What is FinOps and Why It Matters in Cloud Era?

According to Precedence Research, 96% of organizations use at least one cloud service, and the cloud market is projected to surpass $1 trillion by 2028. Organizations are investing heavily in technology, and a significant portion of that spend is going to the cloud.

For instance, estimates suggest that Netflix pays approximately $115 million annually to AWS, Pinterest spends between $190 million and $225 million per year, and Snapchat allocates around $400 million annually to AWS services.

These costs are expected to grow each year and that’s where the real challenge lies.

CLOUD COST MANAGEMENT

Cloud spending has become a hot topic. 75% of organizations report that around 32% of their cloud budget goes to waste. This waste can be controlled and optimized, but the bigger issue is that nearly half struggle with it due to a lack of knowledge, tools, or strategy.

And this is exactly where FinOps comes in.

FinOps focuses on optimizing cloud resources for efficient usage and implementing governance to gain visibility into spending so costs can be controlled effectively.

What is FinOps?

Many people mistakenly believe that FinOps is just about cutting costs through resource optimization, but that is not true.

As per the 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.

After working in this field for a while, I see it as a set of principles that delivers business value aligned with cloud spending. It involves team collaboration, cost visibility, resource optimization, forecasting, and governance.

Just like DevOps focuses on development and operations, FinOps focuses on cloud financial operations.

In the early days, FinOps focused on maximizing business value from cloud provider spending. But today, it’s scope has extended beyond just cloud and includes AI, SaaS platform, and increasingly, any technology-related spend.

Key Principles of FinOps

FinOps isn't just about saving money. It's about making cloud spend meaningful. Here's how it works in practice:

Imagine a product engineering team builds a new feature that needs extra cloud resources. During testing, they spin up resources, and the DevOps team adds auto-scaling and CI/CD pipelines to streamline deployment.

But no one informs finance, and there’s no cost estimate shared.

By the next billing cycle, the finance team sees a spike in the cloud bill but has no context. They don’t know what caused it, and the engineering team isn’t sure either.

This disconnect between teams is common in cloud environments, often leading to finger-pointing, delayed responses, and sometimes wasted budget.

This is where FinOps steps in to bring clarity and alignment.

By fostering collaboration between engineering, DevOps, and finance, FinOps helps teams understand the financial impact of their decisions.

It enables them to optimize usage and take ownership of their spending.

Ultimately, it ensures that every cloud dollar is used with intention and delivers meaningful business value.

Core Principles of FinOps:

• Collaborate Early Across Teams: Finance, engineering, and operations work together early to plan and estimate cloud costs.

• Own What You Use: Each team is responsible for their own cloud usage and understands what they are spending and why.

• Optimize Continuously: Teams reduce waste by rightsizing and automating resources.

• Get Timely Insights: Regular cost reports help engineering teams adjust quickly and support finance teams in forecasting.

• Set Clear Policies: Clear policies and rules keep cloud usage in check and prevent budget surprises.

Why FinOps Matters in the Cloud Era?

In traditional IT environments, hosting an application often required overestimating server capacity. Companies would invest significant upfront capital in hardware that frequently went underutilized.

Cloud computing eliminates this burden. It allows organizations to provision exactly the resources they need, when they need them, using a consumption-based pricing model.

Although cloud computing simplifies operations, it also introduces new challenges, particularly in cost visibility and control.

One reason cloud costs are often opaque is the pay-as-you-go pricing model, which fluctuates based on usage. This variability makes it difficult to predict monthly bills and complicates financial planning.

Many cloud services include hidden costs, such as charges for data transfer, API requests, software licenses, and managed service fees. These charges often go unnoticed until they appear unexpectedly on the invoice.

Beyond pricing complexity, many cost-related issues also stem from within the organization. A lack of governance can lead to overspending due to unused resources that continue running.

Unless there is a dedicated FinOps role focused on cost management, most employees remain focused on their individual tasks and often overlook the broader impact of cloud spending.

This results in delays in identifying which teams, projects, or services are driving costs, making it challenging to manage expenses effectively.

Also, missing opportunities to optimize pricing, such as leveraging Reserved Instances, Savings Plans, or right-sizing resources.

With these issues, business spending on the cloud delivers poor return on investment (ROI).

FinOps bridges these gaps by enabling shared accountability, real-time insights, and proactive cost management, turning cloud spend into a strategic advantage rather than a blind expense.

Getting Started with FinOps

1. Gain Visibility
   Begin by collecting and organizing cloud spending data. Know where every penny goes. Organize data in a way that provides insights from finance, tech, and business views. Use resource tagging, and look for high-cost drivers, usage patterns, and unusual spikes.

2. Enable Collaboration and Ownership
   Once you have the data, bring finance, engineering, and operations together. Help teams see that cost is a shared responsibility. Work together to build a strategy for optimization and accountability.

3. Set Up Reporting
   Transparency is key. Create dashboards and reports to give every stakeholders real-time visibility into cloud costs.

4. Start Small and Scale
   Don’t try to fix everything at once. Start with one team or service. Learn, show results, and scale gradually. FinOps is a journey, not a one-time fix.

5. Learn and Implement

   Research how other organizations implement FinOps. Study real examples and apply what works to your environment.

Want to dive deeper?

→ Learn the FinOps lifecycle and How you can implement it in AWS using its built-in tools.

I hope you found this post helpful. I'm diving deeper into FinOps and working to grow in this space. This is my first post on the topic, and I'd love your feedback.

Follow me on my FinOps journey. Let’s learn and grow together!

Thanks for reading,

-Alon