By the end of 2025, global spending on cloud is likely to top a whopping USD 723 billion, according to a Gartner report…
However, if you were to ask enterprise leadership what they spend, they might struggle to answer. Despite a major chunk of organisations relying on cloud services, many either don’t know their cloud spend or can’t explain it. So, the need for effective strategies to manage cloud investments has reached a critical juncture, and “FinOps” is raring to go.
A mash-up of finance and DevOps, FinOps refers to a set of strategies that help track and optimise cloud spending. According to Deloitte, if companies were to implement FinOps tools and practices, they’d save nearly USD 21 billion in 2025 alone, with this number only growing in the subsequent years. In fact, some enterprises might even end up cutting cloud costs as much as 40%. This article does a deep dive into the specifics of FinOps and how it fits into and could be the answer to solving the cloud cost conundrum.
The Complexities of Cloud
Cloud is now indispensable for organisations, having democratised scalability and convenience. It powers innovation at a breakneck speed, helps industries disrupt their markets, and even underpins concepts such as data analytics and AI. While whipping up new cloud environments might be a matter of a few clicks, building its physical infrastructure is arduous, taking weeks or even months to complete, thus driving up cloud costs.
Moreover, the cloud is getting complex, especially with hybrid cloud having entered the picture. Not only do more than 70% companies now use hybrid cloud infrastructures, but also more than 50% organisations source cloud from multiple providers to avoid vendor lock-ins and advantage of specific capabilities. If that wasn’t enough, it’s not uncommon for individual departments to invest in cloud software without the central engineering team coming to know, thus making it increasingly complex to manage data security, compliance, and integration.
Generally speaking, organisations aren’t great at sticking to their cloud budgets. Since costs could be variable, especially in pay-as-you-go billing, forecasting is a challenge. What also doesn’t help is that cloud isn’t cheap and is quickly becoming the largest IT line-item bill for enterprises.
Where Does FinOps fit in?
Cloud users have begun recognising a pattern in cloud spending, or rather overspending, and nearly 50% enterprises now have dedicated FinOps teams. FinOps is a cultural philosophy and financial management discipline with its main objective being cloud and cost-effectiveness. It combines finance and DevOps with its objective being generating maximum business value from the cloud by supporting data-driven decision making and ensuring greater financial control across engineering and finance teams alike. It can range from the not-so-technical aspects, like negotiating credits and discounts, to the overtly technical ones, like redesigning cloud workloads and reviewing what can be shifted to long-term, less-accessible storage.
However, the long-term impact of FinOps is cultural change. At its very core, the concept is all about financial accountability and cross-organisation responsibility, as well as aligning every dollar spent on cloud with the business value it generates. For instance, in 2019, European media and entertainment giant Sky Group discovered that it had spent an entire year’s cloud budget in just 6 months!
After forming and deploying a first-party FinOps tool, it not only identified USD 1.5 million in savings, but it also allowed savings to the tune of USD 3.8 million in the following year after it implemented visibility dashboards.
Implementing FinOps
Implementing FinOps is all about starting with a detailed plan, which includes reviewing current strategies, evaluating any alerting and tagging structures, and then defining key performance indicators.
Naturally, a focus on visibility is the practical first step, which could mean cataloguing current cloud resources and exploring how they could possibly align with enterprise needs. While cloud providers offer a wealth of resource monitoring tools and cost-focused specific tools for this, other third-party FinOps platforms provide even more granular metrics. That being said, interpreting dashboard data might very well require dedicated and in-demand FinOps practitioners and specialists.
Does your company work with multiple cloud providers? You might require a dashboard for each provider, as a single, integrated portal could be extremely challenging with varied data across the board. Finally, organisations need to bear in mind that FinOps tools cost considerably, nearly 3-5% of the cloud bill on the higher end of the spectrum. So, enterprises need to completely understand their cloud economics before they end up deploying FinOps tools.
In the end, implementing cloud FinOps is neither a final destination nor a box that an enterprise can check and then archive. Rather, it’s an ongoing journey and an inherently iterative discipline that requires continuous learning, repetition, and action to affect growth across capabilities.
Final Thoughts
As global IT spending is all set to exceed USD 5 trillion in 2025, partly driven by digital transformation and AI, and the reliance on private cloud growing, FinOps needs to be viewed as a long-term philosophy integral to operational strategy rather than a quick-fix.
With many companies overshooting their cloud Iaas budgets due to lack of cost optimisation, it only furthers the critical need for FinOps, a practice that doesn’t hinder innovation and yet has saved businesses millions by optimising cloud costs.
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