Has the price tag for innovation has become untenable?
As venture-backed companies chased growth rates, higher cloud bills were brushed aside as inevitable. But the exuberance of recent years is fading, and investors are becoming more gloomy about the financials of their portfolio companies. Usage-based cloud and SaaS services, which have become a major cost driver, are coming into the limelight.
Development teams must face the music and become financially responsible for the infrastructure and services they use. Meanwhile, CFOs and CTOs must prepare to answer some tough questions during board meetings.
The practice of FinOps provides key ideas and tools to help you understand, design, and forecast cloud spend in a way that aligns with business goals. By applying FinOps principles, companies have the opportunity to significantly improve their gross margins and chart a path to profitability, as well as allay investor concerns about revenue metrics.
Gross margins are a board-level concern
Knowing the economics of your cloud unit is key to building an explicable, transparent model of your cloud costs.
The cloud and app ecosystems that have evolved over the past decade are driving innovation. They enable developers to build features, design experiments, and run tests at breakneck speed, with minimal infrastructure concerns. However, this innovation comes at a hefty price tag and leads to a loss of financial oversight as teams struggle to understand which features or customers are driving costs up.
This has become an urgent problem today. Venture capital firms have become reluctant to put more money into money-burning companies. Gross margins, previously seen as a problem to be solved at some unspecified point in the future, have become an immediate priority at the board level.
What’s especially troubling to investors is how opaque cloud spend tends to be: a single figure can span many internal and customer-facing use cases, making it impossible to justify or optimize coherently.