Enhancing Financial Efficiency and Innovation Through Cloud FinOps
Traditional IT cost management practices fall short in the cloud era, where the shift from fixed Capex to elastic Opex, itemized billing, self-service purchasing, and virtually unlimited capacity disrupts conventional methods. To navigate these challenges, FinOps emerges as a critical framework, maximizing business value of cloud spend and enabling teams to make informed, financially accountable decisions when it comes to their IT costs. PwC’s FinOps services focus on optimizing cloud spend, enhancing transparency, and aligning cloud usage with organizational priorities. Through successful implementations with various clients, PwC has demonstrated the power of FinOps to drive significant cost savings, operational efficiency, and strategic alignment in cloud management.
Nearly 60% of IT spending on software is directed toward cloud technologies. However, 32% of cloud spending is still wasted due to inefficiencies*, causing 54% of the companies to increase their IT spend only because of public cloud usage**. This issue is even more pronounced for companies that transition their “on-premises” solutions to the cloud using a pure lift-and-shift approach, leading to overspending by up to 70% during the first 18 months***.
While 81% of companies are aware that managing cloud spend is a top challenge, not all of them have an effective approach to tackle the exploding costs*. This is where FinOps comes into play. FinOps teams know how to synchronize cloud spending with business objectives, providing a solution that results in greater efficiency, faster integration, and exceptional scalability, leading to a severe reduction in wasted cloud resources.
* Flexera, Title: Flexera 2022 State of the Cloud Report Date Published: 2022
** Gartner, Digital Business Requires a New Normal in IT 2021
*** Gartner, Solution Criteria for Cloud Provider Native Cost Optimization Tools 2020
The cloud promises big benefits but rushing into migration can be costly.
Companies often rush cloud migration, focusing on quick decommissioning of legacy systems rather than changing the “on-premises” mindset, adapting processes, and optimizing their application landscape for cloud usage. This urgency, driven by high expectations and lift-and-shift strategies, often overshadows the goal of realizing the full value of cloud adoption, leading to extended migration timelines, and missed cost savings. Inefficient integration and communication across company functions compound these issues, while the complexity of cloud “as-a-service” offerings, with their variable and usage-based pricing models (e.g., for API calls, data transfer, database utilization), complicates decision-making and forecasting. Additionally, hidden costs such as unused storage resources, advanced security features, and higher-tier support plans inflate budgets even more. Without an experienced cloud finance expert to support the development of a strategic migration plan and continuous cost monitoring, the expected benefits of cloud adoption can quickly turn into escalating costs and operational inefficiencies.
Traditional IT management does not work with cloud. FinOps needed in Finance IT.
Traditional infrastructure management methods fall short in the cloud era, having problems such as the transition from:
– Large fixed “Capex” to elastic pay-as-you-use Opex.
– Simple bill to extremely detailed itemized bill with thousand-line items.
– Centralized purchasing turning into self-service by cloud users.
– Limited “on-premises” capacity to virtually unlimited capacity by cloud services.
In response to new challenges, FinOps serves as an operational framework and cultural practice that maximizes the business value of every euro spent on the cloud. By mapping cloud costs directly to business value, FinOps enables teams to understand the financial impact of their cloud usage. Within this framework, teams are financially accountable for their cloud consumption and empowered to make data-driven decisions based on their specific demand. Since cloud services operate on a pay-per-use model, resource consumption can be scaled up or down as needed, leading to more cost-effective, demand-based cloud usage.
Support your cloud journey with PwC.
At PwC, our FinOps services focus on enhancing cloud spend transparency, identifying optimization opportunities, and developing sustainable processes and governance. We make your cloud journey efficient and successful by forming cross-functional FinOps teams, aligning goals with your organizational objectives, and implementing dynamic budgeting and forecasting processes. We have a proven track record of success, as demonstrated by two of our most recent projects:
Business Case I: International Technology Company
An international technology company faced escalating cloud costs and inefficiencies in its Microsoft Azure IaaS solutions. PwC established a centralized FinOps function, starting with a month-long IaaS instance analysis to determine rightsizing opportunities. A comprehensive optimization strategy was developed, followed by the forming of a dedicated FinOps team. PwC also designed a training curriculum, implemented a FinOps certification program, and created a digital catalog on ServiceNow for effective demand management. This approach led to significant cost savings, enhanced operational efficiency, high stakeholder engagement, and improved service delivery through an optimized, digitalized catalog.
Business Case II: International Energy Company
An international energy company struggled with managing cloud expenditure and needed a cohesive FinOps strategy. PwC evaluated cloud performance metrics to identify optimization opportunities and created a tailored FinOps-based cloud framework. A comprehensive migration strategy was developed, and service provision was centralized through an automated catalog. PwC established an integrated FinOps platform with existing IT systems, enhancing monitoring and management. This unified approach resulted in significant cost optimization, improved consistency through standardized procedures, and enhanced spend management with real-time predictive analytics.
Ready to transform your cloud financial management?
As shown in the business cases above, our comprehensive approach delivers tangible results. Contact Enzo Orsi today to start aligning your cloud costs with your business goals. With our extensive experience, we can help you navigate the complexities of cloud financial management and drive your organization toward greater efficiency and profitability.
Authors:
Paramvir Parhar (AT)
Maximilian Rienth (AT)
