Author: Hayley Salyar from Snow Software (an ITAM Forum Patron)
This blog first appeared here on the Snow Software website.
Managing costs and resources efficiently has become paramount for organisations seeking to maintain competitiveness. Financial Operations (FinOps) and IT Asset Management are two distinct but interconnected fields that play a vital role in optimising costs and resources. This blog discusses crucial use cases, demonstrating how FinOps and ITAM collaboration can lead to streamlined processes and enhanced cost management.
Use case #1: Cost allocation
Cost allocation is a fundamental aspect of financial management, and it’s where FinOps and ITAM converge effectively.
FinOps cost allocation activities:
- Developing strategic naming standards and hierarchical groupings
- Defining governance standards for various groups
- Tagging groups such as by team, project, application, region, etc.
- Reporting on key financial metrics such as cost per group/user
- Allocating costs with any associated commitment-based discounts
ITAM cost allocation activities:
- Using naming standards for license allocation
- Applying cloud naming standards for Bring Your Own License (BYOL)
- Developing reporting standards for BYOL usage
FinOps and ITAM intersection – Cost allocation:
- Shared understanding and utilisation of naming standards
- Overlaps in areas like BYOL and cloud service provider (CSP) marketplace, necessitating collaboration for optimal cost allocation
Use case #2: Managing shared costs
Shared costs present unique challenges, but collaboration between FinOps and ITAM can ensure equitable distribution.
FinOps activities with managing shared costs:
- Identifying shared cost types
- Establishing mechanisms for dividing shared costs
- Applying shared cost models
- Reporting on shared costs
ITAM activities for managing shared costs:
- Collaborating with Finance to establish cost-sharing methodologies
- Agreeing on a methodology for distributing monthly costs
FinOps and ITAM intersection – Managing shared costs:
- Overlaps in support costs (CSP or software)
- Collaborating with application owners for shared cost allocation
- Handling products with prepaid lump sums and variable monthly usage costs
Use case #3: Managing anomalies
Identifying and managing anomalies is crucial to preventing financial leakages and ensuring IT organisational processes are followed.
FinOps activities with managing anomalies:
- Establishing an anomaly management process
- Detecting, documenting, and communicating about the peaks and valleys of cloud activity
- Generating alert reports to surface anomalous spending
ITAM activities with managing anomalies:
- Conducting regular license compliance reviews (for example, when cloud spending spikes, it’s possible the associated license use spikes as well. It becomes a difficult situation when you don’t have enough licenses to cover the increase, leading you to fall out of compliance).
- Investigating license shortages and underutilisation
- Addressing unauthorised/unsupported applications
FinOps and ITAM intersection – Managing anomalies:
- Managing license usage, particularly overages
- Addressing unauthorised/unsupported use of services and products
- Rightsizing licenses in response to overages
Use case #4: Forecasting
FinOps and ITAM come together to make stronger forecasts for the business as a whole.
FinOps activities with forecasting:
- Collaborating with multiple teams to develop a forecasting methodology and process
- Leveraging historical data and future plans to create forecasts
- Coordinating with budget leaders to ensure budgets align with business goals
- Tracking and reporting on KPIs
ITAM activities with forecasting:
- Projecting cost increases, reductions, and requirements based on license reviews
- Collaborating with stakeholders to determine license requirements and cost adjustments
FinOps and ITAM intersection – Forecasting:
- ITAM engages in forecasting, particularly related to licenses, while cloud forecasting is generally outside its scope
- Overlaps occur in areas like BYOL, CSP marketplace, and standalone SaaS, requiring collaborative planning and forecasting
Use case #5: Budget management
ITAM and FinOps teams can work together to optimise budgets for greater efficiency.
FinOps activities with budget management:
- Planning with budget leaders for efficient budget plans
- Tracking and reporting KPIs to monitor cloud spend versus budget
- Exploring optimisation opportunities and overspending by alerting teams projected to exceed budgets
- Communicating with leadership when underspending is expected
ITAM activities on budget management:
- Advising Finance on budget expectations based on licensing insights
- Conducting annual reviews of renewal expenditures
FinOps and ITAM intersection – Budget management:
- FinOps collaborates with ITAM to ensure license and consumption-based usage aligns with budget expectations
Use case #6: Workload management and automation
Workload management and automation prioritise efficient resource usage by ensuring that resources are active only when necessary.
FinOps activities with workload management and automation:
- Collaborating with application owners to tag resources effectively
- Communication of performance statistics regarding automation and non-tagged resources
ITAM activities with workload management and automation:
- Establishing protocols for transparent communication of performance metrics related to resource usage and automation
FinOps and ITAM intersection – Workload management and automation:
- ITAM reviews license usage and collaborated with FinOps to clean up temporary or abandoned assets
- Collaboration ensures that licensed assets align with elasticity and scaling considerations, factoring in license rights and entitlements
The intersection of FinOps and ITAM offers a powerful synergy for organisations seeking to enhance their cost management efforts. By leveraging the strengths of both disciplines, organisations navigate the complexities of cost allocation, data analysis, anomaly management, shared cost distribution, and more.
See these other blogs related to FinOps and ITAM:
- The importance of cost accountability
- ITAM and FinOps: discover blindspots and close the gap
- ITAM and FinOps: how it works in real life
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- eBook: Your FinOps questions. Our experts answer
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