INTRODUCING

FinOps cloud cost optimization framework: Domains overview

Yurii Kucherenko

Yurii Kucherenko

A FinOps Domain is a specific area or scope within an organization where financial operations (FinOps) practices are applied. It could be a department, a project, or a product line. The main goal of having FinOps Domains is to bring financial accountability and optimization to different parts of an organization’s operations. When adopting FinOps, every organization engages in activities across various FinOps Domains, each representing a distinct area of focus and expertise. These Domains are made up of FinOps Capabilities, which outline the specific functional activities associated with that Domain. In our upcoming articles, we’ll cover the six components of a cloud cost optimization framework, starting from FinOps Domains.

Domain Model

The FinOps Domains collectively encompass the Capabilities that organizations must employ in their FinOps practices. While each organization will utilize every Domain, the specific mix of capabilities within each Domain may vary based on the organization’s level of FinOps maturity.

The Domains are interconnected, providing a high-level overview of the functional activities necessary for running a FinOps practice. Implementing these Domains yields tangible outcomes such as cost and usage reporting, improved performance, and the identification of new opportunities that inform subsequent iterations through the FinOps Phases.

Domains of cloud cost optimization framework

Understanding Cloud Usage and Cost:

Within this Domain, organizations strive to gather comprehensive information about their cloud usage and costs, normalize the data, and make it accessible for review by relevant stakeholders. This includes circulating the data to personas involved in other Domains.

  • Measuring Unit Costs
  • Managing Shared Cost
  • Managing Anomalies
  • Forecasting
  • Data Ingestion & Normalization
  • Cost Allocation (Metadata & Hierarchy)
  • Data Analysis and Showback

By gaining a comprehensive understanding of cloud usage and costs, organizations can effectively optimize their cloud expenses. This Domain enables organizations to identify patterns, trends, and anomalies in their usage and cost data. By normalizing and analyzing this information, organizations can make informed decisions about resource allocation, identify areas of inefficiency, and optimize their cloud spend. The ability to accurately allocate costs and provide detailed usage reporting also promotes transparency and accountability within the organization.

Performance Tracking & Benchmarking

This Domain involves setting and mapping usage and cost to budgets, utilizing historical data for forecasting, and establishing and measuring key performance indicators (KPIs) and benchmarks.

  • Resource Utilization & Efficiency
  • Measuring Unit Costs
  • Managing Commitment Based Discounts
  • Managing Anomalies
  • Forecasting
  • Budget Management

Tracking performance metrics and benchmarking against established targets and industry standards is crucial for cloud cost optimization. This Domain allows organizations to measure resource utilization and efficiency, identify areas of overprovisioning or underutilization, and make data-driven decisions to optimize their cloud spend. By aligning usage and costs with budgets and establishing KPIs, organizations can proactively monitor their cloud costs, identify deviations, and take corrective actions in real-time, ensuring efficient resource allocation and cost control.

Real-Time Decision Making

This Domain focuses on enhancing stakeholder enablement by curating data in stakeholder-specific contexts, improving decision velocity iteratively, and aligning organizational processes with the realities of operating in the cloud.

  • Measuring Unit Costs
  • Managing Anomalies
  • Establishing a FinOps Decision & Accountability Structure
  • Data Analysis and Showback

Real-time decision making is essential for agile cost optimization in the cloud. This Domain enables organizations to curate and analyze data in real-time, empowering stakeholders to make informed decisions that align with the realities of cloud operations. By establishing a FinOps decision and accountability structure, organizations can streamline decision-making processes, improve response times to cost-related issues, and optimize cloud costs based on up-to-date information. This Domain also fosters a culture of continuous improvement, enabling organizations to adapt their strategies and tactics as needed to achieve optimal cost efficiency.

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Cloud Rate Optimization:

In this domain, organizations define pricing model goals, make pricing adjustments based on historical data, leverage commitment-based discounts, and manage pricing aspects of cloud services.

  • Intersection of Cloud FinOps & Sustainability
  • Managing Commitment Based Discounts
  • Data Analysis and Showback

Optimizing cloud rates and pricing models is a key aspect of cloud cost optimization. Within this Domain, organizations can define their pricing goals, leverage historical data to make pricing adjustments, and strategically utilize commitment-based discounts to maximize cost savings. By effectively managing the pricing aspects of the cloud services they utilize, organizations can ensure they are getting the most value for their investment, optimize cost structures, and align their pricing models with their specific business needs.

Cloud Usage Optimization:

This Domain focuses on matching running cloud resources with the actual demand of workloads at any given time. It involves predictive rightsizing, workload management, automation, resource utilization, and techniques to optimize resource usage.

  • Intersection of Cloud FinOps & Sustainability
  • Workload Management & Automation
  • Resource Utilization & Efficiency
  • Onboarding Workloads
  • Data Analysis and Showback

Aligning cloud resource usage with actual demand is critical for cost optimization. This Domain enables organizations to identify opportunities to optimize resource allocation, automate workload management, and rightsize their resources based on predicted usage patterns. By continuously monitoring and optimizing resource utilization and efficiency, organizations can avoid unnecessary costs associated with idle or underutilized resources. Techniques such as workload automation and onboarding can further optimize cloud usage, ensuring resources are provisioned and deprovisioned as needed, resulting in cost savings and improved operational efficiency.

Organizational Alignment:

This Domain entails managing cloud usage in alignment with other IT Finance activities, integrating FinOps capabilities into existing organizational processes, units, and technology.

  • Intersection of FinOps & ITSM
  • Intersection of FinOps & Security
  • Intersection of FinOps & ITFM/TBM
  • Intersection of FinOps & ITAM/SAM
  • Cloud Policy & Governance
  • Managing Shared Cost
  • Managing Commitment Based Discounts
  • Establishing FinOps Culture
  • FinOps Education & Enablement
  • Establishing a FinOps Decision & Accountability Structure
  • Chargeback & Finance Integration
  • Budget Management
  • FinOps & Intersecting Frameworks

Aligning cloud usage and FinOps capabilities with other IT finance activities and existing organizational processes is vital for cost optimization. This Domain enables organizations to integrate FinOps practices with IT service management, security processes, financial management, and other frameworks. By establishing effective cloud policy and governance, managing shared costs, and integrating FinOps into existing organizational units, organizations can streamline financial processes, enhance cost visibility, and ensure proper financial control over cloud usage. This alignment also facilitates effective communication and collaboration between IT and finance teams, leading to better decision-making and cost optimization outcomes.

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By leveraging the capabilities within each FinOps Domain, organizations can achieve significant cost savings, improved resource utilization, and enhanced operational efficiency in their cloud environments. These Domains provide a structured approach to cloud cost optimization, allowing organizations to systematically address various aspects of their cloud usage and expenditure and make data-driven decisions to optimize their cloud costs while maximizing business value. FinOps Domains enables organizations to harness the full potential of cloud computing while maintaining financial discipline and maximizing value. In the next article, we are going to talk about Capabilities that each Domain includes.

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