Cloud Spending is Perplexing CFOs

As my family’s “CFO,” I meticulously scanned my utility bills late one night. As I went through them, line by line, I was confused and frustrated – I couldn’t understand the jump in costs and what was driving them. It was a confusing mix of kilowatt hours, supply and transmission costs, and local fees. I’m seeing a very similar phenomenon with cloud spending.

My day job at IBM is creating automation solutions to help solve organizations’ efficiency and observability issues in the IT industry. As a foundation for today’s digital transformation, cloud and hybrid cloud technologies offer many benefits, from cost savings to flexibility, security, and automatic software updates; yet, all the benefits come with various costs that can be difficult to measure and manage.

What makes cloud spending difficult?

The hard part about cloud spending is that it’s too complex to fully understand how much cloud costs will be. Surface-level cloud spending is fairly easy to track, but when it gets down to things like Kubernetes workloads – how software is deployed, scaled, and managed in and across clouds – AI model inferencing and provisioning, cost projections are extremely difficult and often wildly inaccurate because there are too many gaps not being accounted for.

Some gaps are the size of canyons, and others are hard to spot. Remember, this isn’t the pinnacle of cloud complexity either; it will only worsen.

Think of this situation in the spirit of getting AI initiatives off the ground. Organizations tend to be okay with initial high associated cloud costs to create more revenue and profit; however, that way of spending isn’t sustainable.

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What is FinOps, and how can it help manage cloud spending?

Managing cloud costs is so significant that the IT industry created a practice to manage it. FinOps, as it’s known in my industry, is an operational framework for managing cloud costs from engineering to operations. In fact, according to Civo’s The Cost of Cloud Report 2024, 60% of organizations saw cloud spending increase this past year, and 40% of those said costs rose by more than 25%.

If you bring in the larger macro-factors of companies cutting resources for efficiency, inflationary price increases, and new technology spending, CFOs need more support and visibility.

How can partnering with CIOs and using automation help CFOs tackle cloud costs?

CIOs can help their CFO colleagues by adopting FinOps practices powered by AI technologies that reduce the burden of tracking, tagging, and constantly chasing your operations team to understand how budgets are being spent, bringing real-time visibility and decision support to your fingertips.

The cloud operates in real-time, but it can be predictable and forecasted in a way that improves visibility and automates resource management, observability, and cost transparency.

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Automation can save by over-provisioning CPUs/GPUs, memory, and storage. It can help observe application health and proactively remediate issues. Automation also can provide a holistic and granular breakdown of how cloud costs are racking up.

Partnering with CIO peers and implementing automation solutions can help get a CFO off the hot seat. CFOs need to be able to manage budget expectations while keeping the business on track with innovation and spending.

CFOs, CIOs, engineers, DevOps, and cloud/AI team leads must tackle this problem together. The synergy of aligning business and financial outcomes will allow spending to shrink and maximize its potential simultaneously. A good FinOps posture means everyone has equal visibility and accountability in spending.

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Is investing in a FinOps automation solution worth it?

Yes. The extra initial cost of buying a FinOps automation solution will pay for itself in less than two years – I bet it could happen in 12 months.

Implementation of a a FinOps automation solution is critical. Get it done right from the start – maximize the connectivity, efficiencies, and collaboration – and watch the cloud spending and your CFO’s stress melt away.

Some old financial advice has never been more prevalent than now: Live within your means. Bills shouldn’t surprise you or make you sweat, and CFOs shouldn’t pay the price for your overspending.

Bill Lobig is responsible for IBM IT Automation Software Product Management. This includes a range of technologies allowing people and organizations to optimize their technology spend and ensure the health and performance of applications.

Bill has been in the enterprise software space for over 25 years holding various roles in engineering & product management ranging from unstructured data/content management, information life cycle governance, business process management, machine learning & AI, and Application Modernization, FinOps, and IT Operations. Bill graduated Summa Cum Laude from the University of Maryland College Park.