What is FinOps? Principles, Practices, and Tools You Need

Introduction

With more businesses relying on the cloud, managing cloud costs has become essential for staying competitive and growing. That’s where FinOps comes in. It’s a way to help companies get the most out of their cloud spending by bringing together teams from engineering, finance, and business. FinOps makes it easier to make smart decisions quickly and ensures everyone shares responsibility for managing costs.

What is FinOps?

FinOps, at its core, is a cultural practice designed to help teams take ownership of their cloud usage while being supported by a central group dedicated to best practices. It enables cross-functional teams—including Engineering, Finance, and Product—to work together to deliver products faster, all while gaining better financial control and predictability.

The term “FinOps” combines “Finance” and “DevOps,” highlighting the importance of collaboration and communication between business and engineering teams. While other terms like “Cloud Financial Management,” “Cloud Cost Management,” “Cloud Optimization,” or “Cloud Financial Optimization” are also used, FinOps uniquely emphasizes the cultural and operational shift required to optimize cloud investments.

Though sometimes mistakenly referred to as “Cloud Financial Operations,” that term is increasingly avoided due to its association with traditional financial operations roles. Regardless of the terminology, FinOps is all about fostering financial accountability in the variable spend model of the cloud, empowering teams to balance speed, cost, and quality in their cloud architecture and decision-making.

Alternative Terminology

FinOps is also known by several other names, including:

• ‍Cloud Financial Management
• Cloud Financial Engineering
• Cloud Cost Management
• Cloud Optimization
• Cloud Financial Optimization

The Core Purpose of FinOps

FinOps isn’t just about cutting costs—it’s about unlocking the full potential of cloud investments to fuel efficient growth. By implementing effective FinOps practices, organizations can ensure that cloud spending contributes to:

• Driving higher revenue
• Expanding the customer base
• Accelerating product and feature launches
• Supporting strategic initiatives like data center shutdowns

By eliminating roadblocks and empowering engineering teams, FinOps enables faster delivery of high-quality features, applications, and migrations. It also fosters collaboration across teams, encouraging open discussions about cloud investment strategies. This approach ensures informed decisions on when to control costs or scale resources, with everyone aligned on the rationale behind these choices. FinOps bridges the gap between cost management and value creation, making it an essential practice for modern cloud management.

Six Principles of FinOps

These principles are in no particular order and should be viewed as a collective framework. To get the most out of FinOps, it’s essential to understand and apply all of these principles together.

1. Work Together as a Team

Finance, technology, product, and business teams must work together in real-time to optimize cloud usage and costs efficiently. Collaboration fosters innovation and continuous improvement.

2. Decisions Are Driven by Business Value of Cloud

Cloud decisions should focus on the business impact, leveraging unit economics and value-based metrics. Teams must balance cost, quality, and speed while viewing cloud as a tool for innovation.

3. Everyone Takes Ownership of Their Cloud Usage

Accountability for cloud usage extends to all teams. Engineers, product teams, and individuals are empowered to manage their usage and costs, considering efficiency from the earliest stages of development.

4. FinOps Data Should Be Accessible and Timely

Real-time visibility into cloud spend drives better decision-making. Consistent access to accurate data supports financial forecasting, variance analysis, and internal benchmarking.

5. A Centralized Team Drives FinOps

A dedicated central team ensures best practices are followed, optimizes discounts, and simplifies processes for engineers and operations teams, allowing them to focus on their core tasks.

6. Take Advantage of the Variable Cost Model of the Cloud

The cloud’s flexibility should be seen as an opportunity, not a risk. Agile planning, just-in-time capacity adjustments, and proactive optimization can deliver more value and reduce inefficiencies.

FinOps Phases

FinOps operates through an iterative approach focused on three key phases: Inform, Optimize, and Operate. Within an organization, different teams may be at varying stages of these phases at any given time. FinOps practitioners play a critical role in continuously analyzing cloud usage, identifying areas for improvement, and providing clear documentation to empower teams to implement meaningful changes that deliver maximum value.

Inform Phase: Gaining Visibility and Control

The Inform phase in FinOps is all about understanding cloud costs, usage, and efficiency. By analyzing data sources, teams can allocate spending accurately using tags, accounts, or business rules. This helps in budgeting, forecasting, and setting KPIs to measure the value of cloud investments.

Accurate allocation enables better reporting, ensuring teams stay within budget, avoid surprises, and maximize ROI. Benchmarking across teams or industry standards offers insights into operational effectiveness. Combining cost data with metrics like sustainability and efficiency provides a clear view of performance.

With the cloud’s flexible and complex pricing, the Inform phase ensures organizations make informed, data-driven decisions to align cloud usage with business goals.

Optimize Phase: Improving Rates and Usage

The Optimize phase focuses on improving cloud efficiency and costs by leveraging insights from the Inform phase. This involves identifying underutilized resources, rightsizing workloads, adopting modern architectures, and automating the removal of waste from unused resources.

Cloud providers offer several cost-saving options, such as Reserved Instances (RIs), Savings Plans (SPs), and Committed Use Discounts (CUDs). The Optimize phase uses visibility and analysis to help teams effectively manage these pricing models and maximize savings.

Collaboration is key in this phase, ensuring teams work together to refine processes and improve reporting where performance metrics show misalignment with business goals. While optimization paths may vary, the ultimate objective is to identify opportunities that enhance the value of the organization’s cloud investment.

Operate Phase: Continuous Improvement in Action

The Operate phase focuses on turning FinOps insights into action by implementing organizational changes and operationalizing the practices established in the Inform and Optimize phases. Key activities include establishing cloud governance policies, monitoring compliance, and creating training programs, team guidelines, and automation strategies aligned with organizational goals.

Success in this phase relies on fostering a culture of accountability. Engineering, finance, and business teams must collaborate on incremental actions, leveraging data from the Inform phase and opportunities identified in the Optimize phase. A bias for action is essential, ensuring continuous progress.

This phase emphasizes iterative improvement. By regularly revisiting the Inform and Optimize phases, organizations can refine strategies, adopt new capabilities, and evolve their FinOps practices to achieve long-term efficiency and value.

Key Stakeholders: What is Primary Role Of The FinOps Team ?

Successfully implementing FinOps relies on collaboration between multiple stakeholders, known as Personas, within an organization. FinOps activities are not carried out by the FinOps team alone—every Persona involved in using, managing, or overseeing cloud resources plays a crucial role in making FinOps work effectively. The FinOps Framework serves as the operating model that brings these Personas together.

Personas represent broad groups of stakeholders rather than individual roles. In large organizations, a Persona may include several people across various related roles, while in smaller organizations, one person might take on the responsibilities of multiple Personas. Regardless of the organization’s size, every Persona contributes to building a successful FinOps practice.

Core Personas: The Backbone of FinOps

Core Personas play a vital role in FinOps by providing the expertise needed to manage cloud resources effectively and align with organizational goals. While each Persona has unique responsibilities and perspectives, they share a common goal: maximizing the value of cloud investments. Their collaboration ensures a balanced, efficient cloud strategy that addresses the diverse needs of FinOps.

Here’s a closer look at Core Personas:

1. FinOps Practitioner

Bridges the gap between business, engineering, and finance teams, fostering a FinOps culture and enabling data-driven cloud decisions.

Key Responsibilities: Technical skills, cost optimization, collaboration, problem-solving, and continuous improvement.

2. Leadership

Aligns organizational goals with FinOps initiatives, driving strategic planning and ensuring compliance.

Key Responsibilities: Strategic planning, decision-making, stakeholder engagement, revenue growth, and governance.

3. Product

Defines requirements and prioritizes initiatives to align FinOps with business objectives, driving cloud value.

Key Responsibilities: Strategic alignment, stakeholder engagement, value delivery, and change management.

4. Engineering

Designs and optimizes cloud infrastructure for cost-effectiveness, performance, and security.

Key Responsibilities: Infrastructure management, resource optimization, monitoring, automation, and compliance.

5. Finance

Provides financial expertise to align cloud spending with business goals, ensuring accurate forecasting and reporting.

Key Responsibilities: Budgeting, cost analysis, financial reporting, and governance.

6. Procurement

Manages vendor relationships and negotiates contracts to ensure cost-effective and compliant cloud services.

Key Responsibilities: Vendor management, discount negotiation, license monitoring, and compliance.

By working together, these Core Personas create a comprehensive, collaborative approach to FinOps, ensuring the organization uses its cloud resources effectively and achieves its financial goals.

FinOps Maturity Model

FinOps is an iterative process, with maturity improving over time as activities, Capabilities, and Domains are repeated and refined. The Crawl, Walk, Run approach enables organizations to start small and scale up as business value justifies the effort. Beginning with limited actions allows teams to evaluate outcomes, gain insights, and decide when to expand efforts.

Maturity levels—Crawl, Walk, Run—help organizations assess their current state and identify where to improve. However, the goal isn’t to reach “Run” in every Capability. Instead, focus on maturing the areas that deliver the most immediate business value. For example, if “Walk” level anomaly detection effectively meets your needs, it might be better to invest resources into advancing other Capabilities with greater impact.

The key is to prioritize outcomes over arbitrary maturity levels. Use tools like the FinOps Assessment and maturity rubric to evaluate progress and communicate effectively about where to focus next. Aim for progress that drives measurable business results, not just higher maturity for its own sake.

Crawl Phase: Building the Basics

The Crawl phase marks the beginning of FinOps maturity, focusing on foundational improvements and quick wins.

Key Characteristics:

• Minimal reporting and tools.
• Basic KPIs and policies in place.
• Initial focus on “low-hanging fruit.”

Sample Goals/KPIs:

• 50% accurate spend allocation.
• 60% coverage of resource-based discounts.
• 20% variance between forecasted and actual spend.

This phase is about setting up the groundwork and building momentum for future progress.

Walk Phase: Advancing Maturity

The Walk phase builds on the foundation of the Crawl phase, focusing on refining processes and addressing more complex challenges.

Key Characteristics:

• Capabilities are widely understood and followed.
• Difficult edge cases are identified, with decisions made on whether to address them.
• Automation supports most Capability requirements.
• Medium to high-level KPIs are set to measure success.

Sample Goals/KPIs:

• 80% accurate spend allocation.
• 70% coverage of resource-based discounts.
• 15% variance between forecasted and actual spend.

This phase focuses on scaling efforts, improving automation, and tackling challenges that impact financial stability.

Run Phase: Achieving Full Optimization

The Run phase represents the highest level of FinOps maturity, focusing on advanced automation and addressing complex challenges to maximize efficiency.

Key Characteristics:

• Capabilities are fully understood and followed by all teams.
• Complex edge cases are actively addressed.
• Very high-level KPIs are set to measure success.
• Automation is the primary approach.

Sample Goals/KPIs:

• Greater than 90% of cloud spend is accurately allocated.
• 80% coverage of resource-based discounts.
• 12% variance between forecasted and actual spend.

This phase emphasizes streamlined processes, advanced automation, and tackling the toughest challenges to ensure optimal cloud efficiency and value.

How Organizations Begin Their FinOps Journey ?

FinOps adoption looks different for every organization, but it generally starts in one of three ways:

1. Leadership Mandate

A leader within the organization directs the team to implement FinOps as a strategic priority.

2. Grassroots Adoption

FinOps practices start informally at lower levels of the organization and gradually gain traction, eventually evolving into a formalized FinOps practice.

3. Individual Initiative

An individual or a small group seeks leadership approval to introduce FinOps, forming a dedicated team and formal practice.

Stages of FinOps Adoption

The stages of initial FinOps adoption provide a framework to guide your journey. While you may not need to start from scratch, these stages help outline clear goals and activities to successfully launch and sustain FinOps in your organization. Periodically revisiting these stages ensures continued growth and alignment with business needs.

Whether you’re an individual champion, a grassroots team, or working under a leadership mandate, use these stages as a flexible guide tailored to your organization’s unique circumstances.

Stage 1: Research

The research stage lays the groundwork for FinOps adoption by analyzing your organization’s current cloud spending and usage, identifying inefficiencies, and building a solid case for implementation.

Steps to Take:

Assess Cloud Spend and Usage:

Gather a complete view of your cloud contracts, cost reports (e.g., AWS Cost and Usage Reports, GCP Billing Reports), and usage data. Review tagging practices and cloud hierarchy to ensure proper tracking across the organization. Evaluate spending trends, identify rate optimization opportunities, and pinpoint inefficiencies like idle resources or oversized instances.

Establish Metrics and Benchmarks:

Compute FinOps KPIs to create a baseline and compare them to industry benchmarks like the State of FinOps report. This helps identify starting points and growth opportunities.

Explore Tools and Resources:

Investigate available FinOps tools and services, and evaluate the need for additional funding for resources or training (e.g., FinOps Foundation Training and FinOps Landscape).

Create a Vision Statement:

Based on your findings, draft a vision statement outlining the benefits of FinOps, the activities required for implementation, and a high-level timeline to guide adoption.

Who to Involve:

Collaborate with all core FinOps Personas to gather data and use cases that support your proposal. During these discussions:

• Identify Pain Points: Understand the challenges faced by different teams and explain how FinOps can address them. For example, finance may struggle with cost visibility, while engineering may need help optimizing workloads.
• Engage Key Supporters: Look for individuals eager to support FinOps adoption, as they can serve as FinOps Champions or join formal change coalitions to drive momentum.

Finance and engineering are two critical groups to involve in these conversations, as their needs often align closely with FinOps goals. Refer to the Appendix for recommended questions to guide discussions during this phase.

Stage 2: Propose

The proposal stage focuses on gaining stakeholder buy-in to implement FinOps. Use your research, data, and use cases to show how FinOps aligns with organizational goals, addresses pain points, and delivers value.

Clarify Your Ask

Define whether you’re proposing:

• A pilot approach to demonstrate early wins before full adoption, or
• Full adoption across the organization.

Your proposal might include approval for FinOps, funding (e.g., for training or tools), dedicated resources, or leadership sponsorship. Early wins help build momentum and confidence.

Tailor to Your Audience

Customize your proposal for different FinOps Personas:

• Leadership: Focus on ROI and strategic alignment.
• Finance: Highlight visibility and cost optimization.
• Engineering: Address inefficiencies like idle resources.

Leverage advocates identified during the research phase to strengthen your case.

Define the Opportunity

Outline three key areas:

• Current State: Highlight pain points (e.g., rising costs, inefficiencies) and risks of inaction.
• Roadmap: Present a timeline of activities like team formation, training, and early wins.
• Future State: Showcase benefits such as improved KPIs, collaboration, and predictable cloud costs.

Deliver and Follow Up

Choose the best format (e.g., written, conversational, or presentation) based on your audience. Use relatable examples and visuals to simplify concepts. For instance, compare usage optimization to “turning off lights when leaving a room.”

If approved, begin execution. If not, refine your proposal, gather more support, and try again later. Keep stakeholders engaged by regularly sharing progress with KPIs to demonstrate the value of FinOps.

Helpful Tips

• Educate stakeholders on FinOps as needed.
• Stay open to feedback and remain flexible.
• Use clear language and relatable examples.

A well-aligned proposal maximizes approval chances and sets the stage for successful FinOps adoption.

Stage 3: Prepare for Execution

With your FinOps proposal approved, this stage focuses on building the foundation for effective implementation by setting up the team, processes, and collaboration framework.

Build the FinOps Team

Define the FinOps function’s structure and roles, integrating it with existing teams like the Cloud Center of Excellence. Decide which roles will be filled internally or externally and prioritize responsibilities to maximize efficiency.

Focus on Core Capabilities

Start with key FinOps capabilities and expand as you mature:

• Data Visibility: Enable cost tracking and reporting.
• Forecasting & Budgeting: Proactively manage spending and detect anomalies.
• Optimization: Reduce costs through workload and rate efficiency.
• Education: Train team members with internal resources or certifications.
• Tools: Deploy tools that provide actionable insights to stakeholders.

Collaborate and Align Goals

Engage stakeholders to set shared goals, establish updates, and maintain feedback loops using regular meetings or reporting mechanisms.

Key Personas to Involve

Focus on engineering and finance as primary collaborators while involving other personas as needed based on activities.

Outcome

A well-prepared team, clear processes, and strong collaboration position your organization to launch FinOps successfully and deliver immediate value. Focus on urgent needs and expand over time as your practice matures.

Stage 4: Launch

The launch stage marks the official start of your FinOps practice, kicking off the implementation of processes, tools, and policies designed during earlier stages. This milestone transitions FinOps into normal, ongoing operations.

Key Launch Activities

The following actions can be part of the initial launch or rolled out over time:

• Announce the establishment of the FinOps practice across the organization.
• Provide training and share FinOps documentation to familiarize teams with tools, processes, and policies.
• Execute easy wins (e.g., quick cost optimizations) and share success stories to build momentum.
• Roll out tooling and distribute FinOps reports, empowering teams to make informed decisions.
• Start hosting routine meetings such as cloud cost updates or Cloud Center of Excellence calls.
• Begin performing FinOps Capabilities like forecasting, budgeting, usage, and rate optimization.
• Collect feedback from teams to refine operations and improve workflows.

Who to Involve

All FinOps Personas play a role during the launch and beyond. Close collaboration between the FinOps team, leadership, and core personas is crucial to ensuring everyone understands their responsibilities. Tools like RACI matrices (Responsible, Accountable, Consulted, Informed) can help clarify roles and improve coordination.

Launch Tips

• Start Small: Focus on what brings the most immediate value to your organization rather than trying to implement everything at once.
• Celebrate Early Wins: Highlight quick successes to maintain momentum and build organizational confidence in the practice.
• Sustain the Momentum: Launching FinOps is just the beginning. Success requires continuous adherence to FinOps principles, iterative improvements, and maturity development to meet evolving business needs.

FinOps as a Continuous Journey

Launching FinOps doesn’t mean the work is done. Regularly assess your practice to determine if more investment is needed, revisit priorities, and adapt capabilities to the changing needs of your organization. FinOps adoption is an iterative process—one that you may revisit as the practice expands, your organization evolves, or new challenges arise.

By embracing this ongoing journey, your organization can maximize the value of its cloud investments and stay aligned with its strategic goals.

Cloudchipr: Your FinOps Ally for Saving Time and Costs

Incorporating a robust FinOps tool is essential for organizations aiming to optimize cloud expenditures and enhance collaboration between engineering and financial teams. Cloudchipr is a comprehensive platform designed to streamline cloud cost management through automation and real-time insights.

Key Features of Cloudchipr:

• Automation Workflows: Automate routine cloud operations to identify and eliminate underutilized resources, reducing manual intervention and saving engineering hours.

• Dashboards: Gain immediate visibility into cloud spending with customizable dashboards, enabling teams to monitor expenses and identify optimization opportunities.

• Billing Explorer: Gain a unified view of billing across multicloud environments with tools for cost tracking, detailed analysis, and accurate spend forecasting.

• Saving Opportunities: Receive actionable insights to optimize cloud usage and reduce costs, with the ability to implement suggestions directly through the platform.

• Commitments Management: Monitor and optimize Reserved Instances, Savings Plans, and Committed to ensure your organization is making the most of its cloud investments.

Benefits of Using Cloudchipr:

• Time Savings: Engineering teams have reported saving up to 200 hours per month by automating cloud operations.
• Cost Reduction: Organizations have achieved significant cost savings, with some reducing cloud expenses by 30% or more.
• Enhanced Collaboration: By providing a unified platform, Cloudchipr fosters better communication and alignment between engineering and financial teams.

Integrating Cloudchipr into your FinOps strategy can lead to substantial time and cost savings, empowering your organization to achieve greater efficiency in cloud operations.

Conclusion

FinOps adoption goes beyond cutting costs—it fosters collaboration and accountability across engineering, finance, and business teams to maximize cloud value. By following FinOps Principles, organizations can balance cost, speed, and quality while leveraging real-time data and teamwork to drive innovation.

The FinOps Phases—Inform, Optimize, Operate— provide a structured path for continuous improvement. From understanding cloud costs to optimizing usage and embedding best practices, these stages ensure better cloud management and financial control.

With Core Personas like engineering, finance, and leadership aligned, FinOps creates a unified approach to managing cloud resources efficiently and effectively.

Cloudchipr takes FinOps to the next level, offering automation, real-time insights, and actionable recommendations. It helps organizations save time, cut costs, and enhance collaboration, making it an essential tool for modern FinOps practices.

By embracing FinOps and leveraging tools like Cloudchipr, organizations can unlock the full potential of their cloud investments and achieve sustainable growth in a competitive, cloud-driven world.