As cloud spending continues to climb, the discipline known as finops (financial operations) has emerged as a critical strategy for managing and optimizing cloud investments. This is no longer news. Finops has been a discipline and a toolkit for years. The core promise of finops is immensely appealing: Achieve radical cost optimization, enhance operational efficiency, and ultimately drive measurable business value. In the real world, many organizations struggle to realize this promise. There’s a troubling trend that the ROI for many finops initiatives is falling far below expectations. In some cases, a dollar invested in finops delivers a mere 30 cents in actual savings. What’s going wrong?
1. Dismantle the barriers between finops and engineering
One of the most significant challenges is the lack of integration between the finops and engineering teams responsible for building and deploying cloud applications. McKinsey’s report showed that many organizations struggle to capture savings beyond the immediate finops team’s mandate because these teams often lack the incentives or access to cloud cost data. Consequently, many well-meaning optimization efforts fall by the wayside as engineers juggle multiple priorities or lack the resources to focus on cost-related improvements.
Communication breakdowns and organizational silos can exacerbate the problem. Engineers are often more focused on performance and delivery timelines, while finops teams are driving toward cost savings and budget adherence. These are not opposing goals, but aligning them requires concerted effort and cross-functional collaboration. Integrating finops principles into an engineer’s workflow—providing them with real-time cost visibility, actionable insights, and accountability for resource consumption—can bridge this gap. When finops and engineering teams are united with common objectives and shared responsibilities, cloud cost optimization can be approached holistically rather than in disjointed fragments.
2. Adopt FaC to move beyond reactive cost management
Another critical aspect where many enterprises fall short is the systematic implementation of finops best practices. This is where FinOps as Code (FaC) becomes essential by incorporating finops processes directly into application configurations to make them foolproof. FaC can dramatically reduce costs by integrating financial management principles directly into the infrastructure management lifecycle. By automatically embedding budgeting constraints and cost optimization checks into the development and deployment pipeline, organizations create a proactive rather than reactive cost management environment.
The beauty of FaC lies in its automation capabilities. Rather than relying on human intervention to identify cost savings opportunities or enforce spending policies, FaC leverages automation to perform these tasks continuously and consistently. For instance, a well-implemented FaC solution can automatically identify opportunities to optimize resource scheduling or detect when cloud-native services can be used more cost-effectively than traditional infrastructure. Such automated policy enforcement can lead to substantial cost reductions and a more efficient use of cloud resources, aligning financial goals with operational necessities.
3. Develop and consistently enforce a strong tagging strategy
Many organizations struggle with basic cloud hygiene practices. They’re not effectively identifying and eliminating obvious sources of waste, such as underutilized resources, oversized virtual machines, and redundant storage volumes. A tagging strategy should be implemented to assign resource costs to specific teams or projects to foster accountability. Without a strong and consistently enforced tagging strategy, it becomes exceedingly difficult to allocate costs accurately, track financial performance, and provide detailed reporting.
A robust tagging strategy not only aids in cost allocation but also in tracking resource usage and identifying areas for optimization. When resources are appropriately tagged, it becomes simpler to generate reports detailing cloud expenditure by team, project, or department. This granular visibility can highlight inefficiencies and prompt necessary actions for cost reduction. Effective tagging also supports chargeback mechanisms, enabling organizations to hold teams accountable for their cloud spending and foster a culture of financial responsibility.
4. Regularly identify and eliminate underutilized resources
Regularly identifying and eliminating underutilized resources is crucial for maintaining cloud cost efficiency. Many enterprises continue to pay for cloud resources that are seldom used or not needed at all, leading to excessive expenditures that could be avoided with vigilant cost management practices. Organizations must implement strategies for assessing resource utilization on an ongoing basis, ensuring that virtual machines are right-sized to match actual workload requirements and storage usage is optimized to minimize unnecessary expenses.
Right-sizing virtual machines involves adjusting their specifications—such as CPU and memory allocations—to better reflect the actual demands of the workload. Over-provisioned machines waste resources, while under-provisioned machines can hinder performance. Similarly, optimizing storage usage involves regularly reviewing storage volumes, eliminating redundant data, and leveraging tiered storage options where applicable to reduce costs. These practices help prevent waste and ensure that cloud resources are allocated and used efficiently, aligning with the overarching goals of finops.
5. Carefully select finops tools that provide granular visibility
As cloud spending keeps rising, the discipline known as finops (financial operations) has become a vital strategy for managing and optimizing cloud investments. While this development isn’t new, finops has served as a discipline and toolkit for years. Its core appeal is clear: achieve significant cost optimization, enhance operational efficiency, and ultimately drive measurable business value. However, many organizations struggle to attain these benefits. There’s a concerning trend showing that the ROI for numerous finops initiatives is falling well below expectations. In some instances, a dollar invested in finops only yields about 30 cents in actual savings. What’s going wrong? The challenges might be multifaceted, involving misalignment of goals, lack of expertise, or inadequate tools. Organizations may not be fully leveraging the potential of finops practices or might be facing issues in integrating them effectively into their existing processes. These obstacles can prevent firms from realizing the full promise and benefits that finops offers.
