The FinOps Foundation, representing practitioners who leverage spending observability to empower engineering teams, recently published its 2024 State of FinOps survey report. In what the report describes as a reflection of "macroeconomic trends", respondents ranked waste and cost reduction as their highest priority. The category of "empowering engineers to take action" has, for the first time, fallen from being the highest-ranked priority in the survey. The report also provides guidance on creating guardrails to ensure financial visibility into AI projects, and highlights the value of FinOps data for sustainability initiatives.
Engineers remain the biggest beneficiary of FinOps observability, even though "engineering enablement" has dropped to a lower position in the report's ranking of surveyed priorities. This indicates that engineers are those best suited to responding to a sudden change in cost metrics. The report observes that the "engineering persona" is reported as getting the most value from both "FinOps training and self-service reporting."
Mike Routier gave a 2023 FinOps X talk describing the combination of FinOps reporting with coaching, titled Empower Engineers with Cost-Conscious Decision Making. Routier, senior cloud cost analyst at Choice Hotel International, described creating a "cost discipline" in teams by providing spend information which enables engineers to target cost avoidance or cost-savings, using a combination of AWS resource tagging, billing reports, anomaly detection and monthly team check-ins. He shared:
Most of our engineers want to be cost conscious, they just don't know what is the right decision to make. That's where I come into play and say ... these are the opportunities I would leverage which provide the most value.
While waste reduction is a common driver across all respondents; segmenting the survey by cloud spend revealed that those with smaller budgets would tend to then prioritise improvements in the accuracy of billing forecasts. The report states that these respondents faced the challenge of understanding "the trajectory of spending" prior to it "getting out of hand." Most invested in low-effort solutions such as "manual adjustments" to generate forecast data. In contrast, those with larger budgets tended to prioritise the optimisation of commitment-based discounts to benefit from economies of scale. This included the right-sizing of "reserved instances, savings plans, committed use discounts," as well as specific negotiated discounts. The following shows a breakdown of respondent priorities by cloud-spend.
Respondent priorities by cloud spend. (Source: FinOps Foundation)
Matt Saunders recently reported for InfoQ on AI and FinOps combining to lead cost observability innovation in 2024. Citing individuals from Grafana, Saunders wrote that the confluence of AI and financial observability will enable "strategic decision-making, avoiding excessive cost-cutting in revenue-generating areas." The 2024 survey also calls out the use of machine learning to target waste, highlighting two areas:
- "AI for FinOps" - Using ML for great visibility, optimisation and forecasting of costs.
- "FinOps for AI" - Creating early visibility of cost as teams ramp up AI experimentation, projects and spend.
The survey describes this current period in AI as being "reminiscent of when the Cloud itself first hit the scene." It calls out that cloud migrations initially had "little consideration to cost or governance," and this remained the case until "budget thresholds" were crossed at an accelerated rate. Warning of how experimentation in the Cloud was suddenly "slowed or stopped;" the report advises practitioners to implement early observability into AI and ML infrastructure:
We recommend for any new cloud technology that an organization wants to adopt, that reporting, forecasting, and basic guardrails be implemented early to ensure that experimentation is enabled within limits, and major rework is avoided.
Diving into examples of areas which have seen waste and cost reduction, the survey shows that the largest optimisation efforts have gone into enabling teams to manage compute spend, which is also the "highest spend for most." Such optimisations have yet to seep into areas "associated with newer technologies," with the data indicating that optimisations into "AI/ML" spend remain under-invested in. Whilst smaller firms have lower AI investments, the survey reported that for larger enterprises AI and ML are a "rapidly increasing source of variable cost that needs to be managed."
Optimisation and waste reduction by cost category. (Source: FinOps Foundation)
To aid practitioners in waste reduction, the 2023 survey resulted in the FinOps Foundation creating a library of waste-reduction scenarios. The scenarios are organised by cost and cloud providers, ranging from optimising the use of EBS volumes to right-sizing capacity commitments. Accompanying each scenario is a short case study, reference material and examples of relevant infrastructure-as-code.
In a recent 2024 look-ahead piece, Forbes published an article on the impact of AI on Cloud ERP (Enterprise Resource Planning) in 2024, indicating that the resulting insights will enable improved tracking of "sustainability goals" and environmental impact through a "Green Ledger." The Green Ledger is a concept that was discussed at Cop28 which correlates financial investments with carbon emission observability. The State of FinOps Report states that "less than 20% of FinOps teams are currently collaborating with sustainability teams (or taking on the responsibility of cloud sustainability themselves)." Half of the respondents report "collaboration with sustainability teams" increasing in the future.
The State of FinOps survey respondents provide insights into the adoption of FinOps practices across a range of firms. 23% of respondents were from companies with under 1000 staff, and 15% came from enterprises with over 100,000 people. Those surveyed reported annual cloud spends averaging at USD $44M and included reports of larger spends of over USD $1B. The FinOps foundation has made its data interrogable at https://data.finops.org.