The rapid growth of cloud-based IT necessitated a discipline to manage the costs and complexity of entrusting much of an organization’s IT environment to one or more third parties. This materialized as FinOps, designed and structured by the FinOps Foundation. At first, the focus was on the three hyperscale cloud providers (AWS, GCP and Azure), but, as cloud customers began to adopt a multicloud approach, FinOps was tailored to cater for multiple cloud vendors and situations. While FinOps is a well thought out approach to managing cloud-based infrastructure, platforms and software, there were some unintended consequences; necessitating alignment of FinOps to other areas of the business that also had a vested interest in managing IT assets, especially ITSM, ITAM, and SAM. We will discuss alignment of SAM and FinOps in a separate article; here we consider what must be done to make FinOps and ITAM speak with one voice with regards to IaaS and PaaS, conveniently bundled under another acronym CIPS (Cloud Infrastructure & Platform Services). First of all, let’s look at some definitions of ITAM and FinOps.
This definition of ITAM is from the ISO Standards Committee, justifying ISO/EC standard 19770.
“IT Asset Management (ITAM) encompasses the system, processes and technology used to detect, track, manage and optimize IT assets throughout all stages of their lifecycle. IT Assets are defined as any IT-related hardware, software, subscriptions or services which the organization owns, is paying for, or is otherwise utilizing directly or indirectly. This definition of an IT Asset is broad, and includes not only servers, desktops and mobile devices, but also IoT, network and storage devices, and cloud services such as Software as a Service, Infrastructure as a Service, and Platform as a Service (SaaS/IaaS/PaaS), amongst many others.”(https://committee.iso.org/sites/jtc1sc7/home/news/content-left-area/news-and-updates/it-asset-management-standards-is.htm)
How does FinOps compare with this? The FinOps Foundation describes FinOps as essentially a cultural practice, where Finance and DevOps collaborate as teams to optimize the organization’s cloud usage:
FinOps is an evolving cloud financial management discipline and cultural practice that enables organizations to get maximum business value by helping engineering, finance, technology and business teams to collaborate on data-driven spending decisions.(*Definition Updated: November 2021 by the FinOps Foundation Technical Advisory Council)
Clearly, these two practices have the same objectives, yet in many organizations they seem to be operating independently of each other, which could lead to an increased risk of non-compliance with vendor agreements, as well as excess spend on IT assets, even where the organization has a mature and responsive ITAM environment, managed by an effective team. We can only speculate that this came to pass as various business units invested independently in cloud solutions, bypassing IT procurement, in the mistaken belief that ITAM is only responsible for tangible and on-premise assets. In fact, as defined above, ISO/IEC 19770 clearly states that ITAM is responsible for all classes of IT assets, physical, digital and virtual, so according to this classification, FinOps is part of ITAM.
Enabling a Meeting of Minds
FinOps defines six Domains, each of which represents a set of related activities. Each domain has specific capabilities, which the organization must attain levels of competence in its journey to FinOps maturity. The specific domain we are exploring in this article is Organizational Alignment, and the competency is the “Intersection of ITAM/SAM”. There is the potential for mutual added value between the ITAM and FinOps teams, but there is also considerable risk to the organization where they are not integrated, in the form of overspend and potential compliance infractions. Yet, despite most companies acknowledging these risks, very few have achieved integration. Where they are working towards achieving alignment, much of the attention is on SAM, while hardware and infrastructure, or HAM, are operating under the radar. The ITAM team is faced with the following challenges:-
- Lack of visibility of the virtual and digital assets operating off-premise
- Inability to obtain real-time/neartime data on the utilization of these assets
- The lifecycle of cloud assets can be very volatile and short-term. Consider the rental of GPUs or QPUs for a complex calculation, which may take a couple of minutes or weeks, after which the service is discontinued.
- Generally multiple cloud vendors are contracted for HAM services, each with its own pricing structures
- There can be conflicts in terminology used by the ITAM and SAM teams.
Resolving the above challenges is only part of the equation. There is a growing need for integrating sustainability monitoring and management, especially in regions where legislation to comply with is impending. It is not enough to report on on-premise carbon emissions, comprehensive ESG reporting requires a view of all players in the organizational IT supply chain. This will be yet more accountability to add to ITAM’s role, but we will discuss this requirement in a separate article on GreenOps, the practice of sustainability measuring and reporting in the IT domain.
Where to Start
There are two paths to follow; alignment of the ITAM and FinOps business models and the FinOps lifecycle, assisted by ITAM institutional knowledge, which can be conducted simultaneously. There needs to be an agreement on common taxonomy, policy and process and data management between the two entities, directed towards building a CCOE, or Cloud Centre of Excellence.
The aim is to have timeous and accurate reporting on consumption, both off- and on-premise, in a format that is understandable to the users. This should also be accompanied by engagement and training of users so that they understand their roles and responsibilities. This is obviously not an overnight job and is iterative. The FinOps Lifecycle “Inform, Optimize , Operate”, is a useful process to underpin this journey, which has no defined endpoint, as both ISO/IEC 19770 and FinOps practices are still a work in progress.
Herding the FinOps Cats
The progress of a FinOps team is very similar to the road that the ITAM team has already travelled, beginning with implementing a centralized control of all the various cloud services to which departments throughout the company have subscribed. This fragmentation naturally results in overspending and potential non-compliance, as each CSP (cloud service provider) has their unique costs and rules built into their business model. This is where ITAM can assist, having developed skills in reading the small print in vendor contracts. The pricing models for the “Big Three” hyperscalers also offer a wide range of discounts based on variables such as expected usage, to which the company commits (CUD – Committed Use Discount). Obviously, it makes sense to have a company-wide CUD, to obtain the best discount, rather than many small subscriptions.
What works in reverse for ITAM and FinOps is cost allocation. In a mature ITAM environment, usage costs are charged back to the department, while in FinOps, each department signed up for their cloud usage. This needs to be defragmented, with a longer-term view on optimizing usage; business users cannot be expected to pay attention to factors such as time of use and management of containers; this will take a joint operation between ITAM and FinOps.
Once there is a helicopter view of company-wide cloud usage, optimization of services can begin, which includes accurate reporting and interrogation of the various subscriptions and agreements in place to identify cost savings, and, most critically, whether there is business value, which is the primary goal of cloud management, and naturally ITAM as well. ITAM’s skills in managing the IT campus will prove very valuable to FinOps.
This is very much an overview of what is needed to align both practices. It is also important that the rest of the business recognizes that ITAM and FinOps are unified in the services they provide. ITAM has rarely received the attention it deserved before the rise of FinOps. Now that everyone in the company is starting to understand how cloud usage is impacted by their actions and vice versa, ITAM’s importance to the business is gaining ground. However, it will be more than a few years before there is industry-wide understanding and adherence
The Slow Journey to Alignment
The need for alignment between ITAM and FinOps is recognized by the majority of organizations. However, in the FinOps Foundation’s 2023 State of FinOps Report, less than 5% of respondents to the survey reported complete integration, although a further 21% were working towards this milestone and the teams were collaborating. The remaining 75% of organizations either did not have a FinOps team, or the FinOps practitioners worked independently of ITAM.
(screen clip from FinOps foundation illustrating these stats – https://data.finops.org/#3305)
Clearly, companies must prioritize time and effort to this integration, in order to have one solution to view and manage their software licensing, both on premise and in the cloud for data driven, informed decision-making. Open iT is here to assist you in gaining visibility over all your software assets and break the silos between various departments. Contact us to learn how you can get accurate reports on license usage and how to identify cost optimization opportunities.