increased speed of innovation.

Hiring for FinOps

Can't just hire a person or a contractor, you need to hire FOR FinOps across all roles. Roles will evolve to meet the needs of FinOps. Multidisciplinary employees who have a business head, fiscal thinking, and technology acumen will emerge. Finance people will learn cloud, just as IT people will learn finance.

Skillsets:

Summary: FinOps capability is a mix of governance, communication, analysis, engineering/automation, data foundations, and enablement—distributed across roles (not a single “FinOps person”).

Skillset	What it covers
Policy governance	Creates policy documents, standards, KPIs/OKRs, and governance frameworks to guide cost allocation and cloud use.
Technical writing	Documents FinOps processes, socializes standards (e.g., tagging), and communicates items like budget alerts.
Analysis	Investigates cost anomalies, explains cloud cost models to engineering/finance, and delivers reporting (including to executives).
Engineering	Considers cost impacts of architectural decisions and helps automate billing data, optimization, budgets/forecasts, and governance.
Automation engineering	Automates cloud tooling such as budget alerts/commitments and optimization recommendation workflows.
Data engineering	Builds/maintains pipelines to collect, normalize, and improve reliability/quality of raw billing + usage data for analysis and reporting.
Training	Enables teams with materials and course delivery (self-paced or in-person) so people know what FinOps means for their roles.
Evangelism/marketing	Builds FinOps visibility and support, growing promoters and winning over detractors by clarifying delivered value.

FinOps Teams​