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The FinOps Foundation provides six Finops principles every cloud company should follow. Here’s a practical guide on how to get it done.
On the surface, they seem straightforward enough. The first principle, for example, is that teams should always collaborate in real-time to “continuously improve for efficiency and innovation” when it comes to staying on top of software development cloud costs.
Upon further inspection, however, most companies — especially those that are still developing their FinOps knowledge and policies — are left with more questions than answers.
In an ideal world, of course teams would always collaborate to work toward cost efficiency in everything they develop. But how do you actually get there? How does a company go from out-of-control cloud spending to suddenly improving efficiency and innovation?
In other words, there are a lot of missing steps to get from point A to point B.
CloudZero has spent years helping cloud-driven companies take control of their spending and work toward true, long-lasting cost efficiency.
We’ve had the benefit of seeing these companies make the FinOps journey from beginning to end — as far as a state of continuous learning and improvement could be considered the “end” — and we’ve made a note of the most practical and efficient paths these companies have taken to achieve their goals.
We’ve put together this explanation of the six FinOps principles, along with some practical tips your company can use to achieve each of them, in the hopes that filling in some of the missing blanks can help more companies take advantage of this incredibly valuable framework.
At its core, this principle is making the point that everyone in your company needs to be on the same page regarding cost optimization and the importance of cost efficiency.
This is more of a company culture shift than a change in how you build projects, but it can make all the difference. Having a culture where everyone works together and keeps cost as a top priority makes implementing the other cost-related changes much easier.
Unfortunately, culture shifts don’t happen overnight. The best thing you can do is use incentives, reminders, and positive encouragement when your employees make smarter cost decisions. It’s also crucial to make sure every employee has the ability to see the direct results of their actions. We’ll get to that later.
The second principle emphasizes the value of understanding the unit economics of every portion of your business. Depending on how your business model works, this may mean you need to understand your costs per customer, per product, per feature, per region, per support ticket, or any number of other metrics.
It doesn’t make sense to continue operating in areas that are not profitable, so you will need to sort out which aspects are bringing in enough revenue to justify their expenses. It’s this knowledge that will ultimately inform your future decisions about which directions you should grow toward and which areas should be reined in to cut costs.
This can be a tricky one to implement in your business unless you’re using specialized tools that can break your costs down into their individual, granular parts. You could build your own tools or opt for a ready-made solution, such as CloudZero, that allocates every dollar of your spending so you can see where your money is going and why.
Every person in the company who has the ability to affect costs should be aware of the consequences of their actions (especially engineers). For example, if an engineer makes an infrastructure decision that raises costs by 20%, he or she should see that result and understand that the higher costs are a product of that infrastructure choice.
Crucially, that means your engineers will need to have access to the company’s cost data you obtained as part of the previous principle.
In order to make informed decisions, you need to see your cost data as soon as possible. Waiting until next month’s cloud bill hits your inbox puts you too far behind schedule to make any meaningful changes before other critical pieces of infrastructure have been built upon the faulty foundation.
If you want to make smart build decisions as you go, without having to gut and rebuild an inefficient project later on, you need to see the effects of each choice in as close to real time as possible. There is always a little bit of lag between your building decisions and your resulting cost data, but that lag should ideally not be more than a day.
Keeping everyone in the company organized and on track toward making smarter cost decisions can be difficult without a centralized hub managing your FinOps policies.
The solution is to have a Cloud Center of Excellence or a dedicated FinOps team — even if that CCoE or FinOps team consists of just one person — in charge of establishing best practices and guiding teams on how to allocate costs, tag resources, check their individual spending results, and other important tasks.
There are a number of different levers you can pull to affect your cloud costs.
For example, if you know certain workloads will be transient and can withstand the occasional interruption, spot instances could be a great way to save some money on cloud services.
Companies with steady workloads that can’t be interrupted might want to take advantage of savings plans in exchange for a specific usage or time commitment. Plus, big spenders may have the opportunity to negotiate for a better pricing tier with their cloud providers.
Additionally, you’ll want to decide whether to opt for managed services from your cloud provider or manage all the patches, security updates, and other maintenance yourself. Using managed services will save time which you could put toward other tasks, such as revenue-generating innovation.
Managing your own services, however, will save a little bit of money upfront. There’s no right answer here; you’ll need to choose which option best fits your priorities.
It’s all well and good to say you want to drill down into your unit costs to make more informed development decisions.
But unless you have the tools to do so already at your fingertips, you’ll need some help breaking apart your cloud bill into its smaller components. That’s where CloudZero really shines — but it’s also not the only way we can help you pursue these FinOps goals.
In addition to the powerful capabilities of the CloudZero platform, customers have access to our team of FinOps experts.
This can be especially helpful in scenarios where you have to weigh the effects of one decision against another, such as deciding whether to use managed services or switch to using spot instances for some of your workloads. Our team provides recommendations and coaching throughout your FinOps journey.
The CloudZero platform can show you what instances and resources are running and how much they cost, and our expert consultants can provide guidance on how to optimize your services and savings plans to achieve the most cost-efficient solution for your circumstances.
We also help companies shift toward a culture of cost efficiency by providing the guidance and resources needed to change employees’ mindsets.
Finally, we’ll help you stay up to date with near real-time cost data reports for all stakeholders, so you can fulfill the third and fourth principles without having to turn to another third-party service.
With CloudZero, every person who has the ability to affect your company’s costs can receive daily Slack messages informing them of their cost contributions, so they can see how their decisions stack up against the project’s budget.
Empowered by these insights, and in combination with a culture of cost-efficiency, every employee will be able to make that shift toward smarter spending.
Cody Slingerland, a FinOps certified practitioner, is an avid content creator with over 10 years of experience creating content for SaaS and technology companies. Cody collaborates with internal team members and subject matter experts to create expert-written content on the CloudZero blog.
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.