By Nathan Besh, Senior Director, Product Management and Technical Evangelism, Apptio
Technology Business Management (TBM), a best practice discipline for IT business management; and FinOps, the financial operations model for using the public cloud, shares the same goal of defining IT by impact rather than spending.
TBM was developed to provide on-prem IT needs with data-driven decision-making to manage, plan, and optimize spending. TBM incorporates data-driven decision-making for the cloud but does not manage the complexities of allocating costs to the cloud and the prescriptive ways of controlling those costs. TBM looks at the “what” of all IT spend, including a macro view of cloud spend.
By bringing together people (and data) from IT finance, operations, and business, TBM creates a community of stakeholders to manage all of IT.
FinOps was born for the cloud. Systems, best practices, and culture increase an organization’s ability to understand cloud costs and make smart and timely balancing decisions. FinOps focuses on cost optimization and cloud utilization through technical and organizational means.
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FinOps puts the responsibility for cloud costs in the hands of cloud practitioners. Senior management has a say on what to do, but not how. Application owners, especially cloud practitioners, are better resource managers when they have the visibility and ability to manage their cloud-related costs. FinOps gives organizations the ability to build responsible cloud users.
Senior management sets the strategic direction, but relies on tactics (e.g. the budget is X; application delivery costs cannot exceed Y per unit). Cloud practitioners allocate and optimize cloud resources to meet these guidelines and keep stakeholders informed and prepared for rapid change, creating a flexible, resilient, and efficient organization. .
The use of TBM and FinOps in a particular company will largely be based on the IT spending characteristics of each company. If IT costs are large and complex, TBM will be appropriate whether multi-cloud is used or not. FinOps is needed when an organization adopts changing spending patterns of public cloud services, regardless of the size and complexity of overall IT spending. When the same conditions exist, use the same principles.
TBM is like Google Maps: it helps you navigate from city to city and gives you macro images. For cloud services, FinOps is the windshield and dashboard you use to maintain speed, grip on the road, avoid colliding with other vehicles, stop and accelerate, and more. You need both, a macro view with instructions on where to go and a real-time tactical view to get there most effectively.
Hybrid IT, which relies on traditional, on -premises technologies, as well as in cloud -based public services, requires both TBM and IT perspectives. They support the same important conversations, but TBM uses a top-down IT scale data approach with monthly reporting from different perspectives. In contrast, FinOps uses a bottom-up approach to real-time cloud data. Together, they provide a top-down view of IT costs, providing insight into the value of the IT business.
Consider this scenario: Workloads are being transferred from on-site infrastructure to public cloud services. To do this wisely, it’s important to understand the cost and consumption of these workloads before migrating them, along with the costs your business will maintain. TBM allows you to do this by using data to provide transparency on the total cost of owning applications and infrastructure.
For companies with FinOps, TBM addresses a unique challenge to public cloud consumption: measuring and changing hourly consumption patterns that can quickly consume an entire month’s budget. or in extreme cases a full year. The standard rhythm of monthly TBM reporting is inadequate. FinOps provides the discipline, tools, and data to manage public cloud consumption in near real-time; use that data to optimize usage; and build a culture to continually increase your efficiency and capability in the cloud.
With the ability to adapt and optimize each of the thousands and millions of lines of cloud resources, FinOps is focused on working with the details. TBM informs about all IT expenses with general ledger data (e.g., labor costs, licensing, revenue) and operational data from on-prem (e.g., BMC TrueSight), private cloud ( eg, vRealize), and monthly cloud bill data.
In other words, FinOps can work completely on its own to help maximize change in the cloud and integrate with TBM using APIs. Doing both would be better. If you only do one, you need key inputs, stakeholders and mutual understanding in one.
FinOps, TBM, and development teams support the cloud economy. Start with detailed cloud data from FinOps and GL labor, costs, and revenue. Together, they provide influential chargebacks to the cloud. If you are using the cloud, there is no FinOps process, the chargeback may not be accurate. When the IT unit economy is controlled, development teams, your organization’s innovation engine, can be unlocked, because they don’t have to do costly rework or stop innovation to rebuild solutions. does not meet organizational efficiency requirements.
For most companies with both TBM and FinOps, they are owned and operated by two different but collaborative groups. Clearly, TBM and FinOps should be on the same page about these types of decisions.
FinOps and TBM provide complete and accurate IT unit cost economics. The higher percentage of cloud spending, governed by FinOps principles, makes unit costs more accurate. Unit economics is organizational and workload-specific-there is no generally accepted metric for specific verticals (e.g. hospitals with different KPIs for inpatient patient care and emergency services; costs; of the transportation company varies according to the mode of transportation). FinOps and TBM combine data and apply best practices to reduce cloud unit economics, but the organization still needs to define how to implement that in conjunction with its overall strategy.
FinOps and TBM drive IT excellence and measure customer satisfaction, a leading indicator of revenue growth. For example, by running tests, the DevOps team may discover that infrastructure enhancements can reduce time to 400 milliseconds, but the cost reaches $ 0.011 per stream. That’s a 10% increase in cost, but they also find that customers are starting to consume 20% more paid content. Increasing IT spending to improve the customer experience has diminishing revenue. Business leaders and DevOps should ask: “How far should we push change that results in increased IT costs compared to TBM, and FinOps measures the business value of the new IT operations model as it rolls out brake on cloud adoption.
Apptio develops technology business management software as a service application. The apptio enterprise app is designed to assess and inform the value of IT services for planning, budgeting, and forecasting.