ITAM and FinOps: Is There Value in a Hybrid Approach?

The pandemic highlighted latent cost pressures and supply chain issues — fast-forward to 2024- businesses constantly strive to optimise their operations and maximise their financial resources. IT asset management (ITAM) and Financial Operations (FinOps) are crucial in achieving these goals.

While each of these disciplines has its unique benefits, there is immense value in combining them into a hybrid approach. Connecting them allows you to achieve greater financial transparency and make data-driven decisions regarding your technology investments.

Today, I will outline seven critical benefits of ITAM and FinOps and why adopting a hybrid approach is essential for modern businesses.

What is ITAM?

ITAM, or IT asset management, manages and optimises an organisation’s IT assets throughout their lifecycle. It involves tracking, monitoring, and controlling all aspects of these assets, including hardware, software, licenses, and contracts.

ITAM goes to the early days of computers when organisations started realising the need for effective management of their growing number of IT assets

Today, with the increasing complexity and diversity of IT environments in hybrid cloud setups, the importance of ITAM has only grown. You’re now dealing with various assets across multiple platforms and providers. Proper management ensures cost optimisation by preventing overspending on unnecessary resources while ensuring compliance with licensing agreements.

It is for this reason that the synergy with FinOps is so crucial.

What is FinOps?

FinOps, short for financial operations, is a relatively new concept that aims to bridge the gap between IT teams and finance departments. It emerged in 2017, and its primary goal is to enable you to manage cloud costs effectively by implementing financial accountability and optimisation practices.

Since most of us rely heavily on cloud services, FinOps has become increasingly important. Additionally, with the growing complexity of cloud environments, FinOps provides valuable insights into how different business units utilise resources and enables accurate showback or chargeback models for internal billing purposes.

Why a Hybrid ITAM + FinOps Approach is Essential

Combining ITAM with FinOps principles can add value in seven ways. However, it is better to understand the opportunities and risks associated first:

Integrating IT Asset Management (ITAM) and Financial Operations (FinOps) is an opportunity or risk depending on the context.

Opportunity: ITAM and FinOps intersect in multiple areas, with both disciplines aiming to optimise cost, risk, and operational efficiency. While ITAM and FinOps can collaborate to provide clear visibility into SaaS usage and spending. However, when they can work together to cover blind spots and close gaps for each other, IT spending and IT-related spending have become significant; thus, ITAM and FinOps can synergise to create a harmonious environment for IT financial optimisation.

Risk: While harmonious financial optimisation is excellent, integration requires a robust governance framework and iterative optimisation activities. It also involves the creation of a new operating model by reducing waste, thereby avoiding costly licensing and contracting issues. With the sponsorship and support of senior leadership, it will be easier to bring the two disciplines together.

While integrating ITAM and FinOps presents opportunities for improved efficiency and cost savings, it poses governance and operational change risks. Therefore, careful planning and execution are crucial for successful integration. Let us deep dive into value adds from integrating ITAM and FinOps:

1. Cost management for IT assets

The hybrid approach enables businesses to track and analyse costs associated with IT assets more effectively. It includes monitoring expenditures on hardware, software licenses, cloud services, and maintenance contracts.

With a comprehensive view of costs across the entire technology infrastructure, organisations can make informed decisions about resource allocation and budget planning. By leveraging FinOps and ITAM practices, you can identify cost-saving opportunities, such as optimising resource utilisation or identifying unnecessary expenses.

2. Spend data analysis and IT show back

With spend data analysis, businesses can track and analyse their IT expenses to identify areas where cost-optimisation programs require implementation. Through the power of FinOps principles, such as cost allocation tagging and resource tracking, you gain granular visibility into their spending habits.

IT show presents the value and impact of IT services to organisational stakeholders. By combining FinOps with ITAM practices like asset tracking and inventory management, organisations can access accurate data on how specific resources contribute to business outcomes.

This combined information is leveraged during presentations or reports to demonstrate the financial implications and the tangible benefits of investing in specific technologies or projects.

A hybrid approach lets you optimise your spending while showcasing the value of your technology investments without sacrificing transparency or accountability in financial decision-making.

3. Anomaly detection and resolution

With the integration of financial data from FinOps and asset management insights from ITAM, businesses gain a comprehensive view of their operations. It enables them to spot any irregularities or deviations from expected patterns, such as sudden spikes in usage or unauthorised access attempts.

By promptly detecting these anomalies, organisations can immediately resolve issues before they escalate into problems that impact cost management and security.

The combination of FinOps and ITAM also helps identify potential vulnerabilities or inefficiencies within the system. For example, businesses can identify instances where resources are underutilised or overprovisioned by analysing spending data alongside asset utilisation metrics.

4. Shared cost management

By combining FinOps with ITAM, businesses can effectively manage and allocate costs across teams and shared service departments. This approach allows for greater transparency and accountability regarding shared expenses.

By integrating ITAM tools with FinOps practices, businesses gain insights into which teams or departments are utilising resources more than others.

Further, implementing shared cost management makes it easier to identify areas where it can reduce costs or improve efficiency. You can find opportunities for consolidation or optimisation to make informed decisions about resource allocation and budgetary planning.

5. IT budget forecasting

With FinOps, teams can analyse historical spending patterns and trends to predict future costs accurately. Additionally, by integrating ITAM data into the forecasting process, you ensure that all assets are accounted for and accurately included in the budget projections.

By leveraging a hybrid approach, organisations can achieve better accuracy in their budget forecasts. It allows them to be proactive rather than reactive when managing their IT expenses and ensures the assignment of sufficient funds for upcoming projects or initiatives.

6. Resource utilisation and efficiency

A hybrid approach allows for better visibility into resource usage patterns. With ITAM, you gain comprehensive knowledge about your IT assets and their utilisation rates. Combining this information with FinOps data on costs and spending helps identify problem areas. For example, if specific applications consume excessive resources without delivering commensurate value, adjustments can be made to streamline usage and eliminate waste.

It enables you to allocate resources more efficiently, reducing unnecessary expenses while ensuring critical workloads have the necessary resources.

Combining FinOps with ITAM brings together financial insights and asset management capabilities in a powerful way. This combination improves resource utilisation and efficiency across your organisation’s IT landscape.

7. New IT workload onboarding

By leveraging FinOps principles, organisations can accurately assess the financial impact of adding new workloads. It allows for better planning and budgeting while allocating resources appropriately.

Additionally, by incorporating ITAM practices into the onboarding process, organisations can track and manage their assets effectively, minimising risks associated with unlicensed software or underutilised resources.

It is a potential combination which enables organisations to optimise the onboarding process and ensures that new workloads dovetail into existing infrastructure without unnecessary costs or complications.

Implementing ITAM and FinOps integration in your organisation involves several steps, some of which are:

- Establish Clear Communication: Maintain clear lines of communication and coordination with FinOps professionals or Cloud Center of Excellence (CCOE) within the organisation.

- Understand Cloud Services: Determine the nature of cloud services billing with software licenses, including those bundled with a service or purchased from a cloud provider marketplace.

- Identify BYOL Services: Determine which cloud services configuration is of type Bring-Your-Own-License (BYOL).

- Resource Utilisation and Efficiency: Collaborate with FinOps during right-sizing or resource cleanup efforts. Ensure that resources are efficient, license allocation is appropriate, security review is constant, and governance monitoring is in place.

- Measure Unit Costs: Work with stakeholders to develop and report unit economic metrics, aligning cost allocation with organisational strategy.

- Slow and Steady Approach: Follow the FinOps Foundation’s maturity model, called the “crawl, walk and run” approach. It enables organisations to start small and grow in scale, scope, and complexity.

Promoting a unified approach requires ITAM and FinOps to collaborate transparently and in a centralised way, ensuring they work together to maximise their impact and cover each other’s blind spots. This joint effort creates a cohesive, centralised, cost-effective cloud management culture.

The success of ITAM and FinOps integration involves tracking key performance indicators (KPIs), setting objectives with critical results (OKRs), and defining thresholds for acceptable variance from forecasted trends. Here are some specific measures you can consider:

- Cost Optimisation: Track how much you’ve saved through the integration. It could be through reduced software licensing costs, more efficient use of resources, or other cost-saving measures.

- Risk Reduction: Measure the decrease in compliance risks and security vulnerabilities due to better asset management.

- Operational Efficiency: Monitor improvements in operational processes. Its measurement unit will be the time saved in managing assets, the reduced wasted resources, or the speed of response to issues.

- Governance: Evaluate the effectiveness of your governance framework. It could be through the number of governance issues resolved, the reduction in audit findings, or improvements in policy compliance.

- Visibility and Accountability: Assess the increase in visibility into cloud costs and the level of accountability among teams.

The above measures of success are represented in the context of cloud costs and may vary based on your organisation’s specific goals and objectives. It’s essential to regularly review these metrics and adjust your strategies as needed to continue driving value from your ITAM and FinOps integration.

What are the Potential Roadblocks?

While combining ITAM and FinOps can offer numerous benefits, there are also challenges that organisations may face when adopting a hybrid model. One major challenge is integrating ITAM and FinOps processes and systems. It requires coordination between different teams, including finance, procurement, IT operations, and asset management. Another roadblock is the resistance to change within an organisation. Implementing a new approach may require changes in workflows, roles, responsibilities, and cultural shifts.

In our above paragraph, IT Asset Management (ITAM) and Financial Operations (FinOps) share common goals but must fully converge due to their different scopes and focuses.

- Different Focus Areas: ITAM is a form of lifecycle management that helps businesses manage IT assets from purchased until deboarded. On the other hand, FinOps is about reducing cloud spending wherever possible without necessarily breaking cloud cost management into different lifecycle stages.

- Cloud Visibility: ITAM has limited visibility into the cloud unless they have a Software Asset Management (SAM) tool agent deployed into an instance. Conversely, FinOps tends to focus on assets that appear on the cloud bill, often ignoring software and SaaS applications that are not on the cloud.

- Operational Differences: ITAM traditionally involves centrally procured, owned, and optimised IT resources. In contrast, FinOps supports a model where individual engineers or teams create infrastructure as code, committing organisations to spend.

- Asset Ephemeral Nature: The temporary nature of cloud assets, which can be leased and used for as short a time as desired, presents a challenge for ITAM, which tracks the lifecycle of every IT asset.

Despite these differences, ITAM and FinOps aim to optimise cost, risk, and operational efficiency. Therefore, their integration can lead to a more comprehensive and practical approach to managing IT assets and cloud spending. Organisations must identify and proactively address these potential roadblocks through effective communication, training programs, and ongoing support. Working with an experienced IT consultant can provide valuable support and guidance when integrating ITAM with FinOps.

Are you curious to know more about IT asset lifecycle management? Please write to me at Arvind @ AM-PMAssociates.com for more actionable insights.