FinOps consulting grows as IT cost management efforts expand
IT service providers pursue advisory, training and automation opportunities as customers adopt FinOps and apply its cost optimization principles across more IT resources.
IT service providers are finding increased FinOps consulting opportunities as their customers seek to more deeply embed cloud cost management and optimization practices in their day-to-day operations.
FinOps gained traction in the wake of the COVID-19 pandemic and subsequent economic uncertainty. Organizations needed to get a better grip on hastily made cloud purchases and deal with inflated IT commodity prices. FinOps, with its emphasis on cloud cost management, provided a potential remedy. But the rise of generative AI in late 2022 somewhat overshadowed FinOps as channel partners trained thousands of consultants for anticipated GenAI gigs.
Two years on, however, FinOps remains much on the minds of business and technology leaders. Forrester reported that 58% of the 3,493 cloud decision-makers it polled for its 2024 Cloud Survey had established FinOps practices, and an additional 18% planned to do so within the next 12 months. The survey included enterprises and small businesses.
Widespread adoption isn't the entire story, however. Businesses are also expanding their use of FinOps. While the cost-cutting angle remains important, organizations also use FinOps metrics to wring more value out of their cloud investments. Some adherents are applying FinOps principles across a wider swath of IT, beyond the original focus on cloud compute and storage resources.
In this context, organizations are calling on service providers for advice as they pursue broader and more sophisticated use of FinOps.
"What we're seeing from more customers is a demand to dive deeper into their FinOps," said Eric Ethridge, senior technical account manager at DoiT, a multi-cloud services and FinOps provider based in Santa Clara, Calif.
Tracy Woo, principal analyst at Forrester, said FinOps calls for process transformation, which plays into the traditional strengths of consultancies and global systems integrators.
When you are doing FinOps, you are asking folks to fundamentally change the way they work.
Tracy WooPrincipal analyst, Forrester
"When you are doing FinOps, you are asking folks to fundamentally change the way they work," she said. "'How do we stand up a practice? Where do we start?'"
Roles for service providers in setting up FinOps practices
Service providers can play multiple roles in helping organizations establish FinOps practices. They can help customers develop FinOps governance rules and metrics, integrate FinOps with their overall cloud strategies and assemble a FinOps team, Woo said.
As for the latter, a core FinOps principle is spreading cloud cost management duties across multiple departments and stakeholders. A consultant can mediate among a company's various groups to establish cross-functional collaboration.
Ethridge cited the importance of diffusing FinOps thinking throughout a business -- as opposed to assigning the responsibility to one person.
"When it becomes everyone's job, everyone has much less to do to make it happen," he said. "Many hands make light work."
Service providers emphasized cultural change as key to embedding FinOps best practices across an enterprise's finance, product and engineering groups. The goal is to help employees who don't routinely focus on cost containment become better stewards of cloud resources.
"A hands-on-keyboard developer is not always looking at strategic cost optimization," Ethridge said. "They're just trying to get those lines of code out to make the product better, to meet their [goals on] sprints. But, once we turn [FinOps] into an organizational thing, it becomes more of an automatic action for them."
Service providers increasingly are working with clients to help them adopt FinOps principles.
Supporting FinOps expansion
Consultants can also assist clients as they expand FinOps practices. For example, organizations are now using FinOps to oversee SaaS subscriptions and even in-house technology investments. The FinOps Foundation, a nonprofit organization that promotes FinOps practices, is redefining the field to include on-premises IT, Woo said.
"It's more than just a function of public cloud services," said Chris Cagnazzi, chief innovation officer with Presidio, a technology services company based in New York. "FinOps is really embedded in everything around IT now."
Customers are turning to IT service providers to help broaden their use of FinOps into new areas, including ones with different financial characteristics.
Woo pointed to the difficult transition of FinOps from cloud-driven, consumption-based Opex spending to on-premises Capex investment as one example.
Service providers also work with customers as they expand their overarching FinOps objectives. Ethridge said enterprises are shifting from what he termed "the old style of FinOps," which emphasized cost cutting, to a "value optimization" approach, which focuses on getting the most out of cloud resources.
To illustrate the difference, Ethridge said a cost-slashing FinOps practice might switch off an underused cloud resource, regardless of its importance to users. On the other hand, the value optimization approach looks to improve that resource's utilization. DoiT considers not only an organization's monetary investment in cloud infrastructure, but the time spent tuning and maintaining it, he said. Optimization might not generate direct cash savings, but can result in efficiency breakthroughs in time and effort saved, he added.
"Value optimization makes your KPIs less about saving money and more about return on investment," Ethridge said.
In addition, consultants and integrators can help customers adopt new FinOps metrics to achieve their updated goals. Unit cost is a key FinOps metric in that regard -- and one that's getting more attention among enterprises. JPMorgan Chase, for example, has made unit cost an important part of its strategy to balance IT innovation and cost control.
"With KPIs right now, the entire focus seems to be going to unit cost analysis," said Kevin Garcia, vice president of cloud solutions at Presidio. "That is the biggest driver."
Ethridge also cited growing interest in unit cost as a measure of cloud value.
"I'm seeing more and more of a focus, regardless of the type of organization, on finding the cost of goods sold," he said. "'What are we actually selling, and how do we define what it is costing us to create it?'"
Unit cost offers a more granular method for evaluating the value of cloud investments. This metric tracks costs at the product or service level versus other FinOps KPIs that track costs by business unit or department. As a result, an enterprise can compare the per-unit cloud cost of a new digital product with the per-unit revenue it generates to understand the value of its cloud expenditures.
A higher level of granularity lets an organization determine, for example, that a particular application consumed 15% of its overall cloud resources and resulted in a 5% increase in revenue due to new features, Ethridge said.
New tools support unit cost KPIs
FinOps tools are beginning to support unit cost metrics, which have become more prevalent among enterprises analyzing their cloud investments.
Early in their evolution, FinOps offerings were limited in their ability to collect unit cost data. Legacy tools were usually one-dimensional products that allowed ingestion of AWS Cost and Usage Reports (CUR) but were unable to tie in other external data sources in a meaningful way, Garcia said. But tools such as Finout and CloudZero now tap into a broader set of data to better enable unit cost measurement, he added.
For example, a "next-gen visibility platform" consumes metadata regarding a particular workload directly from hyperscalers, including tags, instance type, OS and region, he noted. The platform also consumes metadata from tools customers use to report OS data and metrics.
Such data sources, combined with AWS CUR data, help customers understand how much a cloud application costs the organization.
Help with FinOps tools
An expanding set of metrics requires tooling to collect and sift through mountains of cloud cost and usage data. Organizations can deploy cloud cost management tools or FinOps offerings. Those somewhat overlapping categories appeal to different types of users. Traditional cloud cost management tools target a limited group of managers, while newer FinOps tools encompass corporate groups from finance to engineering. Collectively, those tools let enterprises track cloud spending, manage budgets, allocate costs to business units, alert IT managers to unexpected increases in usage and improve cloud resource utilization rates. Some tools also let customers automate management of reserved instances, discounted capacity cloud vendors offer to businesses that commit to purchasing resources for one-year or three-year terms.
Here, IT service providers help customers assemble a cloud cost management tool kit, working with third-party vendors and, in some cases, offering their own products and services.
"We are seeing a lot of requests for tooling," Ethridge said, noting customers are calling for out-of-the-box functionality, as opposed to build-it-yourself cloud optimization software.
With that in mind, DoiT has been providing cloud cost management tools for a few years. It added more such offerings in 2024: a GenAI virtual assistant for visualizing cloud usage and costs, a cloud billing data analysis tool, and dashboards to help optimize the cost of running containerized workloads on Amazon Elastic Kubernetes Service and Google Kubernetes Engine.
Data and tool integration is part of the company's strategy. DoiT's DataHub component works with a customer's historical data and third-party billing information to provide a wide-angle view of cloud spending and usage, Ethridge said. In addition, the company's integrations with the Zapier automation tool let customers plug into a variety of third-party applications, he noted.
Presidio, meanwhile, offers an outsourced FinOps service that incorporates several tools. The company's Proactive Recapture Into Savings Management (PRISM) service includes components that analyze cloud spending data, tag cloud resources for cost allocation, identify usage spikes, track budgets and forecast costs. PRISM is built on Presidio's proprietary technology but integrates with third-party and cloud vendor tools.
PRISM also identifies opportunities to expand the use of reserved instances. Presidio found that the major cloud hyperscalers built their financial models with the expectation that customers would only be able to cover around 65% of their cloud spending through reserved instances, Cagnazzi said. The service provider has since built algorithms into PRISM that analyze cloud consumption trends to drive what he called a "90% coverage model."
The FinOps service, which integrates with third-party and cloud vendor tools, is gaining ground among midmarket companies, Cagnazzi said. He defined the midmarket as organizations with 1,000 to 5,000 employees.
"That's an area where they don't have the dollars to spend to have their own [FinOps] teams," Cagnazzi noted.
That said, larger businesses and cloud-intensive companies with fewer than 1,000 employees also use the service, he added.
John Moore is a writer for TechTarget Editorial covering the CIO role, economic trends and the IT services industry.
