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How the benefits of FinOps go beyond balancing the books for financial services

Tanya Anand
12 Jun 2023

Is there more to FinOps than cost reduction for financial services organizations? Our FinOps experts share their perspectives from their firsthand experience.

In recent years, the financial services sector has seen an increase in the pace of digitization. This is a reaction to the demands of the omnichannel customer and the need to compete with FinTech challengers whilst maintaining a cost discipline. Cloud transformation has been a key pillar of digitization for many of these organizations, leading to a mix of hybrid and multi-cloud environments.

Throughout the past few years, increased cost consciousness amongst financial services companies and a lower appetite for risk have meant that organizations are reducing their technology investments and reprioritizing their technology portfolio. It is in this climate that the cost of cloud computing has taken a number of organizations by surprise. As a result, many CIOs, COOs, and CFOs are now turning to FinOps to help reduce the cost of their cloud spends. A recent survey indicated 31% organizations have a cloud spend over $12 million per annum.[1] FinOps is an operational framework as well as a shift in both culture and mindset, enabling organizations to maximize the value of cloud investments.[2] However, when FinOps is not approached strategically, it fails to deliver sustainable cost and business benefits that CXOs need now more than ever. In this blog, our Capgemini Cloud Advisory and FinOps experts share some lessons learned from their experience with FinOps implementation and share practical solutions for FS CIOs, COOs, and CFOs to consider in their FinOps transformation journey.

What is the business case for FinOps?

Ewan MacLeod, who has been part of several FinOps setups with financial services clients, describes how enterprises often start their journey to cloud computing by assuming that replicating their IT environment in the cloud will result in cost savings.

“Most organizations will overspend on cloud solutions if they do not adopt the right FinOps thinking right from the start. Early adoption is key to the business sustainability of a cloud-based organization.”

Vikram Rajan, VP at Capgemini for Cloud Advisory Services for financial services organizations, agrees:

“Even if an organization does not have a significant cloud spend today, they should establish the FinOps thinking early on. This is to ensure that teams are proactively making cost-conscious decisions and do need to go into fire-fighting mode against wasted cloud spend.”

Our experts unanimously challenge the myth that FinOps is mainly utilized to achieve cost reductions.

FinOps enables an organization to answer two key questions:

FinOps provides greater transparency of which department, project, and team the cost should be allocated to.

FinOps enables the organization to tie the spending back to business benefits and, in many cases, maximize business value at the unit spend level. For instance, onboarding a new customer may have an instance cost of $10 per customer.

Elaborating on the above $10 per customer example, Ewan believes the benefits of FinOps for onboarding are self-evident:

“When you can onboard 1,000 customers quicker due to being on the cloud, you can trace the value of a $10,000 spend and justify the cost.”

FinOps thereby facilitates greater flexibility and agility for investments in cloud computing. It enables organizations to think in terms of how to be flexible over how they spend, how and when they should shut resources down, how long they need an environment for, and what the working hours for that environment should be.

In Vikram’s experience, FinOps can prove pivotal for high-value product lines:

“Where organizations have products delivering value in hundreds of millions of dollars, they are looking to improve the accuracy of forecasts and predictability of spends to manage their platform/products’ scalability.”

Lokesh Sah, a Cloud Advisory specialist at Capgemini, is also quick to point out that FinOps insights can also enable organizations to develop operational improvements, such as developing a cloud data archiving policy to manage data storage costs, which then helps with cost avoidance and improves data efficiencies.

Our experts emphasize that the business case for FinOps programs appears to be straightforward:

‘FinOps pays for itself by accelerating the business benefits, such as improved cost management, value maximization, agility, and scalability.’

benefits of FinOps for financial services

Clients often take a tactical approach to FinOps, by bringing in consultancies or SWAT teams to deliver quick wins in FinOps, such as identifying significant savings and recommending changes needed. There are certainly initial benefits to be achieved by doing this. Recently, we helped a client reduce their annual cloud spend by £3 million savings within three weeks. Here’s more from Vikram:

“Whilst delivering an immediate benefit, such savings are only sustainable with the creation of a self-sustaining FinOps operating model. It is essential to create one that enables organizations to exert ongoing due diligence on cloud spends, embed a focus on maximizing business value at a unit spend level, and achieve financial accountability and autonomy.”

Thomas Sarrazin, the global FinOps offer leader at Capgemini, emphasizes the need for enterprises to evolve ‘more than just skills, processes, and tools. The FinOps operating model should be underpinned by the right governance, culture shift, and operational efficiencies to build robust foundations for FinOps.’[3]

One of the big challenges is aligning C-Suite thinking and the organization’s developers – it is important to have everyone pulling in the same direction. Vikram emphasizes the need for an all-encompassing change in culture:

“For the CFO and CIO, cost control and cost optimization are key financial objectives; whereas, developers are often measured on the velocity of their feature development. Therefore, embedding a FinOps culture across the organization’s layers is key. Achieving this cultural shift at the grassroots as well as at a leadership level requires innovative adoption models. Gamification has recently been very effective with our clients; however, we need to define the right adoption model and techniques suited to the organization.”

There is also a required culture shift towards greater financial autonomy at the Product Owner level. FinOps enables accountability of spends at project and team level due to cost allocation agreements and transparent reporting. It thereby encourages the engineers, business and product teams, and finance stakeholders to work as one entity and embed a no-blame culture of overspending. In Ewan’s experience, this is not something that is achieved overnight:

“The complex and hierarchical nature of Financial Services organizations often means it takes a while to foster psychological safety and the one-team mindset.”

Lokesh believes the discipline of looking at both the cloud spend and business value side of the equation together also helps move conversations away from the blame game to discussions about maximizing the “value realization from cloud computing.”

For effective FinOps, organizations require timely decisions made by empowered teams on time-critical activities, such as the right sizing instances. This is something Ewan knows all too well:

“Long tail approval processes can be counterproductive for achieving the desired cost benefits. Therefore, the right governance process based on agile principles needs to be set up early on and fully integrated into the cloud operating model.”

Vikram believes many C-suites make the mistake of being too overbearing, which can stifle the progress developers seek to make:

“When setting up a FinOps governance model, it is important to think about how one can make it easier to do the right things without putting in too many roadblocks and onerous governance. This requires setting up the right guardrails and best practices and then getting out of the way of the developers and letting them get on with the job at hand.”

One common pitfall when setting up a FinOps governance approach is that many organizations fail to create a detailed tagging strategy upfront. According to Lokesh:

“The right set of tags should be created and used for automated actions.”

Our experts also recommend leveraging “compliance as a code” when maturing FinOps governance, whereby some of the guardrails are set up as thresholds in the code.

There is also a consensus amongst this panel of experts that local FinOps functions should be supplemented with a central FinOps governance entity to provide higher-level oversight, coordinate the cloud strategy, monitor alerts, manage escalations, and provide a macro view of cost optimization opportunities. This includes assessing reserved instances across the organization for achieving the discount targets, identifying operational improvements, and so on.

A key and often overlooked aspect of governance is the tracking and management of the implementation of recommended optimization. The right prioritization models and tracking mechanisms need to be put in place to ensure that savings are banked. The KPIs for the FinOps teams and anyone associated with such efforts have to be linked to the actual spend optimisation and not just opportunity discovery. In the absence of such mechanisms and KPIs, recommendations are often moved to the back of the priority list and may never see the light of day.

In Vikram’s experience, a robust FinOps operating model should not overlook the way the organization works with its suppliers.

“An effective incentivization model needs to be in place, one that positively rewards suppliers for cost avoidance and disincentivizes wasted cloud spend.”

This is especially important for banks and insurers that are working in a multi-vendor environment.

As a FinOps practitioner for retail banks, Jack Gardiner knows first-hand that the FinOps journey is not without operational difficulties. He is a strong advocate for investigating automation opportunities in FinOps processes.

“In one of the organizations I recently worked with, we moved the client from manual to an automated Reserved Instance and Savings Plan strategy, and this initiative alone helped them save $0.5 million dollars.”

Thomas reminds us that ‘while automation can help with executing optimization initiatives, it’s important to win the support of the app business owners, app architects, and operations teams to make things happen.’

Is it too late to adopt FinOps if your organization has already started its cloud transformation without it?

In a perfect world, organizations would have incorporated FinOps at the start of their cloud transformation journey, but Ewan has good news for those organizations who didn’t:

“It’s never too late. It’s like tackling your credit card spending. From the point at which you start auditing your spending, you can identify the overspending and savings and redirect them to a holiday or a car purchase or back to your cashflows. In the case of FinOps, I would say the sooner an organization adopts it in the right way, the better, but it’s never too late.”

1 Flexera (2023) 2023 State of the Cloud Report; 2 Capgemini (2023) The Rise of FinOps; 3 Sarrazin, T. (2023) The Secret to Successful FinOps

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