The Hidden Costs of Cloud: Why Your Business Needs FinOps

Cloud computing—the practice of renting computational resources over the internet—has become essential for modern business operations, with global cloud spending expected to reach $488.5 billion in 2026. There are many use cases and situations where this brings advantages to the product and the business. Switching to cloud services offers numerous benefits, such as easier data access, enhanced security, operational efficiency, and scalability. 

While we believe cloud computing is a strong solution for many business needs, it's important to note that it's not universally the best option for every situation. Effective cost management is crucial, as oversight issues can negatively impact a company's financials.

This is where FinOps comes in. FinOps (Financial Operations) is a business methodology that combines financial accountability with cloud operations, enabling organizations to optimize costs while maintaining operational excellence. Industry data shows that organizations adopting  FinOps  practices  demonstrate  significant improvements in resource utiliation, with average optimisation rates of 35% within the first six months of implementation.

This article explores how FinOps frameworks drive cost optimisation, enhance visibility, and foster collaboration between technical and business teams.

Understanding Cloud Costs Challenges

Cloud computing offers undeniable benefits, but inadequate cost oversight can significantly impact an organisation's finances. Companies often underestimate the exponential growth of cloud costs and hidden project expenses. Lack of visibility into resource usage and costs complicates the issue further, leading to unmanaged and inactive resources still incurring costs until it's too late. 

The lack of alignment between technical and financial teams often adds a layer of complexity. While engineers may prioritise performance and reliability by setting up redundant cloud resources and taking the "better safe than sorry" approach, financial teams focus on cost control. Without proper collaboration and guidance, this can often result in misalignment concerning the cloud project in question and, in turn, lead to inefficient resource allocation and unnecessary expenses. 

FinOps directly addresses these challenges by promoting visibility, accountability, and collaboration. It ensures that every team understands the financial impact of their cloud usage and has the tools necessary to optimise it. By overcoming these common pitfalls, businesses can harness the full potential of cloud computing, maintaining efficiency without unnecessary financial strain.

How The FinOps Framework Works

FinOps, as defined by the FinOps Foundation, is an operational framework and cultural practice that maximises the business value of the cloud, it enables timely data-driven decision-making and creates financial accountability through collaboration between engineering, finance, and business teams. 

This framework revolves around three core phases: inform, optimise, and operate.

1. The inform phase: This phase focuses on creating transparency in cloud spending by collecting raw cloud usage data and transforming it into clear, actionable overviews. By implementing tools like Grafana Cloud, we have increased our awareness and taken a massive step in observability, allowing us to make better resource choices. These overviews break down cloud spending by team, project, and resource. The goal is to provide the company with comprehensive visibility into its cloud usage, enabling informed decisions and appropriate actions based on this data. A few core practices in this phase include real-time cost tracking, allocation and tagging, budgeting and forecasting, and more. Beyond simple cost tracking, implementing robust anomaly detection systems in the Finops inform phase can be beneficial as well. For example, by leveraging AI and machine learning algorithms, companies can automatically identify unusual spending patterns or spikes that might indicate inefficiencies. This proactive approach enables swift intervention, preventing potential budget overruns. Integrating AI-powered tools into the Inform phase transforms raw data into actionable insights, significantly enhancing a company's ability to understand and manage its cloud expenditure effectively.

2. The optimise phase: Once the necessary visibility is in place, the next phase comes into effect. This focuses on identifying opportunities to improve cloud efficiency using the data collected in the inform phase. In this phase, the key focus is on analysing usage patterns and uncovering inefficiencies to ensure that the cloud resources are being used correctly and efficiently. Core practices in this phase are analysing usage, rightsizing workloads, and leveraging discounts that the various cloud providers provide.

3. The operate phase: In the operate phase, the main objective is implementing organisational changes to operationalise FinOps using the data and capabilities developed in the inform and optimise phase. This is done through integration and automation. Implementing these to streamline cost management reduces manual effort and increases efficiency. Another big part of the operating phase is the implementation of continuous integration, the art of reviewing and refining FinOps tasks to ensure continuous integration and continuous improvement in these tasks is essential to keep up with the ever-changing cloud infrastructure.

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Key Benefits of FinOps for In The Pocket

Implementing FinOps has already brought significant advantages to our teams, helping us optimise cloud usage while building a foundation for greater accountability and efficiency. 

Key benefits we have realised so far are the following:

1. Enhanced cost oversight‍

One of the immediate outcomes of adopting FinOps is improved visibility into our cloud expenses. We now have clear insights into spending by team, project, and resource, enabling us to track real-time costs. This transparency allows us to identify inefficiencies and focus on the areas that need attention, ensuring every euro is well-spent. 

2. Quick wins with low-hanging fruit‍

What is meant by this is that by implementing FinOps practices, we’ve been able to address easy-to-spot inefficiencies quickly. For instance:

• Shutting down unused resources.
• Adjusting resource sizes to better align with actual usage.
• Taking advantage of cost-saving options like reserved instances or discounts for predictable workloads. These actions have already resulted in tangible savings and more efficient use of our cloud resources.

3. Optimised resource utilisation

We’ve made significant progress in ensuring our resources are used more effectively. By analysing usage patterns and applying optimisation strategies, we’ve reduced waste and improved the overall efficiency of our cloud infrastructure, enabling better performance without unnecessary costs.

Fostering a Culture of Cost Awareness

While linking individual users to every resource is a future goal, we've taken significant steps toward fostering a culture of cost awareness. Teams understand now the financial impact of their cloud usage and are more mindful of how they allocate and consume resources. A helpful tool for this is our increased use of alerting. Over the past months, we have focused on refining this crucial part of our infrastructure, with the focus being on billing alerts and anomaly detection. This has enabled us to set a limit on certain project spending before an alert is triggered, informing all the stakeholders about the exceeded limit.

As we continue to grow, FinOps has positioned us to scale our cloud usage efficiently. By embedding cost management into our processes now, we're setting the stage for sustainable growth without the risk of runaway expenses. An example of this is the separation of the internal and reseller products, which has allowed us to create a clear visual of what should be considered an internal cost and what should be considered a cost for our clients. This is done by simply restructuring our way of assigning billing accounts to various cloud projects. This helps us assign labels to our projects to filter out internal or reseller differences.

FinOps will play a critical role in ensuring that our cloud operations remain scalable, efficient, and aligned with our business objectives. While we've made significant strides in optimising our cloud usage and fostering cost awareness, there's still much potential to unlock as we further embed FinOps practices into our workflows:

1. Strengthening Accountability

Moving forward, our focus will be linking individual users or teams to specific cloud resources. This will enhance accountability and ensure that each team understands the financial impact of their decisions. By implementing more granular tracking and cost allocation mechanisms, we can empower teams to take ownership of their cloud spending and actively seek opportunities for optimisation.

2. Driving Proactive Decision-Making

With real-time insights and advanced forecasting tools, we aim to move from reactive to proactive decision-making. This includes identifying opportunities for cost savings before they impact budgets and planning cloud investments that directly support our long-term growth.

3. Scaling Efficiently

As our cloud usage grows alongside our business, FinOps will help us scale responsibly. We'll maintain a balance between innovation and cost control by continuously optimising our cloud spending and aligning it with evolving business needs. This includes leveraging automation, exploring advanced pricing models, and allocating resources based on clear business priorities.

4. Fostering Collaboration Across Teams

FinOps will continue to serve as a bridge between finance, operations, and engineering, ensuring that all teams are aligned in their efforts to optimise cloud usage. By fostering a collaborative culture, we can break down silos and create shared accountability for our cloud costs, driving both efficiency and innovation.

5. Evolving FinOps Practices

Finally, as the cloud landscape evolves, so too will our FinOps practices. Staying ahead means adopting new tools, refining our processes, and incorporating industry best practices. Keeping FinOps at the forefront of our cloud strategy will ensure that ITP remains competitive and agile in an ever-changing market.

By embracing these future-focused initiatives, FinOps will not only support the day-to-day management of our cloud resources but also play a vital role in driving the sustainable growth of ITP. 

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