7 Critical FinOps KPIs: How to Gain Control of Your Cloud Costs

Escalating cloud costs have become a major problem for many companies. Experience from FinOps teams suggests that at least 75% of costs should be allocated to the correct cost center in the organization to have real control. An old school cost center model with ambiguous distribution of cost is no longer sufficient. It is perceived as a disempowerment of the business, which in turn leads to all responsibility for costs resting with the IT manager. It is not uncommon for the IT department to be criticized for not delivering quickly enough on business requirements, while simultaneously being scolded for costs being too high.

In this blog post, I provide some tips on how you can take control of cloud expenses through targeted use of FinOps KPIs. Get ready for a review of the most important KPIs that can save the IT budget in 2025. This is not about fancy buzzwords or complicated frameworks – just practical metrics that actually work.

7 FinOps KPIs to Get You Started

Let’s be honest – most companies have too little control over IT costs. It’s not necessarily about exceeding budgets, but about insufficient transparency around costs and too little benchmarking of value creation in digitalization processes. Here are the most important KPIs you should get control over:

1 – %allocated resources: Percentage of resources with correct tagging

This is the foundation of all FinOps work. Think of it as an accounting system where only 20% of the transactions are properly recorded – it would never be approved. Yet, this is exactly how many handle their cloud costs. Data from the FinOps Foundation shows that organizations should achieve at least 75% allocation at a basic level, and 80-100% if you want to call yourself mature.

2 – %unallocated cost: Percentage of total cost from untagged resources

This is a critical metric in FinOps that measures the proportion of cloud costs originating from resources lacking proper tagging. This KPI is crucial for organizations aiming to improve transparency, accountability, and value creation.

3 – %monthly cost increase: Cost increase from the previous month

Measures the percentage change in cloud expenses from one month to the next. It is a crucial KPI for monitoring cloud cost trends, identifying unexpected increases, and ensuring that expenses align with the organization’s budgets and forecasts.

TIP: Take into account normal seasonal variations to avoid creating unnecessary crisis situations.

4 – %budget variance: The difference between actual and budgeted cost

Measures the difference between actual cloud expenses and the budgeted or estimated amount. This is a critical KPI for assessing how well the business adheres to its financial plans. When used correctly, it also identifies the areas where costs deviate from expectations.

7 – Unit Cost: Cost per customer, transaction, product, etc.

The Unit Cost KPI in FinOps measures the cost associated with delivering a single unit of business value, such as a transaction, user or customer interaction, or a sale. This is the KPI that directly links cloud costs to business outcomes. For most organizations, this is one of the most challenging KPIs to implement, but also the one that generates the greatest results over time. I will eventually write a separate blog post about this KPI.

Implementation of FinOps KPIs

Having impressive KPIs is of little use if no one utilizes them. I’ve seen far too many dashboards that merely collect digital dust. In FinOps, as well as in other areas, technology implementation is the easy and enjoyable part of the process. Ensuring adoption and continuous improvement generates the results, but demands both time and focus. The key to success is to start with something that creates a significant impact, and ensure that this impact is highly visible within the company.

Create motivating goals and visualize progress

“We need to save money” can be a goal, but it’s unlikely to create any change. The most common mistake we make is confusing goals with desired effects. This error occurs frequently in most businesses and is presented with great enthusiasm by CEOs, IT managers, and other leaders. I like to use OKR methodology for performance management, but other frameworks work as well. It’s about building a logical relationship between a motivating goal and the right KPIs. Once that’s in place, you must ensure that progress is visible to everyone – and that it’s talked about often. I will write a blog post about OKR in FinOps at a later occasion.

Choose few, but appropriate KPIs

Change is created through focus. The most common mistake we make is NOT choosing to omit important things. It’s unlikely that you’ll manage to become a world champion in both pole vaulting and the 400-meter sprint simultaneously. If the goal is to become cost-optimal and value-creating, which it should be if you’re working with FinOps, it’s wise to implement KPIs in the following order:

1. Indicators for resource allocation (tagging): Ensuring that the “books” are correct is the very foundation of your FinOps work
2. Indicators for utilization of discount mechanisms: Finding the right balance between PAYG (pay-as-you-go) and discount agreements can quickly reduce costs
3. Indicators for resource utilization: Reducing waste is good for both your wallet and the planet (read article about Cloud Waste here)
4. Indicators for unit cost: Unit economics refers to the analysis of costs and revenues associated with a single unit of business value, such as a product, customer, transaction, or service. Unit economic KPIs can be complex to calculate, but often create significant progress once in place.

Choose the right tools and procedures

By automating data collection and leveraging dashboards for visualization and performance benchmarking, you can efficiently monitor and analyze your FinOps KPIs. This ensures better cost control and resource optimization over time. The best tool for this task is likely the one you already have. The major cloud platforms come with excellent tools for cost analysis and monitoring, which can be successfully utilized if the company doesn’t already have a BI solution used across the organization. Otherwise, you’ll get the best results if cost and performance data end up in the same data platform used for business reports and KPIs.

If the organization is multi-cloud and/or hybrid, it might be wise to look at FOCUS (FinOps Open Cost and Usage Specification), which is a technical specification for normalizing cost and usage billing data across cloud providers and platforms.

Adjust the course based on the insights you gain

The whole point of benchmarking is to create incentives for improvement. Regular review of your KPI strategy is crucial to ensure alignment with evolving business goals, dynamic cloud environments, and operational priorities. It helps the company adapt to changes, identify inefficiencies, improve forecast accuracy, and stay competitive.

This doesn’t happen by itself. By leveraging insights from collected data and involving key stakeholders, the business can at any time focus on the KPIs and activities that produce the best results.

Summary

The key to success with FinOps is continuous monitoring, clear visualization of progress, and focus on the right KPIs. This gives companies the opportunity to reduce inefficiency, improve forecasts, and maximize value creation in their digital processes.

• Start with basic KPIs such as resource allocation before moving on to more complex indicators like unit cost.
• Leverage existing cloud platforms or BI tools for data collection and analysis.
• For multi-cloud environments, specifications like FOCUS can be useful for normalizing data across platforms.

Success Factors

• Motivating goals: Utilize methodologies like OKR to link KPIs to concrete objectives.
• Automation and visualization: Use dashboards and tools to continuously monitor KPIs.
• Evaluate and ajust: Regular evaluation of the KPI strategy ensures alignment with changing needs.

Resources

https://www.finops.org/wg/finops-kpis/
https://www.finops.org/framework/capabilities/allocation/
https://focus.finops.org/
https://azure.microsoft.com/en-us/pricing/reserved-vm-instances