The success of any enterprise transformation requires significant shifts in culture to break down organizational silos. Adopting Cloud FinOps is one such transformation that requires a change in mindset about your cloud spending as not just a finance issue but an infrastructure one as well, where value is always the priority. FinOps is a huge change from how cloud spend has been managed in the past, touching IT Engineering, the Project Management Organization (PMO), Finance, Procurement, and any other departments impacted by cloud spend—nearly every team within your organization. 

Nearly a hundred public and private stakeholders attended the October 2023 FinOps DC Roadshow, one of the city-by-city meetups hosted by the FinOps Foundation to promote FinOps best practices around the country. The Woolly Mammoth Theatre provided a great venue in which FinOps practitioners from around Washington, DC, Maryland, and Virginia (DMV) shared how their organizations and agencies approach sound cloud cost management practices to better understand the positive impacts of integrating FinOps programs into their company or agency.

Melvin Brown II, Deputy CIO at the U.S. Office of Personnel Management (OPM) and a member of the governing board of the FinOps Foundation, memorably compared the FinOps wave of change to the transition from outhouses to indoor plumbing. No longer is the cloud a mysterious dumping ground. FinOps gives you the right amount of visibility to manage the costs of consumption. Just as toilets became an integral part of every household from the first flush, FinOps is poised to become the way we do our business of cloud management.

With the total number of FinOps Certified Practitioners second only to the San Francisco Bay area, the DMV is rapidly becoming a hub for this emerging discipline. The high concentration provides a unique opportunity for public and private partnerships in which both learn from each other and ensure everyone has a stake in being better stewards of taxpayer dollars.

The General Services Administration (GSA) recently identified five major federal agencies that together spend $40M monthly on cloud computing for a pilot of FinOps. The pilot participants—Veterans Administration (VA), Department of Energy (DOE), Nuclear Regulatory Commission (NRC), the Army, and OPM— were able to realize significant savings by implementing cost avoidance optimization efforts in conjunction with Reserved Instance and Savings Plan commitments. As data center consolidation and closures continue and new applications are born in the cloud, it’s incumbent on all federal agencies to execute a robust FinOps strategy.

Building Consensus for Change

Optimizing cloud spending stands to be a significant gamechanger for government agencies as more and more data and workflows move to the cloud. To foster adoption and drive future investment in cloud solutions that benefit the mission, stakeholders need to openly collaborate on common goals, share accountability, and leverage data-driven insights to make cost-optimized decisions.

To build consensus for FinOps, focus on generating culture change within and among these two pillars to success:

  • Executive Leadership: Build support for the new FinOps approach within executive leadership by focusing on well-defined objectives associated with expected business outcomes.
  • Cross-department Teams: Provide training and concrete examples of how each team will be involved in FinOps activities, tying the benefits of transformation to each team’s mission and objectives.

While this may prove challenging at first, embracing FinOps across government agencies will ultimately save vast amounts of money and resources. With the right mindset, thought leadership, advanced analytics capabilities, and professional guidance on best practices, everyone—from business units and IT to senior budgetary decision makers—will see clear value in shifting focus toward FinOps for the long run.

FinOps Maturity: The Challenges to Public Sector Adoption

Momentum for effective cloud management tools and solutions is growing as cloud spend continues to grow. At the DC Roadshow, Capital One Head of Infrastructure Jerzy Grzywinski illustrated how far the private sector has already gone with FinOps, showcasing how you can scale at the enterprise level using automation for intelligent storage tiering. But some public sector organizations have migrated less than 20 percent of their applications to the cloud and are struggling with common government challenges with FinOps.

The Colors of Cloud Money

Cloud computing is often viewed as a utility, with users paying only for what they use, a model that differs from traditional IT infrastructure in which the cost of equipment and infrastructure is considered a capital expense (CapEx). The bulk of federal cloud adoption is now focused on operational expenses (OpEx) since cloud spend allows organizations to avoid the purchase of expensive hardware and software and ongoing maintenance costs. Yet, there is still a lack of understanding among federal government decision makers when it comes to the cloud, not just the distinction between utility and fixed costs but how cloud spend is funded.

The federal government has different funding streams for various technology projects, and it is crucial to understand the various types of funding streams that are available to determine the best fit for a cloud initiative. The nature of cloud adoption means that agencies may use funding from multiple sources:

  • Operations and Maintenance (O&M): Used to maintain existing systems and operations and the funding source for ongoing cloud management costs.
  • Development Modernization and Enhancement (DME): Used to modernize legacy systems and applications, reduce O&M costs, and increase efficiency.
  • Technology Modernization Fund (TMF): Supports modernization initiatives and new technology investments.
  • Working Capital Fund (WCM): Used to fund shared administrative services.
  • Multi-year Money: Funding that the government approves in one year but is allocated over multiple years.
  • One-year Money: Funding provided for the specific fiscal year based on various requirements and approvals.

FedRAMP Authorization for Cloud Cost Management Tools

Tracking and understanding where the money is coming from is an essential part of FinOps, as is tracking and understanding cloud utilization. As co-chair of the Special Interest Group (SIG) for the public sector, I work closely with government leaders on developing a new Cloud Acquisition playbook. Additionally, I lead another project with FinOps practitioners in the federal marketplace to draft requirements for a third-party cloud cost management tool or Cloud Management Platform (CMP) that complies with government regulations.

Today many of the software tools used in the private sector are not approved for use by the federal government. In addition, native tools for cloud management can only take you so far—they are cumbersome and require time-consuming downloads and imports of large file sizes of aggregated data, making it impossible to pull monthly reports filtered to a particular area.

The granularity and ease of use provided by third-party software tools are necessary for real-time visibility into your cloud spend, allowing for efficient reporting and meaningful metrics so you can track things like anomalous spend. They enable tagging of storage, database, and compute usage so you can pull relevant data on the fly or in automatically generated reports. The increasing shift toward cloud computing in the federal government requires an understanding of cloud spend and visibility into cloud usage across normally siloed departments. The FinOps approach to managing cloud spend is a crucial part of staying ahead of the curve, allowing you to implement the latest cloud technology and security while comprehensively managing your agency’s cloud growth and modernization. By adopting FinOps, the federal government can make informed decisions on cloud adoption to operate efficiently while properly managing costs and forecasting for and furthering mission goals.