Chapter 7. The FinOps Foundation Framework
The FinOps Foundation Framework is a constantly evolving set of building blocks that enable you to construct a FinOps practice to match your organization’s cloud maturity and complexity. This chapter introduces you to what the Framework is and how to use it in your FinOps practice. In addition, the chapter explains the Framework’s structure and illustrates how you can adapt it to meet your organization’s FinOps needs with related implementations, such as guides, assessments, and playbooks.
Adopting the Framework into your practice keeps you from reinventing the wheel and enables you to quickly remix known building blocks that have existed in various forms for years. Some parts of the Framework are relevant to all practices, such as cost allocation (i.e., metadata and hierarchy) and establishing a FinOps culture, and some are relevant only to specific scenarios, like managing shared costs or IT asset management integration.
The Framework outlines the principles, personas, maturity characteristics, and key capabilities to structure the activities and measures of success needed for a successful FinOps practice. The FinOps Foundation practitioner community, the cloud service providers, and partner members have all contributed to the FinOps Framework. You can relate everything in this book back to the Framework.
Every organization adopting the cloud will need to develop mechanisms to manage cloud costs. The Framework provides an operating model for your FinOps practice by aligning with cloud cost management best practices.
Rather than discover new, unknown pitfalls as you mature, you can use the Framework to structure your FinOps practice and maintain focus on all the areas of FinOps that help you achieve your goals earlier, while being aware of the elements you are not currently focusing on.
The Framework also serves as a mechanism for better communication between all the people in your organization assigned with FinOps responsibilities. The Framework forms the basis for implementations like the FinOps Assessment, which helps to evaluate and align key stakeholders around a common evaluation of your organization’s maturity.
An Operating Model for Your Practice
Think of the Framework as an operating model for your FinOps practice. It is not a specific list of tasks to be completed in a specific order, since no FinOps practice is exactly like any other; rather, it is a comprehensive list of activities you may call upon to use in your practice as needed.
Imagine for a moment that you are planting a garden. Every day you assess what you see and decide what task will provide the most value. You might plant, prune, water, fertilize, mulch, and so on. There are plenty of guides to help you discover and develop the list of skills you need as a gardener. Your garden is growing and has ever-changing needs. You cannot simply mulch your way to the world’s best garden. Following the same list of tasks every day won’t allow you to adjust priority toward whatever might best benefit the garden at that specific time. You need to develop an operating model and a feedback loop that tunes your daily activities to the needs of the garden, adding and maturing capabilities based on the plants you have, the condition of the garden, the type of climate you are in, the amount of seasonal rainfall, changes to soil conditions, and other changing factors.
Similarly, in your FinOps practice there is no simple list of tasks for you to follow that will always lead to positive results. The Framework is there to help you understand the list of capabilities and the basic structure of how these capabilities are implemented within different organizations, and to allow you to select the capabilities and implementation details that suit your organization at that time.
The Framework Model
Figure 7-1 shows an overview of the primary components of the FinOps Foundation Framework. This section talks briefly about each of the supporting elements in the Framework: principles, personas, maturity, and phases. Then the next section describes domains and capabilities that form the main components of the Framework.
Figure 7-1. The FinOps Foundation Framework poster 2022 available online
Principles
The Framework includes the FinOps principles, covered in Chapter 1. All of the activities you perform in your FinOps practice must be consistent with the principles. The domains, capabilities, personas, and phases all reinforce the values they espouse. As you extend the FinOps Framework and customize its components for your organization, always keep the principles in mind and maintain consistency with them in your practice.
Personas
Although the FinOps practitioner needs to be involved in all aspects of the Framework, all personas involved in FinOps will also benefit from understanding its structure. Business leaders will be interested in understanding the domain outcomes and which areas to invest in to ensure their questions are answered and objectives are met. Engineering teams need to know how each of their tasks contributes to a particular capability and the Framework gives context to the outcomes of their efforts. A consistent language of FinOps is enabled via the Framework terminology and helps each persona develop their understanding of the role they need to play.
Maturity
The Framework applies to all practices regardless of the level of maturity. As you mature, you will adopt more of the capabilities over time and then set ever-increasing targets on the measures of success. Each capability itself will be at different stages of maturity.
Each capability in the Framework has a maturity assessment. You should aim to be familiar with both the capabilities you plan to tackle immediately as well as those you plan to delay starting. The list of capabilities is not a rote list you should aim to follow blindly. Maturing a capability takes time and continuous iteration as your organization grows into the activities required. The goal is not to be at an advanced maturity level across every capability; it is to be at the level of maturity in each capability appropriate for the needs of your organization. You should assess which of the domains will help you achieve the desired outcomes, then then which capabilities within the domains require improvement.
Shared costs are a common example of a capability that can be given too much time early on. These often occur when a single cloud resource or service is used by multiple teams. While you can introduce detailed sharing models via your own data crunching or tooling to reallocate costs according to real-time usage, such specificity is not always needed. While the tooling and best practices in this space have improved greatly over the past few years, you should assess whether having an agreed-upon fixed percentage—like splitting some shared costs based on an agreed percentage—is adequate for now. Simple allocation solutions can often meet the business needs early on without adding in the complexity of a more mature and dynamic shared cost capability.
Phases
Chapter 9 covers the FinOps lifecycle and the three FinOps lifecycle phases: inform, optimize, and operate. The phases help you organize the activities of each capability in a consistent order. They remind you to always work in an iterative, cyclical fashion by making incremental improvements as you gain maturity.
Domains and Capabilities
The FinOps Framework leverages a collection of domains and capabilities to implement the concepts in the FinOps principles.
The high-level domains encompass a set of desired outcomes for the business. The domains and their related outcomes may change over time, so we recommend viewing the Framework at the FinOps Foundation website. Table 7-1 shows the domain list and primary outcome at the time of publication.
| Domain | Primary outcome |
|---|---|
| Understanding cloud usage and cost | Drives accountability and transparency |
| Performance tracking and benchmarking | Defines what good looks like |
| Real-time decision making | Enables a fast feedback loop for data-driven decisions on spend |
| Cloud usage optimization | Ensures efficient use of cloud resources, while reducing wasted spend |
| Cloud rate optimization | Uses the various commitment-based discount programs to reduce the amount you pay for consumed resources |
| Organizational alignment | Aligns your cloud usage with your organizational goals and structure |
These outcomes help you to answer the real-world questions you will get from your organization, such as:
What is this application’s biggest cost driver? (understanding cloud usage and cost)
How can you reduce spending on a particular service? (usage optimization, rate optimization)
How has your usage of a category of resource changed over time? (performance tracking)
Each domain then identifies a set of capabilities that help solve specific challenges you will face when trying to achieve your required outcomes. Each capability describes the required data, actions, and metrics that contribute to the success of the capability.
Structure of a Domain
The core sections of each domain follow a standard structure:
- Definition
- Helps you understand the high-level activities you need to perform in your FinOps practice to achieve the desired outcomes you should expect and the primary questions that the domain aims to address for you.
- Capabilities
- Provides a list of capabilities to achieve the outcomes for this domain. We’ll talk about capabilities in more detail later in the chapter.
- Vendors and service providers
- A list of tools and service providers that provide solutions to help you within this domain. Some solutions providers specialize in tooling that targets a single domain with deep expertise, and others offer holistic solutions across multiple domains.
- Training and courses
- A list of the training supplied by the FinOps Foundation and certified training partners to help educate you and your staff in this domain.
Some domains may have additional content specific to the domain.
Structure of Capabilities
Each capability represents functional areas of activity supporting its corresponding FinOps domain(s). The core sections of each capability follow a standard structure.
Assessment lenses
By looking at your FinOps practice through a variety of lenses, you can assess the strengths of each with respect to your broader organization as well as specific target groups within it. As outlined by Ben de Mora from the FinOps Foundation, there are five lenses through which to assess your capability maturity:
- Knowledge
- Does your target group understand what the capability involves? How broadly is this concept and its mechanisms, terms, and processes known?
- Process
- Can your target group describe a process for conducting the capability in their context? Consider the efficacy, validity, and prevalence of such processes.
- Metrics
- Is this capability measured? Do you have a way to prove progress over time? How are you obtaining those measurements, and how relevant are they to business outcomes?
- Adoption
- How broadly has the capability been adopted and accepted by your business as part of its integral and critical functions? Consider the prevalence and presence of this capability across your entire organization.
- Automation
- Is your target group automating this capability in ways that are repeatable, consistent, efficient, and labor-saving?
Functional activities
Functional activities are tasks or processes that allow various personas to meet the demands of a FinOps practice iteratively through the phases of the FinOps lifecycle (covered later in this book). These activities and procedures serve one or more of the following:
- Enablement
- Building capabilities to help others perform a FinOps activity
- Education/knowledge sharing
- Teaching others how to perform a FinOps activity
- Advocacy
- Helping others understand the importance of the capability
- Actionable tasks
- Creating and communicating a task that requires someone in your organization to take action
- Improving FinOps maturity
- Developing processes and tooling that enable FinOps to become more successful within your business
The number of functional activities implemented within an active FinOps practice will increase as the maturity of FinOps increases.
Measures of success
Each capability needs to have at least one metric that monitors its performance and allows the FinOps practitioner to set targets. These metrics and the associated targets measure how successful you are in a given capability. As your practice matures, you will increase targets, allowing for short-term goals to be set and objectively measured. Measures of success can also help you identify which activity is holding you back from achieving your goals.
Some examples of measures of success in various capabilities include:
- Cost allocation
- Percent of cloud spend that can be allocated to its owner
- Forecasting variance
- Percent of variance between forecasted spend and actual spend
- Resource utilization
- Percentage threshold of monthly cloud spend that is driven by idle or inefficient resources
Inputs
Inputs that can help with the success of a capability include external data sources, reports, whitepapers, and training. Some examples are cloud adoption frameworks, vendor recommendations for optimization, and business policies/standards. This list of resources can be a great way to get further educated or begin collecting the information needed to set up functional activities.
Adapting the Framework to Fit Your Needs
Because different organizations have different operational needs that shape their path to success, the FinOps Framework itself is deliberately designed to be directional by providing parameters for success through a range of KPIs, by describing maturity characteristics in the context of required activities, and by describing the responsibility of each FinOps persona. For example, a public sector or government agency will have a very different budgeting and forecasting process than that of a private company. The Framework is expected to be adjusted and updated to fit your organization’s operational needs.
Which cloud service providers and vendor tools you are using will further affect how your teams complete specific activities within your FinOps practice as described by the Framework. The recommended approach is to start with the FinOps Framework and modify the functional activities to capture any organizational or industry-specific activities. Examples of this include change management workflows or purchase approval processes. For each activity, assign them to a specific persona within your organization, educate staff on the process to be followed, and advocate the importance of completing each activity.
Framework implementations are resources created by the community to provide industry- and vendor-specific recipes for success. These resources come in many forms, including how-to guides, capability playbooks, and even video presentations. Framework implementations are contributed by individual members of the community, community working groups, and partner members. The aim for implementations is to provide contextually relevant approaches for tackling challenges to improve your FinOps capabilities. Implementations can describe how to use specific tools, processes, or refined functional activities for an individual capability, domain, or the entire FinOps Framework.
Tip
Implementation guides are a great reference to develop your FinOps practice by seeing how other organizations have implemented individual capabilities or even the entire Framework. If you cannot find an example that suits your goals, we recommend you join the FinOps Foundation to use the community of practitioners there to your advantage. They are always willing to answer questions, share their insights, and demonstrate solutions that worked for them.
Connection to Other Frameworks/Models
The existence of other financial models and frameworks, such as IT Financial Management, Technology Business Management (TBM), IT Asset Management (ITAM), or IT Service Management (ITSM), can also impact which personas, specific processes, and functional activities are implemented. Many successful FinOps teams work alongside these existing operational models within their organizations. There is little value in having FinOps replicate or replace existing capabilities in existing operational models that are functioning well. FinOps can plug the cloud financial management challenges these different operational models have and integrate them to combine areas of strength into one holistic system. The FinOps Framework has specific capabilities to share outcomes with these other practices.
For FinOps to work well alongside other operational models/frameworks, you need to identify the functional activities that FinOps will be responsible for and those of the other model. In addition, you’ll need to track which information you shared between the two to keep consistency across them. This information is covered in greater detail in Chapter 25.
Conclusion
The FinOps Framework is a valuable resource not only for those practitioners starting a FinOps practice but also for mature practitioners.
To summarize:
The FinOps Framework is a set of building blocks to allow you to create a successful FinOps practice that matches your organizational maturity in the cloud.
Adopting the terminology used in the Framework will help with a common language used by all personas about FinOps within your business.
The Framework enables you to assess where you have strengths and weaknesses.
The Framework is not only for the FinOps practitioner but also for all personas of your organization.
You should apply the Framework to your own practice by adapting the capabilities to fit into the way your organization operates.
The next chapter looks at considerations for building reports and dashboards that make up the user interface (UI) of FinOps.