Gartner projects that end user cloud spending will reach more than 720 billion USD in 2025 - an increase of more than 20% from 2024. Meanwhile, Berkshire Hathaway reports in a survey with more than 300 respondents that more than 75% of the companies are estimating a cloud waste of 21%-50% of their overall cloud spend.
FinOps aims to control cloud costs by reducing bespoke waste of compute and storage resources in the cloud. We talked extensively about the significance and best practices of integrating FinOps with ITFM to achieve that goal holistically.
Next, we would like to talk about why fair and transparent charging of cloud expenses in particular is a crucial FinOps/ITFM capability that helps controlling costs.
1. Improved Accountability and Ownership
One of the core principles of FinOps is cost accountability, which ensures that teams responsible for cloud consumption are also responsible for their associated costs. Transparent charging helps distribute cloud expenses across departments, teams, or business units.
It is, thus, a pre-requisite for business stakeholders, engineers, application/platform owners and controllers to have clear visibility into the cloud cost and who is causing them. Only then, they can take ownership of their cloud usage and proactively optimize resources.
2. Cost Optimization via efficient use of resources
Organizations often over-provision resources or fail to decommission unused instances, leading to unnecessary expenses. Compute resources run at less than 20% of their capacity or snapshots and outdated monitoring logs are not deleted and consume costly storage.
High-performance compute resources are combined with lower-tier storage (e.g. SATA/SAS SSD or even HDD Storage) or vice versa, preventing that gold level cloud infrastructure components can ever run at their full potential.
Transparent charging enables business, finance and IT teams to analyze spending patterns, relate them to inefficiencies, and implement cost-saving strategies such as rightsizing and (automated) deletion.
3. Cost Optimization via operating model optimization
Many organizations execute their cloud migration “quick-and-dirty” prioritizing fast lift-and-shift of applications over a differentiated more time-consuming cloud migration strategy including replatform, refactor and repurchase approaches.
Correspondingly, modern cloud operation processes such as Infrastructure/Policy as Code, DevOps and autoscaling via Operators are not implemented to their full potential. As a consequence, cloud operation remains effort and internal/external personnel resource intensive and cost potentials from using dynamic rental models for storage and compute resources are not fully realized.
Transparent charging with unit prices based on total cost ownership for services utilizing cloud infrastructure will allow benchmark comparisons to identify such inefficiencies and derive corresponding optimization initiatives to improve the cloud operating model.
4. Aligning Cloud Spend with Business Value
Cloud expenditures should align with business value. High-availability and global low-latency requirements for certain applications may drive cloud costs beyond the point of a justified business value (e.g., avoidance of (opportunity) costs for downtimes and waiting).
The value of flexibility also in terms of infrastructure scaling should be measured against opportunity costs of missed savings from reservations and saving plans.
Transparent cost allocation allows organizations to measure on an application and business user or unit level whether the cloud spending is justified, facilitating discussions between engineering, finance, business and leadership teams about cost-benefit trade-offs.
5. Enhanced Budgeting and Forecasting
Transparent cloud cost allocation provides consumers of cloud services in IT and business with accurate data for budgeting and forecasting. When teams have a clear view of their cloud expenses, they can plan more effectively, reducing the risk of unexpected cost overruns and leveraging benefits from saving plans and reservations.
It also empowers the organization to better deal with changes in cloud contract conditions, in particular price increases.
1. End User Storage Consumption Reduction
Consider a company that faces exponentially increasing cloud storage costs. Transparent charging along storage-intensive end user services (e.g. Sharepoint, Mail, File Service) will show us which business units are effectively responsible for driving storage costs through their consumption behavior.
Providing alternatives such as archiving end user data on lower tier storage will help to outline potentials from cost savings for each business unit. Of course, archiving or deleting certain data may result in inconveniences for end users (like longer waiting times for recovery or data loss) but showing the cost saving potential will help to create buy-in for compromises that e.g., after certain time periods data is archived or deleted.
Automated processes and corresponding down-scaling of storage infrastructure will be needed to in effect realize the potentials.
2. Backup Service Optimization
A client company observed a stepwise increase for storage cost related to applications as depicted in figure 1.
Figure 1 - Cloud Storage Cost Time Series
One main cost driver was that in the course of release upgrades and updates the application teams created (multiple) snapshots for the application itself as well as underlying databases without deleting them.
Every three years the company implemented a project to manually identify and delete the accumulated snapshots that were not needed anymore.
While this mitigated the cost increase short-term to some extent, cloud storage OPEX costs incurred in the meantime (e.g., years 2021/2022 and 2018/2019) were already sunk.
Transparent charging and cost allocation enabled us to identify those application owners that were mostly responsible for this cost pattern and allowed one-on-one discussions to address the issue short-term going forward.
A long-term sustainable solution was to evolve the backup service ensuring automated deletion of snapshots after one week unless the requestor actively requested a prolongation. A gold backup service variant without time limit was established but required explicit approval by the heads of infrastructure and application.
Transparent charging of cloud costs is a foundational principle of effective FinOps, driving accountability, efficiency, and alignment with business value.
Organizations that prioritize cost transparency via charging empower their teams to make informed decisions, optimize cloud spending, and build a culture of financial accountability.
By implementing robust cost allocation and charging strategies businesses can turn cloud operations into a strategic advantage rather than a financial burden. Embracing transparency is not just about reducing costs—it’s about maximizing the value of cloud investments and sustaining long-term business success.