How FinOps Helps Banks Tackle Cloud Costs

Cloud computing is revolutionizing the financial services industry by promising benefits such as lower costs and greater flexibility. Despite these transformative benefits, cost savings have not materialized as expected. We explain why that is and what banks should do now.

Cloud Computing Redefined The Way To Generate Customer Value

Over the past decade, cloud computing has revolutionized financial services, offering the promise of lower costs, greater flexibility, improved resilience, and enhanced security. Beyond these benefits, the cloud has empowered banks, fintech firms, and insurance companies to innovate faster and deliver better services to their customers. Whether it's through real-time payment processing, personalized financial advice, or seamless mobile banking experiences, cloud technology has enabled financial institutions to redefine customer expectations. Yet, despite these transformative advantages, the anticipated cost savings—a key selling point—have proved elusive for many organizations.

A staggering 94% of enterprises overspend on cloud services, according to Forrester research, with some organizations exceeding their budgets by 50% or more. This challenge has forced IT leaders to look for a more reliable approach to control cloud expenses and deliver the promised value. Enter FinOps: a holistic framework for cloud financial management that empowers organizations to optimize their cloud investments while reining in unnecessary costs.

Why Cloud Costs Can Spiral Out of Control

Cloud adoption often starts with the allure of cost efficiency, but the reality can be more complicated. Research from Gartner estimates that 30% of cloud spending is wasted, while an EY survey found that 57% of organizations exceed their annual cloud budgets. Worse still, 72% of organizations have moved at least one enterprise application back on-premises after realizing the true costs of cloud migration.

What Drives Cloud Overspending?

Several factors contribute to cloud cost overruns:

• Outdated Processes: Traditional budgeting and accounting methods are ill-suited for the dynamic, consumption-based nature of cloud services.
• Limited Visibility: Without real-time monitoring, organizations lack clarity on where their cloud spend is going and how to optimize it.
• Overlapping Costs: Many organizations fail to phase out legacy infrastructure during cloud migration, leading to dual expenses.
• Misconceptions About Cost: The scalability of cloud platforms often results in unchecked consumption as teams expand resources without fully considering the financial implications.
• Lack of Expertise: Many companies lack the skills required to analyze and optimize their cloud environments effectively.

These challenges highlight the need for a systematic approach to managing cloud costs—one that goes beyond simple budgeting tools or reactive cost-cutting measures.

The FinOps Solution: Managing Cloud Costs Holistically

FinOps, short for Financial Operations, is designed to tackle these challenges head-on. By combining technology, best practices, and cross-departmental collaboration, FinOps helps financial institutions take control of their cloud spending. Unlike one-off cost optimization efforts, FinOps is a long-term strategy that builds a culture of cost awareness across the organization.

Why FinOps Works

FinOps isn’t just about reducing costs—it’s about maximizing the value of your cloud investments. Here’s how FinOps helps organizations manage their cloud spend effectively:

1. Real-Time Cost Visibility
   FinOps uses dashboards and automated alerts to provide teams with a clear view of cloud expenses, enabling them to address overspending before it becomes a problem.
2. Cross-Department Collaboration
   FinOps brings together IT, finance, and business stakeholders to share ownership of cloud cost management, ensuring alignment on goals and priorities.
3. Proactive Cost Optimization
   By embedding cost considerations into the architecture design process, FinOps ensures that cloud resources are used efficiently throughout their lifecycle.
4. Automation and Reporting
   Automated tools streamline reporting for chargebacks, compliance monitoring, and financial forecasting, reducing manual effort and increasing accuracy.
5. Scalable Governance
   FinOps establishes preventive controls and governance structures to ensure compliance with regulatory requirements while maintaining operational flexibility.

With these capabilities, organizations adopting FinOps can reduce the cost and time of cloud migrations by up to 30% and sustain savings in the long term.

Building a FinOps Framework in Banking

Implementing FinOps requires a combination of top-down leadership and grassroots engagement. Here’s how financial institutions can create a successful FinOps framework:

1. Secure Executive Sponsorship

Executive leaders must champion FinOps adoption by securing buy-in from IT, finance, and procurement teams. They should clearly define roles and responsibilities to ensure accountability across departments.

2. Engage Engineering Teams

For FinOps to succeed, engineering teams must understand its importance and integrate cost-awareness practices into their workflows. Training and tools are essential to help these teams make informed decisions about cloud usage.

3. Establish Core Components of FinOps

To achieve sustainable results, organizations should implement the following components:

• Cost Optimization Models: Continuously analyze cloud spending to identify opportunities for cost savings and align actual spend with forecasts.
• Design Standards: Create architecture guidelines that prioritize cost-efficiency and scalability.
• Dynamic Finance Policies: Adapt budgeting and accounting processes to reflect the variable nature of cloud costs.
• Ongoing Governance: Maintain continuous oversight to ensure compliance, manage risks, and provide visibility into cloud operations.

The Long-Term Value of FinOps

FinOps is more than just a process—it’s a mindset that transforms how organizations approach cloud cost management. Much like agile development or DevOps, FinOps fosters collaboration and accountability across teams, enabling organizations to maximize the value of their cloud investments.

For banks and other financial institutions, the stakes are high. Cloud computing offers tremendous opportunities for innovation, but only if managed effectively. By adopting FinOps, organizations can turn the challenges of cloud cost management into opportunities for growth and efficiency.

Conclusion: FinOps is the key to unlocking the full potential of the cloud. With the right tools, processes, and cultural shifts, financial institutions can optimize their cloud spending, enhance governance, and drive long-term value for their customers.

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