Practical FinOps with IBM, Part 2: Understanding FinOps as a Discipline for Cloud Cost Management

As more businesses shift to the cloud, the need for effective cost control has become critical. Cloud spending is flexible and usage-based, which can quickly lead to budget overruns without proper oversight. As we discussed in Part 1 of the Practical FinOps with IBM series, this is what FinOps, or cloud financial operations, was designed to tackle. At its core, FinOps is a set of principles and practices that allow businesses to manage cloud costs with precision, to make sure that every dollar spent drives value.

In this article, we’ll explore what makes FinOps different from traditional budgeting and why it’s essential to approach FinOps as a mindset and discipline that can encourage financial accountability across an organization's teams. While the real focus remains on how to get started with FinOps, we'll also discuss how IBM’s tools—Cloudability and Turbonomic—can help set up a strong foundation for effective cost control. 

Let's get started by taking a deeper look into why modern organizations need a novel way to approach cloud cost management. 

Why Cloud Costs are Different

According to a Gartner forecast, worldwide public cloud spending is expected to reach $675.4 billion by 2024, driven largely by the flexibility cloud offers. This same flexibility, however, also means finance teams must adapt to more variable spending patterns, complicating budget planning and allocation efforts.

Since costs are no longer predictable - or consistent - but variable, based on usage, it makes understanding the differences between traditional IT spend and cloud spend crucial for effective financial oversight and strategic planning. That leads us to the three reasons cloud costs are fundamentally different from traditional costs:

1. With Cloud, Organizations Move from a CapEx to OpEx Model

Traditionally, IT was treated as Capital Expenditures, or 'CapEx,' with costs for hardware, software, and data centers planned in advance and depreciated over years. This model made technology spending predictable and easy to manage from a financial perspective. Cloud computing, however, operates on an Operating Expenses, or 'OpEx,' model - meaning expenses incurred as resources are used, with no substantial upfront investment.

This shift to usage-based spending offers organizations flexibility to scale up or down based on demand. However, it also brings unpredictability and requires a different mindset for budget planning. For example, many companies discover that cloud costs can vary widely from month-to-month, driven by factors like user demand and application performance requirements. According to a report from Harvard Business Review, the challenge is not just managing the expense, but understanding it in real time and integrating it into daily decision-making 

2. The Impact of Decentralized Spending Power 

One of the most dramatic shifts brought by the cloud is the distribution of spending authority. In many organizations, individual departments—like engineering, product, and R&D—can now directly provision cloud resources. This autonomy has accelerated innovation, but it has also made financial oversight more challenging. When departments act independently, it’s easy for costs to spiral as teams focus on functionality and speed rather than cost control. This decentralized spending can lead to unforeseen charges and difficulty in maintaining a consolidated view of expenses, as discussed by Forbes in their exploration of the hidden costs of cloud computing. 

A 2024 report from the FinOps Foundation notes that a majority of organizations struggle with allocating cloud costs accurately across departments, reflecting the challenges of decentralized spending models.

For finance leaders, this decentralization can lead to “cloud sprawl,” where resources are provisioned and forgotten, or left running even when they’re no longer needed. Left unchecked, this can lead to significant budget overruns, as each team or project operates independently of overall financial objectives.

3. Complex Billing Structures and Usage Patterns

Cloud service providers like Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP) offer a broad range of services, each with its own pricing structure. Usage is billed based on a variety of factors, including compute hours, data storage, network traffic, and additional managed services, making it challenging to calculate total costs upfront. As a result, many organizations end up with complicated bills that are difficult to reconcile with usage.

While AWS Cost Explorer and Azure Cost Management provide tools to help visualize spending, they still require a strong understanding of cloud service metrics to interpret correctly, adding to the cost of overhead and specialists' hours. To add to the complexity, even minor changes in configuration—like scaling up a compute instance or increasing storage limits—can have an outsized impact on monthly bills, making cost predictability more difficult to achieve.

These issues, of course, are compounded and multiplied when organizations have multi-cloud or hybrid-cloud approaches. What's needed, then, is a way to consolidate and fundamentally change how organizations view cloud and approach spend.

FinOps as a Mindset and Discipline for Cloud Cost Management

Unlike traditional financial management, which focuses primarily on tracking and controlling costs, FinOps emphasizes value creation. It is a discipline that unites finance, technology, and business teams in a shared mission: to make cloud spending as efficient, transparent, and aligned with business goals as possible. It is a collaborative, cross-functional framework designed to bring clarity and control to cloud financial management. The objective goes beyond cost cutting, to maximizing the business value for every dollar spent in the cloud. 

Connecting IT, Finance, and Business: The Power of Collaboration

One of the unique strengths of FinOps is its focus on cross-functional collaboration. In a traditional IT setup, finance teams handle costs, and operations teams handle performance. But in a FinOps-driven organization, financial accountability is shared. Engineering teams become directly aware of the financial impact of their decisions, and finance gains a deeper understanding of the operational context of cloud spending.

FinOps helps organizations bridge traditional silos, aligning the goals of finance, IT, and business units to foster a culture of shared responsibility. This collaboration enables teams to achieve a balance between financial oversight and operational agility. In a well-functioning FinOps model, IT can innovate without worrying about financial surprises, finance can manage budgets with real-time insights, and business leaders can make data-driven decisions with a clear view of cloud’s ROI.

Visibility and Real-Time Insight for Clarity and Smarter Choices

For cloud to serve as a strategic asset, transparency is foundational. FinOps provides the framework for tracking costs in a way that’s clear, accessible, and aligned across the organization. With FinOps dashboards and reporting tools, teams across engineering, IT, finance, and leadership gain insights into resource use and potential savings, empowering each function to contribute to cost optimization with clarity and confidence.

FinOps offers visibility tools and dashboards that provide real-time data on how resources are being used and where potential savings lie. With clear data, leaders can make quick, confident decisions about resource allocation, project priorities, and cost optimization strategies, turning cloud costs from a challenge into an advantage.

By embedding FinOps practices into daily operations, companies build resilience, making their cloud spending smarter and more sustainable.

Optimization Without Sacrificing Performance

Unlike traditional costing, which often happened on a monthly or quarterly cadence, FinOps is not a “set it and forget it” model. It is a continuous process of monitoring, managing, and optimizing. In cloud environments, there’s always room to optimize—whether it’s rightsizing resources, eliminating idle instances, or automating commitments to benefit from cost savings.

When considering optimization, however, most organizations jump straight to cutting costs. But that's not how cloud can best be optimized. Instead, it’s all about finding the balance between financial efficiency and operational performance. FinOps emphasizes that cloud optimization should never come at the expense of service quality or user experience. With the right metrics and insights, teams can make informed choices to reduce waste while ensuring that applications and services remain responsive and effective. This principle of “performance-safe optimization” is particularly powerful in high-growth or resource-intensive environments, where scaling can quickly lead to ballooning costs.

The three FinOps discipline areas discussed here—collaborative teamwork, real-time visibility, and continuous optimization—align precisely with the three core principles of FinOps, empowering organizations to create value for themselves and the clients they serve. 

With that understanding, let's consider how IBM's FinOps tools integrate to provide the most comprehensive cloud cost management solution on the market today. 

IBM’s FinOps Tools: Building the Foundation for Cost Control

IBM’s FinOps suite, specifically Cloudability and Turbonomic, is designed to support every stage of cloud cost management. While many FinOps tools provide only cost tracking, IBM’s solution is both comprehensive and proactive, helping organizations gain visibility and control over cloud costs while continuously optimizing resource usage. Here’s how each tool contributes:

1. IBM Cloudability – Visibility and Cost Allocation
   Cloudability is IBM’s core tool for FinOps, providing a single view of cloud spending across all providers. It enables teams to track usage, allocate costs to different departments or projects, and create a clear picture of cloud expenses in real time. This visibility is the first essential step in managing cloud costs effectively.

2. IBM Turbonomic – Real-Time Optimization
    Turbonomic goes beyond cost tracking to continuously monitor resource usage and make real-time adjustments. This ensures that cloud resources are sized correctly to meet demand without overprovisioning. Turbonomic automatically rightsizes instances, reallocates resources, and adjusts scaling to keep performance high and costs low.

With Cloudability providing visibility and Turbonomic enabling continuous optimization, IBM’s tools help create a comprehensive practice for FinOps that can adapt to any cloud environment or business need.

Moving Forward with FinOps

Starting your FinOps journey, whether with IBM’s Cloudability and Turbonomic or other tools, is about building a strong foundation. By focusing first on visibility, accountability, and real-time monitoring, you establish the necessary groundwork for cost-effective cloud management. With these practices in place, FinOps becomes a part of daily cloud operations, aligning cloud spending with business goals and turning cost management into a strategic asset.

In the next part of this series, we’ll dive deeper into laying the groundwork for FinOps using IBM's core tools and strategies. You’ll learn an actionable step-by-step approach on how to take cost control to the next level, using IBM’s tools to create a continuous cycle of optimization and budgeting that scales with your organization’s needs.

If you would like to learn more about this series or any other topic found on the C4G Insights blog, please reach out to us at [email protected] or schedule a free consultation with the C4G Team.