Top Cloud FinOps KPIs you must measure to drive success: A Complete Guide

Maximizing the value of cloud investments and ensuring alignment with strategic objectives is an ongoing challenge for many businesses. 

But, before we deep-dive into the realm of setting FinOps Key Performance Indicators(KPIs), let’s start by asking yourself the following questions:

• Do you have a comprehensive understanding of your current cloud costs? 
• Is your cloud cost allocation aligned with critical business units, cost centers, applications, and projects?
• What specific business goals are you aiming to accomplish through FinOps?
• Are you equipped with the necessary skills and resources, or do you identify any gaps that need to be addressed?
• Is your IT department encountering challenges in identifying the ownership of cloud costs?
• How well does your cloud spending align with your business requirements?

These are a few fundamental questions that organizations must address before starting with the process of performance and benchmarking in FinOps.

Undertaking a thorough assessment of your current IT environment and cloud ecosystem is the crucial first step towards gaining visibility and control over your cloud spending. This evaluation lays the foundation for your cloud financial management journey ahead.

FinOps Key Performance Indicators(KPIs): The guiding beacons of your FinOps strategy

A report by Anodot revealed that nearly half of the cloud-based businesses (49%) struggle with controlling their cloud costs, with a significant portion of cloud waste resulting from a lack of visibility into cloud expenses (54%). 

So what is the solution? FinOps, of course!

FinOps has emerged as a critical discipline that empowers organizations to optimize their cloud spending while aligning it with their business objectives. FinOps enables teams to make informed trade-offs between speed, cost, and quality by bringing accountability to the cloud operating model. 

Every organization can have a FinOps strategy but every successful strategy includes a practice of benchmarking and measurement ensuring continuous progress and improvement in maximizing the return on cloud investments. 

The success of FinOps relies on key performance indicators (KPIs). FinOps KPIs are the true guiding beacons of your FinOps strategy allowing you to navigate your cloud investments with confidence, making informed decisions and course corrections along the way.

As your cloud usage grows, it becomes increasingly important to measure and track the efficiency of your cloud consumption.

Some of the prominent benefits of FinOps KPIs are:

• Make data-driven decisions with improved business insights.
• Improved financial performance and resource allocation.
• Long-term success and enhanced customer satisfaction. 
• Gain a competitive advantage with quantifiable data.
• Achieve business objectives by measuring targets. 

Understanding Critical FinOps KPIs and their objective

Let's delve into some of the top Cloud FinOps KPIs that can propel companies toward greater financial success. The FinOps KPIs are categorized into three to drive results in all aspects of your cloud ecosystem. 

Cloud Visibility KPIs

To effectively address any challenges, it is crucial to first identify them. Cloud visibility key performance indicators (KPIs) play a vital role in offering valuable insights into an organization's cloud infrastructure, facilitating appropriate resource allocation and efficient management of cloud costs. Without comprehensive visibility across all cloud environments, it becomes extremely difficult to enhance governance.

Here are some important KPIs to consider when measuring visibility:

• Percentage of resources with proper tagging

Proper tagging ensures that resources are categorized and organized effectively, allowing for easier management, cost allocation, and resource tracking. The higher the percentage of resources with proper tagging, the better the visibility and control over your cloud infrastructure.

• Percentage of bill from untagged resource

Untagged resources make it difficult to allocate costs accurately and identify the specific purpose or owner of each resource. By tracking this percentage, you can identify areas where tagging compliance is low and take steps to improve visibility and cost management.

• Total spend against the cost of cloud resources per team

It helps identify teams with high or low cloud resource utilization compared to their allocated budget. You can optimize resource allocation, detect potential overspending, and align spending with business priorities by tracking this metric.

• Percentage of Waste

Firstly, to assess the percentage of cloud resource waste, it is necessary to define and categorize different types of waste within the cloud environment. This KPI can be calculated by determining the cost of unused and over-provisioned cloud resources as a percentage of the total cost. It helps identify potential cost savings by highlighting resources that can be right-sized, terminated, or optimized to eliminate unnecessary expenses.

• Forecast accuracy

Forecast accuracy is a FinOps KPI that helps refine future predictions, optimize resource planning, and enhance budgeting decisions. It involves calculating the variance between forecasted and actual costs. The resulting forecasted spend variance (%) can be compared against recommended thresholds based on the maturity level of your FinOps practice.

Below are the recommended thresholds by the FinOps Community of Practitioners; 

1. For FinOps practices operating at Crawl maturity, variance from actual spending cannot exceed 20%.
2. Variance of 15% for a FinOps practice operating at Walk maturity.
3. Variations of 12% for FinOps practices operating at Run maturity.

• Security incidents over a specific period by the team

This FinOps KPI tracks the number of security incidents or breaches within specific teams or departments over a given period. It helps measure the effectiveness of security measures, identify potential vulnerabilities, and evaluate the overall cloud security posture.

Cloud Cost Optimization KPIs

Optimizing your cloud environment goes beyond just cloud cost considerations. It also involves operational efficiency and security enhancements. By focusing on key performance indicators (KPIs) for cloud optimization, organizations can achieve a well-rounded approach that balances cloud cost savings, operational effectiveness, and robust security measures. Let's explore some essential Cloud Optimization KPIs and their significance:

• Effective cloud cost per resource

 This metric helps you identify cost outliers and areas where you can optimize your resources. By monitoring this metric, you can make cost-conscious decisions and ensure that you are using your resources efficiently.

• Percentage of money saved on Reservations, Savings Plans, or Committed Use Discounts against the total cost of cloud resources

 It helps you identify the percentage of your total cloud resource costs that are covered by Reservations, Savings Plans, or Committed Use Discounts. A higher percentage indicates that you are effectively utilizing these cost-saving options, resulting in significant savings on your cloud expenses.

• Cloud usage pattern on weekdays vs weekend

Businesses that experience variable cloud usage can save money by optimizing their spending on weekends versus weekdays. This can be done by shutting down or scaling down non-essential workloads on weekends.
To identify opportunities to optimize weekend spend, businesses should track their cloud usage data on a daily basis. This data can be used to identify trends and patterns in cloud usage. Once these trends and patterns are identified, businesses can develop a plan to optimize their spend on weekends.

• Percentage change in the cost of cloud resources over time (%)

The percentage change in the cost of cloud resources over time measures the rate of cost fluctuation in your cloud environment. It provides insights into how the cost of your cloud resources is changing over a specific period, allowing you to assess the efficiency of your cost management efforts.

• Mean Time to Recovery  (MTTR)

This metric measures how long it takes you to fix cloud infrastructure problems. A good MTTR means that you can resolve problems quickly, minimizing the impact on your business.

• Percentage of infrastructure running on demand

This metric measures how much of your infrastructure is using on-demand pricing. On-demand pricing is the most expensive option, so you should try to move as much of your infrastructure as possible to discounted pricing options, such as reserved instances or savings plans.

• Reverted cloud deployments

This metric measures how often you have to roll back cloud deployments. A high number of reverted deployments indicates that there are problems with your deployment process. You should identify and fix these problems to reduce the number of reverted deployments.

• Meeting SLAs and uptime goals

This metric measures how well you are meeting your service level agreements (SLAs) and uptime goals. By monitoring this metric, you can identify areas where you need to improve your performance and ensure that you are meeting the expectations of your customers.

Cloud Governance and Automation KPIs

Cloud Governance and Automation KPIs are vital in upholding control and ensuring compliance throughout your cloud infrastructure. By tracking specific metrics, you can assess adherence to policies, automate processes, and enhance security.

Here are some of the top FinOps KPIs for cloud governance and automation:

• Percent of policies in a compliant state

This metric measures how well your cloud environment is aligned with your organization's policies. A high percentage indicates that your environment is well-managed and secure.

• Cost-optimized per policy over time

It measures the cost optimization achieved for each specific governance policy implemented within your organization's cloud environment. It evaluates the impact of individual policies on reducing costs and tracks the effectiveness of cost-saving measures over a period of time. For example - Let's say an organization implements a policy to automatically shut down idle instances after a certain period of inactivity. Over time, they track the cost savings achieved by this policy.  By monitoring this KPI over several months, they can assess the long-term effectiveness of the policy in optimizing costs.

• Number of reservations automated

This metric measures the number of cloud resources that are automatically reserved. A high number indicates that you are taking advantage of reserved pricing, which can save you money.

• Time to Resolve Security Issues

This KPI measures the average time taken to remediate security violations or vulnerabilities in your cloud environment. Monitoring this metric allows for timely response and prompt resolution of security concerns, reducing potential risks.

• Time saved as a result of policies

Tracking this KPI highlights valuable insights into the time saved due to policies and provides a tangible measurement of the benefits derived from governance policies. To measure this KPI starts with establishing baseline metrics that determine the average time spent on each identified task before policy implementation or automation.

Post that Implement policies, rules, or automated processes to streamline and enforce desired behaviors or actions. For example, implement compliance checks through automated audits.

The difference between the baseline time and the actual time spent represents the time saved as a result of policies.

Key things to keep in mind while setting FinOps KPIs

Be S.M.A.R.T: Ensure your FinOps KPIs are Specific, Measurable, Achievable, Relevant, and Time-Based.  

Frequently Review and Update KPIs: Keep your FinOps KPIs dynamic by frequently reviewing and updating them as your business evolves. Cloud financial management needs may change over time, so ensure your KPIs remain relevant and aligned with current priorities.

Communicate and Share Insights: Regularly communicate FinOps KPI progress and insights to relevant stakeholders across the organization. This facilitates transparency, collaboration, and informed decision-making at all levels.

Don't just focus on cost: Look beyond cost alone and measure efficiency when evaluating cloud financial management. Assess how effectively resources and investments are utilized to get a comprehensive view of performance.

Rely on Data: Your KPIs should be data-driven and supported by evidence-based reasoning. Avoid making assumptions, as they can lead to failure or suboptimal results. Base your FinOps KPIs on reliable data to make informed decisions.

In this journey, partnering with a FinOps expert can provide valuable support. FinOps partners bring expertise, tools, and best practices to help organizations set meaningful FinOps KPIs. 
Book a free demo to discover how CloudKeeper can help you in your Cloud FinOps Journey.