FinOps strategies can help enterprises manage cloud costs and monitor cloud usage patterns. But is it better to outsource or build a FinOps team in-house?
Because of the scarcity of FinOps expertise, establishing FinOps practices inside an organization often includes outsourcing.
FinOps provides enterprises with a framework to optimize cloud spending and gain visibility into cloud usage patterns. The inherent scope of FinOps requires consistent collaboration among various departments, including finance, operations and engineering. But some enterprises might not have the resources to maintain FinOps practices.
Deciding whether to outsource FinOps or build a team in-house depends on factors specific to a business's context and goals. Some aspects are within the company's control, while others are relative to the employment market.
Let's look at some decisions enterprises must consider when outsourcing FinOps or building an in-house FinOps practice.
4 factors that lead to FinOps outsourcing
Enterprises might choose to outsource FinOps to a third-party partner that can more effectively manage operations. Here are some factors that drive enterprises to outsource FinOps.
1. Cost efficiency
Calls for cloud repatriation and hybrid cloud-first strategies are raising the demand for FinOps expertise, as enterprises need to implement more controls over their cloud spending. The quickest path to cloud cost efficiency often starts with outsourcing FinOps to ensure the organization optimizes its cloud spending with minimal ramp-up time.
2. Expertise
Fostering FinOps expertise in-house takes time, even if enterprises find volunteers from their IT and finance teams who want to add FinOps responsibilities to their current job roles. Cloud FinOps requires a deep understanding of cost allocation, budgeting, forecasting and cloud optimization. Outsourcing such expertise shortens the on-ramp to accurate cost management and financial planning.
Another factor to consider is that teams might not receive the resources to hire skilled FinOps experts in-house. In this case, outsourcing might be the only option to hire FinOps expertise to support cloud operations and initiatives.
Building an effective FinOps team can help an organization see benefits that optimize cloud costs.
3. Flexibility
In some cases, outsourcing FinOps brings an organization the flexibility it needs when trying to hire a full-time cloud economist. Sometimes, a cloud economist isn't necessary or might be too challenging for a recruiting team. Also, full-time FinOps support might not be essential for an early-stage startup or a midsize firm embarking on its first cloud initiatives.
Many state, local and federal government agencies outsource FinOps and support for the rest of their cloud services. Another use case is M&A that lead to significant IT infrastructure changes. M&A are perfect use cases to bring in outsourced FinOps consultants to support systems and data integration and ensure adequate cloud services are in place to support the combined company. Another use case is when businesses need to audit their cloud billing from major cloud service providers as part of a financial initiative.
4. Time to implement
Outsourcing FinOps to an outside firm helps reduce the time it takes enterprises to implement FinOps practices and tools. Organizations benefit from the vendor's tools, framework and expertise. The sooner enterprises implement FinOps expertise, practices and tools to analyze and optimize cloud spending, the sooner they realize cost savings and adapt their DevOps and cloud management practices.
Integrating a cross-functional FinOps team is sometimes more manageable in-house.
Why build in-house FinOps practices?
Building an in-house FinOps team is a long-term investment for enterprises. It gives them complete control over the hiring, training, tools, reporting and processes implemented to monitor cloud spending.
In-house FinOps practices are a strategic investment for cloud-first organizations, though they come with higher initial costs. Some of the returns include keeping valuable FinOps expertise in-house and ensuring FinOps principles become part of an organization's institutional knowledge and processes.
Integrating a cross-functional FinOps team is sometimes more manageable in-house. For example, an in-house team can build a long-term relationship with cloud and financial teams without the ticking clock of a contract end date. Also, an in-house FinOps team can create a more seamless working relationship with the security team for data sharing, fine-tuning collaboration, reporting and alerting between the teams, as an in-house team is more attuned to the organization's confidentiality and security requirements.
How to decide between internal FinOps or outsourcing
Enterprises that can choose whether to keep FinOps in-house or outsource must consider a variety of factors. Stakeholders typically include C-level decision-makers, finance and IT managers, HR and talent acquisition. These factors include the following:
Goal orientation. Outsourcing FinOps might better align with an organization's strategic goals. For example, enterprises embarking on a major AI initiative might find that experienced FinOps support is integral to the success of a FinOps endeavor. Outsourcing can keep the in-house employees focused on day-to-day cloud operations.
Budget concerns. While the initial investment in outsourcing might seem high, it offers long-term savings by providing access to specialized expertise and advanced tools, which can identify cost-saving opportunities. Outsourcing enables enterprises to focus on core competencies and scale services according to financial capacity. This makes it a pragmatic choice for effective cloud cost management.
Regulatory requirements. Regulatory compliance requires companies to maintain strong internal controls over financial reporting. Outsourcing FinOps must not compromise these financial controls. For example, GDPR requires compliant organizations to outsource only to third-party providers who adhere to GDPR compliance. The Sarbanes-Oxley Act has a similar requirement. An outsourced team must also provide adequate oversight and the ability to audit.
Don't discount a hybrid approach to FinOps either. Enterprises can build their own FinOps team in-house by skilling up employees, while augmenting the FinOps team with outside consultants, especially when they need surge support. Whichever FinOps approach enterprises choose, it's important to remember they might need to pivot FinOps hiring and training due to changes in business strategy and economic climate.
Will Kelly is a freelance writer and content strategist who has written about cloud, DevOps, AI and enterprise mobility.
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