FinOps Can Be a Big Waste of Money

Of late, my colleagues and I have been talking to a lot of clients who want to build a "FinOps team," which they seem to hope will wave magic wands and reduce their cloud IaaS+PaaS bill. I'm struck by how many clients I talk to don't have cloud cost problems that are reasonably solvable with FinOps.

Bluntly: For many organizations, there is no reasonable ROI on FinOps (and certainly no sensible business case for building a FinOps team).

This doesn't mean that the organization shouldn't manage their cloud finances. It just means that they don't need to manage their cloud finances in a way that's meaningfully different from the way that they've historically managed IT spending in their on-premises data center. I'll use the term "FinOps" colloquially here to indicate an organization taking an approach and processes for cloud financial management that are different from their established on-premises IT financial management.

There are lots of common reasons why your organization might not need FinOps. For example:

Buying FinOps tools and allocating people to FinOps activities can cost you more than it saves.

Most people launch FinOps practices by purchasing a cloud cost optimization tool of some sort (i.e., a "FinOps tool"). Complicated FinOps processes and/or having a lot of teams and applications you have to corral within your cloud cost governance framework probably result in the genuine need to purchase a third-party FinOps tool — but those tools probably don't represent a positive ROI until you're spending at least a million dollars a year. And then you have to remember that the percentage-of-cloud-spend pricing scheme of those tools can mean that you're giving the FinOps-tool vendor a pile of money for service elements that they have no optimization capabilities for.

But in many cases, the cost of a tool will be dwarfed by the expense of the employees to do this work, especially in organizations who are making a misguided effort to hire a "FinOps team." Not only does FinOps represent finance and sourcing overhead, but also cloud operations and engineering overhead — and, most of all, developer overhead (and overhead for any other technical team being asked to do cloud optimization work). If you go further and end up hiring a team that does performance engineering, those people are super rare and expensive.

In other words, being somewhat oversized in the cloud — or being somewhat inefficient in your application code — is a form of insidious creeping technical debt. But it's the kind of technical debt that tends to linger, because when you look at the business case to actually go after that technical debt, there's inadequate ROI to justify it. (Indeed, on-premises, people historically haven't much cared. They throw hardware at the problem and run heavily oversized anyway. Nobody thinks about it because there was capital budget to buy the gear and once the gear was purchased, there wasn't much reason to contemplate whether the money was efficiently used.)

Moreover, does your business actually want your highly paid application development teams to chase performance issues in their code, or do they want them adding new features that will deliver new functionality to the business, saving you money elsewhere in your business processes and/or delivering something that will be compelling to customers, thus increasing your top-line revenue?

I certainly think it's important for nearly all organizations to do some cloud financial management, which they will probably support with tooling. They've got to do the basics of cloud cost hygiene (preventing gross waste), budget alerts (to gain rapid awareness of accidents), spend allocation (showback/chargeback) and discount-related planning (what's necessary for commits, reserved instances, saving plans, etc.) — but even there the effort needs to be proportional to the potential cost savings.

But full-ceremony FinOps, so to speak, is usually something better left for big money-pit applications where cloud engineer or developer effort can have a significant impact on cost — for organizations with substantial self-service and no culture of cost discipline, or for the big spenders where even moving the needle a little bit on things like basic hygiene can have a pretty large absolute dollar effort relative to the investment.

This article originally appeared on the Gartner Blog Network.