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Achieving cost intelligence is a gradual process. Here’s what FinOps and Engineering should handle in the beginning, middle, and advanced stages.
The FinOps position, for most SaaS companies, is a relatively recent addition to the team. FinOps acts as a liaison between the Finance and Engineering teams, with the goal of getting everyone on the same page (and speaking the same language) when it comes to setting, optimizing, and sticking to budgets.
FinOps and engineering have a special relationship, because engineers are the ones who ultimately make major infrastructure, development, and design choices that impact the cloud bill. FinOps can both guide those decisions and help other departments understand why the engineers have made a particular choice.
The specific tasks handled by FinOps and engineering will vary based on a company’s maturity in regard to its cloud cost intelligence strategy. A company that has only recently begun to look into managing cloud costs will have an entirely different approach than one that has spent years developing and honing a cost intelligence strategy.
Therefore, you may notice as you read the following sections that your business primarily fits into one category along this spectrum of maturity.
This is useful information to know, both because you can get a feel for what to focus on right now, but also because you can look ahead to future maturity checkpoints to anticipate and plan for what’s likely to come next.
In the beginning, most organizations set budgets using a “top-down” approach. Generally, the finance department sets a budget for the year and the rest of the company is responsible for following that budget.
The problem with the top-down approach for a fledgling SaaS company is that, often, the team has little experience in dealing with cloud costs. Finance teams learn the hard way that engineering teams can’t efficiently stick to an immovable budget if they have to prioritize other things like the customer experience or the infrastructure needed to support a new product.
What usually ends up happening is that finance sets a hard budget limit and engineering exceeds that budget.
However, since profits also increased along with that excess spending, no one can really tell in which areas the spending was helpful or where it might have been wasted. Therefore, without more clarity into the situation, it’s difficult to make any improvements for future years.
That’s why one of the first things a SaaS company can do to manage spending is hire a dedicated FinOps team member to bridge the gap between finance and engineering.
The FinOps employee(s) can work with engineers in a number of ways to guide the development process. With background knowledge in both finance and engineering, FinOps can ask important questions, such as:
It’s important to remember that, especially at first, your company’s cost intelligence strategy may be chaotic and a bit rough around the edges.
That’s okay. This is the time for laying the groundwork and getting your barebones plan in place. There will be time to build on that foundation when your company has matured a little more.
Once FinOps and engineering have gotten used to working with each other to answer the broad questions listed above, it’s time for FinOps to take the lead in guiding certain engineering decisions.
The primary goal for engineering should, of course, be the development of effective products. Being able to offload to FinOps the responsibility of making financial analyses on top of their daily development tasks will clear their plates to make room for the work that engineers were hired to do.
While a company is in this middle stage of cost intelligence maturity, FinOps can assume responsibility for a few new objectives (in addition to the tasks they have already been handling):
Let’s say your business is far past its fledgling phase and is confidently off the ground and soaring. You’ve shopped around for cloud services that suit your needs, found discounts, signed up for savings plans, and optimized your development process as much as currently possible.
Finance, FinOps, and engineering work together seamlessly most of the time. Now what?
There’s almost always room to refine further. The exact details may vary based on your company’s current status with your cloud service providers and the way your teams have worked together so far, but some good opportunities for FinOps to make improvements could include:
FinOps should essentially aim for continuous streamlining and optimization in both spending and saving money, and then relay those developments back to finance and engineering to make sure everyone is on the same page.
Implemented well, a mature FinOps team can keep a large enterprise charging full-steam ahead because each department communicates effectively with the others and has the information needed to make optimal decisions that fall under their purview.
It may take years for most companies to learn and master cost intelligence techniques to a point where they can accurately predict the risks and rewards of major business decisions. But it doesn’t have to be a years-long process for your company.
With CloudZero, your organization can understand how and why your costs are changing — and what you're spending to fuel your products, features, development teams, and more. With unit cost analysis, you can measure cost per customer, product, feature, team, environment, and more.
With this cost intelligence, you’ll be able to distinguish between healthy growth and excess spend.
Engineering will be able to see the cost impact of their work and can make architectural decisions that ensure profitability. Finance will be able to more accurately report and forecast costs. And FinOps will be able to align engineering and finance around a shared cost language — and can make cost tradeoffs around where to invest in the business.
CloudZero even has a Cost Intelligence Team that can help you along the way — watching your cost, coaching you on best practices, and helping you take your cloud cost intelligence strategy to the next level.
CloudZero is the only solution that enables you to allocate 100% of your spend in hours — so you can align everyone around cost dimensions that matter to your business.