Hybrid ITAM and FinOps: A United Approach to Cost Optimization

FinOps and asset management are both necessary for comprehensive cost optimization.

IT Asset Management and FinOps

Savvy IT organizations have embraced FinOps, the discipline of cloud financial management. This practice (sometimes called cloud cost management, cloud cost optimization, or cloud financial management) focuses on cloud spend (including PaaS, serverless, containers, and IaaS compute, network, and storage) with centralized, cross-functional teams (from application development, business units, engineering, finance, legal, product, and security, for example) working to support best practices.

The nonprofit FinOps Foundation is increasingly talking about the merger of IT Asset Management and FinOps. See its recent blog Intersection of FinOps & ITAM/SAM.

Concurrently, IT asset management (ITAM) and software asset management (SAM) initiatives are ongoing. These focus on the cost-effective use of commercial software, along with end-of-life and end-of-support (EOL/EOS) and legal considerations for all software deployed across complex, hybrid IT estates.

Clearly, FinOps and asset management are both necessary for comprehensive cost optimization. But when they function independently or in silos, these practices, which can and should be complementary, may “erode their value-maximization potential,” as reported by Garter. A united approach is required: Hybrid ITAM and FinOps.

What is Hybrid ITAM and FinOps?

Hybrid ITAM and FinOps prioritizes the collaboration between FinOps and ITAM teams. Organizations can gain full visibility into all costs associated with running applications in the cloud. Uniting subject matter experts (SMEs) for cloud resources, software licensing, and SaaS management allows for the visualization and optimization of all aspects of an application, supporting a total cost of ownership (TCO) view. This is about far more than cloud resources.

Hybrid ITAM and FinOps blends the strengths of both practices:

  • FinOps practitioners focus on cloud financial management. They generally prioritize optimization of the spend on cloud infrastructure, securing efficiencies in cloud spend through informed usage of provider discounts (such as savings plans and reserved instances), governance policies and procedures, and storage lifecycle management. As part of their work to minimize wasted cloud spend, they must also address the growing reliance on SaaS offerings, as these expenditures are often categorized as cloud costs. FinOps teams typically haven’t focused on the purposes for workloads or the licensing considerations of the workloads on cloud infrastructure.
  • ITAM and SAM practitioners focus on the intricacies of commercial software licensing, including the optimization, governance, and lifecycle management of software, including increasingly prevalent SaaS. They prioritize EOL/EOS, legal, compliance, and cost considerations of commercial software—knowledge that is important for overall cloud spend optimization when public cloud spend waste is estimated at 28%, as found in the Flexera 2023 State of the Cloud Report. As software vendor packages have evolved (with new features and functionality, revised license models and terms, interdependent modules, use rights, deployment restrictions, and entitlement management considerations), SAM practitioners’ knowledge about how to navigate these complexities shouldn’t be assumed to be in the skillsets of FinOps teams.

The Need for Hybrid ITAM and FinOps

Blending the strengths of FinOps and ITAM teams into Hybrid ITAM and FinOps can help eliminate otherwise unseen complexities that often drive costs up. This is particularly important because it isn’t possible to determine the total cost of an application without calculating licensing and the associated costs of running commercial software in the cloud.

  • Licensing costs associated with an application may outpace the costs of the cloud infrastructure it uses. For example, the license for SQL Server running on Azure can be up to 8x the cost of the infrastructure running that software. In this case, adjustments to the infrastructure will impact the overall cost only minimally; focusing on the application itself is necessary for optimization.
  • By finding savings using different cloud infrastructure (e.g., a different cloud instance size, a reserved instance), such modifications may trigger significant impacts on licensing costs and software use rights. Optimization of a single aspect of an application may significantly drive up another aspect of the application and/or expose it to security and regulatory issues; caution is required to ensure that instances meet their licensing requirements.
  • Configurations used for deploying commercial software may significantly impact the overall expense of application. For example, an Oracle database installation, appropriately configured for different compute environments, may be twice as expensive when deployed in containers, compared to cloud deployment costs.
  • In the case of an organization deploying licensed software that was acquired from a cloud provider’s public and/or private marketplace, multiple licenses may exist for the software. It is the responsibility of the organization—not of the software vendor—to identify and utilize the licenses optimally. The paired knowledge of FinOps and ITAM is critical to prevent wasted spend.

Benefits of Hybrid ITAM and FinOps

Hybrid ITAM and FinOps deliver an all-encompassing view of your organization’s IT estate, thereby facilitating technology value optimization (TVO) of each dollar spent on IT resources, regardless of where they’re deployed.

Benefits include:

  • A unified approach, blending ITAM and FinOps disciplines to augment results and eliminate the operational waste that’s all too common with segmented, siloed initiatives.
  • True cost and value optimization of applications and workloads.
  • Full visibility into each application’s utilization of licensed software.
  • Business value is delivered through future-focused savings such as continuous optimization of utilization, elimination of wastage, and establishing guardrails to prevent cost escalation.

Both FinOps and ITAM focus on waste reduction. But without pairing these disciplines in Hybrid ITAM and FinOps, the opportunity exists for wasted effort – and expenses. A hybrid approach provides the rigorous approach required to optimize today’s increasingly complex IT estates.