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What are FinOps tools and how do I choose one?

FinOps tools help organizations optimize cloud usage and spend. Review different native and third-party offerings to find the best fit for your needs.

The cloud can pose serious cost management challenges for businesses. There are varied pricing models and potentially different pricing tiers for each resource or service. In addition, cloud use and resources can easily spiral out of control for organizations with large and disparate user bases.

Businesses need a disciplined and collaborative way to use and pay for cloud services. FinOps is a set of practices designed to address cost management concerns for all types of cloud use. Certain tools can help organizations implement FinOps practices.

What are FinOps tools?

Software is vital for FinOps groups to understand cloud consumption, translate complex billing and invoices, correlate usage and costs against users or projects, maintain reports and alerts, and make decisions that can optimize cloud usage and costs. Many FinOps tools are native to specific cloud providers, while others are offered by third-party vendors.

Although FinOps tools and more "traditional" cloud cost management tools can serve similar purposes, FinOps tools are typically tailored to a different audience. Traditional cloud cost management is fundamentally a reporting function that shows which cloud resources an organization uses and how much those resources cost. These reports are generally seen by a small segment of management, and there are rarely any actionable items.

Ideally, software tools designed for FinOps initiatives cater to cross-discipline FinOps team members, with analysis and reporting tailored to finance, engineering and other major disciplines. In addition, FinOps tools provide recommendations and actionable optimizations. This enables FinOps team members to see how those recommendations can improve cloud performance and spend.

FinOps tool features and capabilities

Tools designed for FinOps have a wide range of uses. FinOps tool features and functionalities can include the following:

  • Granular tags. Tags enable FinOps teams to assign meaningful labels or buckets to cloud resources. Tags allow for efficient budget allocations and chargeback, enabling teams to quickly identify -- and mitigate -- untagged items.
  • Detailed views of cloud use. Every member of a FinOps team is concerned with different aspects of cloud utilization and costs. With FinOps tools, teams can create custom views related to specific cloud services and business departments.
  • Reporting. FinOps teams rely on reporting features to sort complex cloud billing data. They can build billing dashboards for certain applications, departments, teams or roles.
  • Performance metrics. Performance reporting, such scorecards or ratings, use aggregate metrics to report on efficiency. This lets FinOps teams quickly determine which departments or applications are most efficient in deployment and spend -- and which business units may need more guidance.
  • Budgeting. Forecasting and establishing cloud budgets can be difficult because of the large number of services, resources and pricing variables involved. With FinOps tools, businesses can correlate cloud accounts and services against financial reporting, so stakeholders can readily follow budgets and spending trends.
  • Cost explorers. FinOps tools can include cost explorer functions that support visualizations of cloud usage and cost.
List of native and third-party FinOps tools.
List of native and third-party FinOps tools.

FinOps tool tradeoffs

To select a FinOps tool, consider the pros and cons of native and third-party offerings.

The benefits of native FinOps tools include the following:

  • Simplicity. Cloud providers offer numerous tools, with each targeting a specific aspect of FinOps, such as billing or cost estimation. This enables a business to adopt as many native tools as needed and add or remove tools over time.
  • Cost. Native tools can be low-cost, reducing the financial risks of software tool adoption. For example, Azure Pricing Calculator is free. AWS Budgets is free for the first two action-enabled budgets, and each additional action-enabled budget imposes a $0.10 daily cost.
  • Speed. Simpler native tools can be fast and easy to implement, with far lower training and experience demands as compared with third-party tools. These tools are maintained, patched and updated quickly by cloud providers.

However, native FinOps tools also pose several important limitations:

  • Narrow functionality. Native tools may lack the integration and functionality that users require. For example, features for data sorting, visualization, reporting and other outputs may be narrow or limited.
  • Provider-specific. Native tools typically work only for the related cloud provider. This can make native tools a poor choice for multi-cloud environments, where resources and services are spread across two or more providers.

Third-party tools tend to pose tradeoffs that are opposite those of native tools. Common benefits of third-party FinOps tools include the following:

  • Broad functionality. Third-party software tools are commercial products in a highly competitive cloud marketplace and typically offer a broad assortment of features in a single package. For example, Apptio Cloudability handles tagging, varied views, business mapping, budgeting, forecasting, reporting, cost exploration and more -- which means it could replace numerous native tools. In addition, commercial products can often integrate with other third-party tools, such as Atlassian Jira, Datadog and PagerDuty.
  • Multi-cloud potential. FinOps tools often support two or more major cloud providers. This enables FinOps teams to compare, plan and manage costs across multiple cloud providers through the same tool.

But the benefits of third-party tools can be offset by several disadvantages:

  • Greater complexity. A software tool with a broad feature set can be time-consuming and difficult to master. The nuances and inter-relationships between FinOps features require significant attention to software setup and configuration.
  • Cost. Commercial third-party tools can carry a hefty price tag in terms of upfront purchase as well as recurring software maintenance agreements.

Ultimately, the choice of native or third-party FinOps tools will depend on the size of the business, the maturity of the FinOps team, multi-cloud adoption and the FinOps features and functions required by the business.

Achieve team consensus before making a FinOps tool investment.

FinOps tool challenges and best practices

FinOps tools are not automatic; success depends on overcoming important challenges and following best practices. Organizations contemplating a FinOps initiative can boost the probability of long-term success with several of the following tool considerations:

  • Involve the team in tool selection. Provide all cross-discipline team members ample opportunity to test and evaluate potential tool candidates. Achieve team consensus before making a FinOps tool investment.
  • Future-proof the tool. Consider future features and functionalities that may not be vital today. Thinking ahead in tool selection can prevent a tool from becoming obsolete or facing expensive replacement.
  • Consider the tool deployment. Whether available as a SaaS, a cloud-ready container image or a traditional data center installation, decide how you want to deploy and maintain the tool. The FinOps team should work with IT operations to determine which resources to commit to the tool.
  • Take time to set up the tool. FinOps tools are only valuable if they serve every constituent of the FinOps team. Ensure every team member receives the data that is relevant to their specific departmental priorities. To do this, configure and tailor the tool to meet each team member's unique need. This is often the most overlooked and underserved issue in FinOps tool adoption.
  • Justify the investment. A FinOps team may not adopt all of the tool's features immediately, but use the tool to validate the value of FinOps -- and then systematically expand the tool's role. This will quickly justify the tool investment.

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