FinOps Tips to Cut Your Cloud Bill Without Hurting Performance

Imagine that a family purchased an 'all-inclusive' plan for their mobile phone. As it was highlighted to offer 'unlimited data', they did not track their consumption for a year. After a year, upon reviewing the bill, they realize that they have wasted money on an option that they did not need, and one of the lines was active since the last summer.

Something similar occurs in many organizations after adopting cloud computing. The costs can increase exponentially, and the team needs to understand who is responsible, what decisions have been made, and how the cloud bill should be used to make better choices. Good news is that there is a practice called FinOps to address the issue. In the following, I will introduce this concept and demonstrate how anyone can take advantage of FinOps to reduce cloud costs without slowing down the applications or websites.

Prior to moving ahead, please answer for yourself how many times your team reviews the cloud costs in a year. If the response is 'hardly ever' or 'only when something goes wrong and the bill looks outrageous', the following guide is helpful for you.

What Is Cloud Computing in Simple Words?

Cloud computing means renting an online service to host websites, software, applications, and data instead of keeping them on your own computers, servers, or storage devices. The companies that do this are usually huge: Amazon Web Services, Microsoft Azure, Google Cloud, etc. What they do is host enterprises’ data in their data centers, where their computers reside.


The simplest analogy is electricity. Just as you don’t build a power plant to generate electricity at your home or office, but rather buy it from a utility company, cloud computing lets you rent computational power and data storage. Of course, the hook is that the meter never stops running, and it’s surprisingly easy to leave it on when you’re not looking, just as the analogy with electricity implies.

What Is FinOps?

FinOps (short for Financial Operations) is a new collaborative practice that unifies finance, operations, and development lifecycles and enables organizations to optimize costs while delivering maximum value from the cloud. It is not a tool or a specific role but rather a particular culture and set of shared behaviors and responsibilities that emerge when operational finance, technical, financial, and business domains are aligned.


Imagine a scenario where you and your friends decide to order pizza every Friday and split the cost equally as a group. If one of you ordered a large pizza for himself, another one ordered three beers, and the third one didn’t order anything, the average check will still be the same as if everyone had paid for what they ordered. But after a few such Fridays, most people will start to feel that the average check has grown, without knowing the exact reason. FinOps is about attaching the receipt to the bill so that everyone can see what they pay for and have a shared understanding of how the money is spent.

Why Cloud Bills Quietly Grow

Cloud costs rarely have a “big-bang” root cause but rather have many small leaks that add up. According to various industry research reports, including the well-known Flexera State of the Cloud Report, organizations waste almost a quarter or more of their cloud budgets due to mismanagement. It is always a good idea to double-check the most recent reports before using these statistics.

The most frequent cloud management issues that cause such leaks are down-sized resources. Often, developers launch test servers for some applications, which subsequently turn out to be useful, and continue to occupy expensive cloud resources. Oversized resources are also a common problem when teams select more powerful cloud services than necessary just to find out that these resources are only utilized at fifteen percent on average for most tasks. Old storage is yet another issue when multiple backups, old project files, and other data reside in high-performance storage, occupying space and, therefore, budget. The fourth reason concerns the lack of owner accountability: if one does not know who exactly uses particular cloud resources, it becomes impossible to cancel them. Finally, the fifth reason is that some companies are willing to pay full price for resources that operate twenty-four hours a day, seven days a week, and 365 days a year, when significant discounts are available for steady and continuous utilization.

Herein is a great two-minute FinOps exercise. Open the most recent cloud bill, or ask your technical team to provide you with it, and select the three most expensive items. And now, for each of them, answer two questions: what do they mean, and whether the resources are actively used. Some people find that their first cost optimization tip is right here, before even finishing this article.

The Three Stages of FinOps

FinOps is typically split into three stages that form a never-ending cycle: Inform, Optimize, and Operate. In this sense, it is similar to a fitness program, with a diet being a one-time event.

The first stage, Inform, is all about visibility: you cannot squeeze something that is not on the table, and making costs visible means labelling everything by the team, project, or product that uses them. Instead of a wall of figures, the finance team will see what is actually being spent on what, and the conversation with the executives can finally move from numbers to substance. For example, if the marketing department knows how much it has to spend on the websites, the discussion of its monthly budget will no longer be an pointless argument about numbers.

The second stage, Optimize, is about reducing costs by eliminating the obvious inefficiencies. It is best to think of it as bailing out the water from the boat, not jumping into the icy river. Stop paying for what is not needed, downsize the things that are too big, delete unused storage, take advantage of any discounts, etc. Put simply, do not spend the money on things you do not use.

The final stage, Operate, is a grind of making sure that nothing goes back to how it was. Setting up monthly reviews, budgetary alarms, and ensuring that everything is labelled correctly takes time but makes the difference between a project that will last a couple of months and a permanent change. FinOps is always a work-in-progress because costs tend to balloon out of control otherwise, so this stage can be seen as a series of continuous improvements.

Practical Ways to Cut Cloud Costs without Sacrificing Performance

The main concern that companies have with cloud costs is that they will have to give up some performance to get better pricing. In reality, there is no need to hurt the applications, APIs, or databases. It all depends on what you spend your money on: compute, storage, or data transfer. To illustrate the ways of getting better value for money without affecting performance, here are five ideas, each with a real-life analogy and an explanation of how they help.

The most apparent way of cutting costs is to turn off anything that is not in active use. If the software development team only needs the test environment between 9 a.m. and 5 p.m. on weekdays but is always running outside of these hours, why waste money on it otherwise? With some tinkering on the back end, the application will load only between the specified hours and be turned off at all other times, reducing costs by as much as 70%. The nearest analogies would be switching off the electric kettle when it has boiled the water or turning off the lights and the air conditioner when leaving the house.

The next step is to right-size the infrastructure to ensure that the company spends only as much as it needs to on compute power. If the web server only uses 20% of the available RAM on an average day, it makes financial sense to put it on a cheaper plan with a lower amount of memory. It would be like buying a fifty-seat bus to drive to the office with four people, and it is not only wasteful but absurd.

With auto-scaling, the server can temporarily add more RAM and CPU cores when the traffic increases and then shed them back when the demand subsides. It is best to imagine a retail store that hires and fires staff depending on how busy it is, but instead, it is done automatically. For example, an online clothing retailer that sees ten times more traffic on a special promotion day would have all the additional traffic directed at its website, but the infrastructure would be able to handle the increased load without additional costs once the end of the day nears.

It is also a good idea to lock in any discounts, especially those tied to a contract. Cloud service providers offer substantial discounts for customers that commit to a yearly or three-year contract and provide deeply reduced rates for unused capacity that can be used on an ad-hoc basis throughout the year. If the spending is predictable, it is best to tie the payments to a specific date and, by extension, a specific person in charge of billing.

Storage is a great place to find some extra savings without hurting performance. The data that has not been accessed in ninety days can be moved to a cheaper storage plan, and any duplicates can be deleted. Most cloud providers give the option to set up these rules automatically, and they will take care of everything else from then on. Finally, a monthly review of the budget and spending with targeted questions can highlight several more value optimisations. In practice, it would be an e-mail about the current spending at fifty, eighty, and one hundred percent of the projected monthly bill, followed by a fifteen-minute call and a brief update about the biggest expenses and their changes since the last meeting.

Real Brand Stories: What Companies Learned

Looking at how big brands approached cloud costs shows that there is no simple right answer. The numbers below appeared in company reports, so double-check the most recent figures at the time of your audit.

File-storage service Dropbox, a cloud company that moved most of its storage in-house as it grew to the point where its usage was predictable, saved tens of millions of dollars by doing so, as revealed in its public filings. The problem with the approach Dropbox had been taking, to shift away from the cloud entirely, was that it failed to account for the value at scale of regularly re-evaluating your options at a given size. The lesson is not to get locked out of the cloud, but that at genuinely massive, consistent scales it can become a huge opportunity to save.

37signals, the software company behind Basecamp and HEY, took a similarly public approach and also bought servers to run its own applications after realizing that the costs for roughly equivalent workloads in the cloud had been rising month-on-month: it put together a public spreadsheet with estimates of millions of dollars in savings to be had by doing so over the course of several years. Again, it is not that spiky, unpredictable demand should not be handled in the cloud; it is about steady, predictable workloads being potentially much cheaper at scale, with less overhead.

Amazon Prime Video has an interesting lesson in optimization, too. One of its engineering teams published a detailed write-up in 2023 on its experience refactoring a video-monitoring tool by collapsing a number of distributed, interconnected parts into a much more streamlined whole and cutting its infrastructure costs by around ninety percent in the process. Sometimes the cheapest possible architecture is not just a matter of getting a discount.

Streaming music service Spotify, meanwhile, has a story involving transparency. It built out tools and later began sharing its open-sourced Backstage platform for letting engineering teams see what they spent on particular services. Engineers looking at the cost of the things they built and operated are natural candidates for FinOps, and it is the essence of the Inform stage.

Expert Advice From the FinOps Community

FinOps experts from FinOps Foundation and beyond have a few thoughts that tend to crop up again and again.

First among them is the idea that cost should not be somebody else’s problem.

That does not mean the focus should be on savings, alone. FinOps experts recommend talking about value. If something costs more but provides exponentially more value in customers or revenue, there is no need to optimize it the focus should be on unit economics, such as cost per customer or cost per order, as an indicator of where optimization efforts are due.

Another key FinOps principle is timeliness: if the bill arrives a month late, it is not a useful source of information. Reports should be generated daily or weekly, at a minimum. Along similar lines, FinOps experts recommend automating predictable, repetitive tasks, such as shutting systems down when they are not in use, applying cost-saving storage tiers, or setting up budgets and alerts. Lastly, FinOps professionals suggest rewarding and recognizing wins, not just identifying them: celebrating the team that found an ongoing waste the same way you would recognize a team that launched a new feature can go a long way toward building the right culture around FinOps.

Test Yourself: A Quick FinOps Quiz

Check your knowledge of FinOps with this short quiz. Imagine that you have a test server that is running all night but has nobody using it. Do you leave it running, set up a shutdown schedule, or buy a bigger server? If you have a server that is only fifteen percent utilized, do you size it down, throw more servers at the problem, or ignore it? What is the point of labeling? Does it make the bill smaller automatically, help keep track of which team is spending the money, or make your applications run faster? What is the first thing to do in FinOps: cut the biggest system you can find right away, investigate where the money is going, or purchase a new, shiny tool?

The correct answers are: schedule a shutdown, consider sizing down, keep track of which team is spending the money, see where the money is going. If you got all the answers right, you are doing great: it sounds like you are already thinking like a FinOps expert. However, if you missed a couple, not to worry just review the preceding practical section.

Your Seven-Day Starter Plan

You do not need a big budget or a special team to start with.

1. Spend the first day searching for your three biggest expenditures in the cloud, and

2. Use the second day to ask what they are for.

3. On day three, you start labeling resources by the team or project that uses them, and

4. On day four, you set a budget alert. You leave an unused resource switched off

5. On day five and spend day six looking through your storage for old files.

6. Finally, on day seven, you schedule a recurring fifteen-minute monthly review.
   
   
   
   To see what this means in practice, try a simple calculation with your own figures. Take the amount you pay for an abandoned system and multiply it by the time it has been lingering in your budget to see how much you have wasted on such systems. If the system costs two hundred dollars monthly and has been inactive for six months, it has wasted twelve hundred dollars. Now, multiply this by the number of forgotten systems you have in your company to understand the value of a regular review.

Common Mistakes to Avoid

• A few mistakes that beginners make when starting with FinOps could cut their potential gains by a large margin. The first one is to treat it as a one-time task, which leads many companies to fall back into old habits soon after the initial audit.

• The second mistake is to leave everything to the technical team, but the finance and business leaders must be involved as well.

• The third mistake is to optimize too much and hurt the customer experience, as the loss of sales that a company will suffer will most likely surpass its costs.
  
  Other mistakes concern skipping the labels and using the lowest price instead of seeking the best value.

Frequently Asked Questions (FAQs)

Q1. What is FinOps?

A. FinOps (Financial Operations) is a collaborative set of practices that enable FinOps teams to increase cloud efficiency and reduce wasteful spending while maximizing the value of their applications and services.


Q2. Isn't FinOps too complicated for small businesses?

A. On the contrary, small organizations and start-ups could benefit the most from FinOps as they strive to cut costs and stay within budget.


Q3. Do I need to have technical skills to do FinOps?

A. Not really, some basic common sense operations such as analyzing the monthly bill, learning what every charge means and setting up alarms can be done by anyone regardless of their technical expertise. The more involved technical optimizations and transformations will be handled by the technical team


Q4. Won't optimizing my cloud spendings kill my website's performance?

A. No, not if you do it smartly. First, kill the obvious wastes such as the underutilized or completely idle cloud resources, then move on to more involved operations such as adjusting the sizes of your virtual machines (right-sizing).


Q5. Why do cloud bills tend to be so expensive?

A. There are several reasons why most organizations' cloud bills blow their budget. The reasons include leaks resulting from ignored test systems, provisioned oversized resources, unoptimized storage, unlabeled resources, and failure to take advantage of cheaper alternatives among others.


Q6. How much can FinOps help in reducing costs?

A. Well, most organizations currently waste a quarter of their cloud budgets. Thus, there is a significant opportunity for almost all organizations to save between 20% and 50% of their monthly spends. However, it is essential to note that the figures may vary, and thus it is crucial to look at recent studies such as the Flexera State of the Cloud Report 2021 to determine the exact amount.


Q7. What are the three stages of FinOps?

A. FinOps consists of three main stages: Inform, Optimize, and Operate. In the inform stage, the FinOps team determines where the organization is spending its money. In the optimize phase, they begin with optimizing the cloud to reduce costs. Finally, in the operate stage, the FinOps teams institutionalize the most successful operations such as regular audits and budget alerts.


Q8. What is Right-Sizing?

A. Right-sizing refers to a situation in which the organization utilizes virtual machines at the most appropriate capacity level. For instance, an organization could right-size its servers by utilizing smaller virtual machines after realizing that a larger machine is only operating at 15%.


Q9. What is Auto-Scaling?

A. Auto-scaling is a technique that involves making the cloud infrastructure dynamically scale up and down depending on the traffic intensity. Thus, organizations pay less since they are only charged for the extra compute powers utilized during peak times.


Q10. Should we consider quitting the cloud like Dropbox and 37signals?

A. It is not worth quitting the cloud just to cut costs for the majority of organizations. The move by Dropbox and 37signals to traditional servers was made after identifying that they were using a large amount of data consistently. Thus, it would be best to consider optimizing the current cloud to meet the demands of the applications and services.


Q11. Is FinOps a tool or a culture?

A. FinOps is primarily a culture and not a ready-made tool. Although there are tools involved in FinOps, the practices have to be adopted by three departments: technical, finance, and business.


Q12. How regularly should we perform cloud cost analysis?

A. Some organizations could start by analyzing their cloud costs monthly, and then they can set up automated budget alerts to track their spending. Larger organizations with higher cloud spends might consider a weekly or even daily analysis.

Q13. What can we do right now to get started?

A. The first step in FinOps is to start analyzing the latest cloud bill. Highlight the three most expensive items and ensure that they are necessarily contributing to the organization's objectives.

Conclusion

FinOps is not about spending as little as possible. It is about spending wisely, knowing what you pay for, and making sure every rupee or dollar supports something that matters. As the brand stories show, the best results come from visibility, simplicity, and a willingness to keep asking whether your setup still makes sense.

Start small this week. Look at your bill, switch off one unused resource, and set one budget alert. And now I would love to hear from you: what was the biggest surprise on your cloud bill? Share it in the comments below.

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