Lionel Sujay Vailshery
Research expert covering cloud computing and emerging tech industries
Cloud financial management - statistics & facts
While the cloud promises cost savings, the reality could often be a different story. With organizations increasingly relying on complex cloud infrastructures, unexpected expenses can quickly erode the promised benefits. As a result, more mature cloud cost management strategies are necessary to reduce expenditure as additional workloads are moved to the cloud. This becomes more apparent under consideration of the continuous growth of the global public cloud computing market, which emphasizes the necessity of cloud computing technology for organizations to make informed business decisions.
Cloud costs vs. traditional IT
Before moving to the cloud, servers, networking hardware, and other necessary IT equipment were typically hosted in the company’s on-site data center and managed by a dedicated in-house department. In the traditional scenario, organizations would purchase their IT systems and infrastructure and replace or upgrade hardware and software components after a certain amount of time. In the cloud model, IT is no longer owned by the company, with resources made available via the cloud providers. The cloud computing payment model creates the notion of IT being a service, as it is based on resource usage. In other words, the rise of the cloud led to a shift from capital expenditure (CapEx) to operational expenditure (OpEx) in IT.
Cloud costs are not necessarily easy to estimate. They vary based on the kind of workload or service used, the geographical region in which it is deployed, and what specific pricing model the customer chose in the first place. To alleviate this complexity, the major cloud providers Amazon Web Services (AWS), Microsoft Azure, and Google Cloud all offer pricing calculators to help customers estimate the cost of their architecture solution.
Financial management: FinOps
FinOps—short for financial operations— is a relatively recent practice that emphasizes the importance of updating traditional methods of managing infrastructure spend to avoid heavy bills from cloud usage. Advocating for and establishing this practice in organizations is a timely endeavor as the majority of cloud users affirm that cost optimization is a priority. Specifically, FinOps is the process of managing cloud expenditure by performing analyses of costs based on business logic and working to optimize cloud environments on a technical level.
The future of cloud cost management
The overarching challenge of cloud cost optimization is to bridge the gap between business needs and budget especially with the advent of generative AI. In the future, FinOps practitioners will seek to close this gap by bringing about cultural change in organizations that prioritize multidisciplinary collaboration between engineers and finance teams to minimize costs while maximizing results. To realize the potential of these teams, employees with diverse skill sets are required to reflect the complexity of the task at hand. This includes the production of predictable costs and forecasts, as well as adherence to the notion that people involved with cloud deployment take ownership of usage, next to taking advantage of the variable cost models of the cloud.
