FinOps (Financial Operations) is a cultural practice and operational framework that brings financial accountability to the variable spend model of the cloud. It promotes collaboration among engineering, finance, and business teams to make data-driven decisions that balance cost, speed, and quality to maximize business value from cloud investments. 

FinOps Core Principles

The FinOps Foundation outlines six core principles that guide effective cloud cost governance: 

• Collaboration: Finance, engineering, and business teams must work together to make informed decisions and ensure alignment on spending goals.
• Ownership: Responsibility for cloud usage and its associated costs is pushed to individual teams and engineers, who are closest to the resource consumption.
• Centralized Enablement: A central FinOps team drives best practices, provides tools, and establishes governance, while day-to-day execution is decentralized.
• Business Value-Driven Decisions: The primary goal is to maximize the business value of the cloud, not simply to cut costs. Spending decisions are based on ROI and performance trade-offs.
• Accessible and Timely Data: Stakeholders need real-time, granular visibility into costs and usage to enable quick, data-driven decisions and detect anomalies promptly.
• Leverage the Variable Cost Model: Embrace the dynamic nature of cloud pricing by using strategies like autoscaling, spot instances, and commitment-based discounts to optimize efficiency. 

The FinOps Lifecycle

FinOps operates through a continuous, iterative lifecycle of three phases: 

• Inform: This foundational phase focuses on gaining visibility and transparency into cloud costs. Activities include data collection from cloud providers (e.g., AWS Cost and Usage Reports), implementing a robust tagging and labeling strategy for accurate cost allocation, budgeting, and forecasting.
• Optimize: Once costs are visible, this phase involves implementing strategies to reduce waste and improve efficiency. This includes rightsizing underutilized resources, leveraging discounted pricing models like Reserved Instances and Savings Plans, and eliminating idle resources.
• Operate: This final phase is about embedding FinOps into daily operations to ensure continuous improvement and governance. Activities include establishing automated policies for cost control (e.g., auto-shutdown of development environments after hours), defining KPIs to track performance, and fostering a cost-aware culture across the organization.