Overview

According to the State of the Cloud Report released by Flexera in 2024, managing cloud costs is the top challenge for enterprises. The average cloud cost of enterprises exceeds the budget by 15%, and 27% of public cloud costs are wasted. 51% of enterprises have established dedicated FinOps teams, and 20% plan to establish FinOps teams in the next year.

As enterprises increasingly leverage the agility, efficiency, innovation, and elastic scalability of the cloud, they face the following four difficulties in cloud cost management:

• Difficult cost planning: Traditionally, IT costs are fixed after procurement. However, cloud resources are used on demand and dynamically, so cloud costs change with services. For example, cloud resource usage increases during peak hours, and new resources are dynamically provisioned during upgrade and capacity expansion. The dynamic cloud costs cause a large deviation between the budget and the actual spending.
• Difficult cost control: Traditionally, IT procurement is centrally managed by the procurement department, which is easy to control. However, cloud resource consumption runs through the entire cloud usage process, and the procurement becomes decentralized. Resources are purchased directly by engineers instead of by procurement personnel. Engineers' weak cost awareness and the large number of people purchasing cloud resources make it difficult to control cloud costs.
• Difficult cost optimization: Cloud service providers usually provide hundreds of cloud services and diversified billing units, and there is no unified optimization solution across services. In addition, new services, instance types, and discounts continuously emerge. This makes it difficult for enterprises to optimize costs.
• Difficult refined management: While flexible expansion and little expenditure limitation of the cloud facilitate innovation, they also cause resource waste. For example, the service team may configure more resources than required for running the workload to achieve high performance and quality, or forget to dispose of resources added for specific projects, resulting in idle resources.

  When enterprises struggle with finding a cost optimization approach or sustaining optimization effects, FinOps comes into play.

  FinOps is the combination of "Finance" and "DevOps". It encourages communication and collaboration between business teams and engineering teams (IT teams) to solve enterprises' cloud cost management problems. According to FinOps Foundation, "FinOps is an operational framework and cultural practice which maximizes the business value of cloud and technology, enables timely data-driven decision making, and creates financial accountability through collaboration between engineering, finance, and business teams."

  Cloud cost management needs continuous optimization as enterprise cloud resource consumption runs through the entire cloud transformation process. The FinOps framework consists of three phrases: cost visibility, cost optimization, and continuous cost operations, as shown in the following figure. Note that you need to balance cost, quality, and efficiency during cost optimization to prevent extremely low costs from affecting business efficiency and stability.

  Figure 1 Three phases of FinOps
  

  The FinOps framework guides enterprises to build a cost operations system from considering the organization, culture, and processes. Multi-team collaboration and data-based decision-making are used to manage cloud costs in a refined manner. Costs of business service team are visible, and overspending and waste are proactively controlled. Enterprises make data-based decisions on cloud investment to ensure the expenditure of core and strategic businesses. With FinOps, enterprises can continuously reduce the unit business cost.

  For more information about FinOps, visit the FinOps Foundation website.

  Figure 2 Decreasing unit business cost