Key Insight: To effectively manage the variable nature and distributed procurement model of cloud, FinOps Practitioners have built capabilities to maximize the value of their organization’s technology investments. This has resulted in businesses asking FinOps teams to manage technology spending that extends beyond the scope of public cloud. Most Practitioners today are incorporating SaaS and Data Center costs into their practices. To reflect this reality, the FinOps Foundation’s Technical Advisory Council has approved adding a new element to the FinOps Framework to capture the best practices for managing the different types of technology cost and usage data Practitioners are managing: FinOps Scope.
FinOps practices are managing scopes of technology spending beyond public cloud
Over the last 18 months, the FinOps Foundation has seen a shift in the scope of spending that FinOps practices manage. We first explored this anticipated shift in the second edition of Cloud FinOps (pg. 401) where we shared a vision for how we expected the scope of FinOps to expand: to a world where FinOps practices are integrating costs beyond public cloud – from SaaS, to licensing, datacenter, and private cloud – for a more complete picture of cost to drive value-based decision-making across a broader scope of spending.
At FinOps X in 2023, we first heard business leadership talk about applying FinOps to additional areas of spending; Natalie Daley from HSBC discussed incorporating private cloud, SaaS, and licensing costs into their FinOps practice for public cloud costs.
Then, earlier this year at FinOps X 2024, we heard more FinOps Practitioners share that they are being asked to take on additional types of technology spending:
- Applying the FinOps Framework to SaaS at Scale – Under Armour / Avalara
- FinOps Across Public Cloud and On-Prem – Virtasant
- A Closer Look at Capacity Planning in the Private Cloud – Meta
Most recently, at the FinOps Foundation’s September Virtual Summit, Heineken and Priceline shared their experiences applying FinOps to private cloud and SaaS respectively.
At the FinOps Foundation Virtual Summit in September, Priceline shared their strategy for applying FinOps to SaaS spending. Priceline faced a proliferation of SaaS tools without visibility into their costs and usage. The FinOps team centralized all SaaS cost and usage data and allocated it to consuming departments. This total cost visibility improves accountability, ownership, and enables better decision-making around SaaS procurement.
Additionally, many talks planned for the upcoming FinOps X event in Barcelona cover the extension of FinOps to additional areas of technology spending:
- FOCUS for Datacenter: Stories from the Front Lines – UnitedHealth Group / Virtasant
- Scope of FinOps Interactive Chalk Talk – Lloyds Banking Group / Specsavers / SAP
- Mastering FinOps for SaaS Optimization – Priceline
- Let’s Extend FOCUS: Defining the Future of Private Cloud Cost Management – Heineken
In order to get a better understanding of what types of costs FinOps Practitioners are managing, we conducted polls at the September 2024 North America & EMEA Virtual Summit and at the Asia Pacific Virtual Summit.
Results indicate that the majority of FinOps Practitioners across the globe are already managing SaaS, Licensing, and other technology costs in addition to public cloud spending:
FinOps Foundation September 2024 Poll Results: A large majority of FinOps Practitioners are already managing SaaS and Licensing costs in addition to public cloud spending.
These signals make it clear that the practice of FinOps is being applied to areas of technology spending beyond Infrastructure-as-a-Service (IaaS) costs, or public “cloud spend.”
Why the Scope of FinOps has Expanded
The practice of FinOps was born to address the new cost management challenges that come with the variable cost model of public cloud, and Practitioners have developed skills in dissecting, allocating, optimizing, and reporting on high volumes of complex data with deep granularity. This practice has enabled organizations to make real-time, data-driven decisions that maximize the value of their cloud investments through collaboration between business, finance, and technology teams.
The challenges of managing variable public cloud spending are mirrored in the proliferation of SaaS across organizations. Thus, FinOps is ideal for managing “cloud like,” consumption-based costs, particularly “as-a-service” IT costs. Further, FinOps teams’ familiarity with highly granular, real-time data means they can integrate monthly cost data with more ease than existing IT management teams would be able to incorporate volumes of highly variable data into their practices.
Given the success that FinOps teams have had with managing high volumes of real-time cost data, it is not surprising that business leaders are asking if FinOps’s collaborative approaches to driving clarity and value can be applied beyond the public cloud to intersecting areas of technology spending.
To reflect this reality, the FinOps Foundation’s Technical Advisory Council has approved a new element in the FinOps Framework to capture the segments associated with the different types of technology cost and usage data FinOps Practitioners are managing: FinOps Scope.
A FinOps Scope is a segment of technology-related spending to which FinOps Practitioners apply FinOps concepts. Through our work with the community, TAC and Working Groups, the initial FinOps Scopes identified include Public Cloud, SaaS, and Data Center:
The FinOps Foundation’s Technical Advisory Council and community based Working Groups are actively exploring further enhancements and the addition of resources for FinOps Scopes, These efforts are part of the ongoing work to evolve the FinOps Framework to reflect what the community is doing. Some considerations include amending the definition of FinOps, updating elements of the Framework including Principles, Domains, Capabilities, and Personas.
FinOps teams are better equipped to manage additional Scopes
In some cases, especially for companies “born in the cloud,” FinOps teams are the only technology cost management team in the organization. In other cases, FinOps Practitioners are working alongside Allied Personas (e.g., ITAM/ITSM/ITFM/TBM/SAM). But in all cases, FinOps’ success in managing cloud spending has the business asking “Can FinOps keep doing what you’re doing for cloud, AND also do it for X?”.
While other disciplines report on cost at a chargeback level, they do this for a monthly and quarterly roll-up of financial reporting at the general ledger level. FinOps, by contrast, is leveraging extremely granular cost and usage data at levels for all stakeholders, from engineering, to architecture, to product, to finance, and to executives, enabling them to:
- Make information available outside of traditional silos to empower Personas across the organization, beyond Leadership – not just the CFO and CIO.
- Enable timely decision-making about technology investment choices in “fixed” and variable Scopes.
- Enable collaboration between technology and business teams at the engineering and product level.
- Enable Cost Aware Product Decisions by bringing cost considerations earlier into the product development lifecycle.
- Optimize, modernize, and automate to create consistency and iteratively improve technology usage and cost.
FinOps teams have built Capabilities beyond reporting and are equipped to handle huge volumes of data, which can be extended to data from other Scopes of technology spending such as SaaS, and Data Center. FinOps teams can blend costs from any IT environment to provide the organization with a consistent and detailed picture of unit costs by application, business unit, product, etc., and then go beyond that to enable optimization, decision-making, and re-deployment of technology components.
The FinOps team is also set up to provide not only best practices for the Data Ingestion and Allocation of spending, but also actionable insights and data that provide the context to optimize spend at the engineering or product design levels. FinOps delivers the finer-grained visibility to move beyond financial reporting and into active technology management.
FinOps Practitioners are well-equipped to ingest and manage additional Scopes of technology spending for several reasons:
- FinOps teams are already managing extremely large data sets that come at high frequency from numerous sources. It’s easier to apply this skill set to simpler data sets than vice versa.
- FinOps uses a bottom-up approach with granular data, enabling usage-based resource allocation and informing engineering teams to optimize at the resource level.
- FinOps teams have already established a collaborative, data-driven culture across Finance, Procurement, Engineering, Product, Leadership teams and intersecting disciplines.
- Many FinOps Capabilities apply equally well to managing other costs, including Scopes where cost data is less variable.
- Architecting for Cloud principles apply whether the cloud is in the data center or in a public cloud.
- Onboarding Workloads includes making data-driven decisions about if and where an application should be created or moved.
- Allocation and tagging should be done consistently whether resources are in a private data center or a public cloud.
- Invoicing & Chargeback practices foster a collaborative relationship with Finance teams to manage highly variable spending alongside less variable costs.
- Licensing & SaaS management enables full transparency and usage-based allocation of costs.
Going beyond financial reporting to data-driven optimization
Applying FinOps Capabilities to additional Scopes of spending gives businesses more comprehensive visibility into their technology costs. The goal for organizations is to understand and optimize the cost of offering each individual product or service. The first step is to get complete visibility into the cost of a product or service by pulling together all types of costs associated with delivering it.
After getting a complete picture of unit costs, organizations can map those unit costs with the revenue generated by each unit to understand their Unit Economics. FinOps can then take you beyond this initial visibility and allocation of costs by providing the granular data needed to improve the economics of each unit you sell. With an understanding of unit economics, businesses can make data-driven decisions about resource usage, workload placement, and product viability.
This transparency facilitates more informed decision-making and cost optimization, aligning strategic planning with associated investments. FinOps teams can streamline decision-making for business leaders by clarifying the impact of technology choices on business goals.
Unify billing data with FOCUS![™]()
The FinOps Open Cost and Usage Specification (FOCUS
) offers FinOps Practitioners a format for unifying cost and usage data from the public cloud, data centers and private clouds, SaaS and PaaS tools, and any other technology cost data that is mapped to its format. FOCUS currently includes data Columns that support public Cloud Service Provider (CSP) cost and usage data, but FOCUS aims to gain deeper and broader adoption across the industry, particularly among SaaS vendors.
Practitioners can begin to leverage FOCUS as a standard format to unify billing data from disparate sources, just like European Parliament, GitLab, Zoom, Citi, and The Australian Retirement Trust are doing today. To get started, download your cloud provider data in the FOCUS format, and begin incorporating other providers’ data into this pipeline.
GitLab unifies data from multiple vendors with FOCUS: Clément Leroux, Staff FinOps Engineer, shares how GitLab is leveraging FOCUS to unify data from multiple cloud and SaaS vendors to improve visibility and cost allocation, understand unit economics, and enable data-driven optimization.
How to get involved
To support Practitioners with incorporating other Scopes of cost data beyond public cloud, we are hosting Community Calls for Members to discuss Scopes. Please register to attend Scopes Community Calls that are friendly for your time zone.
If you are interested in learning more about using FOCUS to unify datasets from other Scopes of spending with cloud cost and usage data, please register to attend FOCUS Community Calls. If you are interested in helping to build Use Cases with SQL queries to run on FOCUS datasets, please request to join FOCUS User Group calls.