This article has been authored by Dan Rickards, Head of Strategic Cloud Consulting | 27th May 2025

This will be controversial. If you work in finance, turn away now. Cloud costs are only going in one direction, upwards.

One tactic repeatedly implemented to bring this under control is to create a ‘FinOps’ team who implement cloud budgets for individual applications and either show or charge back these costs to the owners or technical teams responsible for them. This is best-practice in the world of FinOps  It creates visibility and transparency, so people take ownership and optimise costs.

But is this the best way to drive long-term cloud value? In this post, I argue that while cloud budgets provide initial control, they can limit strategic decision-making. And why it’s time to adopt unit economics instead.

The Problem with Cloud Budgets

Cloud budgets often introduce a few unspoken problems:

1. Often no link to broader IT strategy

The cloud chargeback mechanism is facilitated by FinOps, enabled by Finance and by an App or Engineering team. This can be an isolated process from the strategic direction of the business.  Especially when decisions are made based on cost rather than value.

2. Time-consuming process

It can take months, if not years, to build accurate cloud budgets and charge these back to teams to decentralise cloud spend. Often organisations bring in consultants (I am guilty here) to accelerate this. These budgets then need continual maintenance as cloud services and associated costs evolve.

3. Provides illusion of control

Most controls or budget sets are illusions. FinOps is a technology-enabling team so the introduction of a budget relies on technical resources taking it seriously. Often there are no additional penalties for ignoring it (especially if engineering velocity is a KPI).

4. May lead to the wrong thing being done

Teams may continue to run a workload without questioning its value or purpose, simply because it sits within budget and there are no more obvious optimisations to make. No pressure will be applied as it’s green from a reporting perspective.

In practice, a cloud budget sets a ceiling. As long as you’re under it, no one asks tough questions. But that ceiling might prevent innovation or efficient scaling.

The case for unit economics

Spending a cloud budget is no guarantee of optimal value from your cloud investment. Spending the least on cloud, may not be the most effective use of capital. Too often organisations hit inertia as they’ve reduced wasted spend through simple optimisations, turned their budgeting reports green, and made their FinOps teams happy.

That is the moment to disregard the budget and adopt unit economics instead.

What is unit economics?

Unit economics measures cloud value by tying cost directly to business outcomes. For example, cost per transaction, cost per customer, or a cost per revenue-generating event. It adds context to spend and helps teams align decisions with business goals, not just budget limits.

This is the best way to measure cloud value and costs. Unit economics provides the missing context of the value cloud spend is bringing to a business that budgets often miss. If spending more, means generating more value and exceeding the budget, that is a good thing. But without unit economics, this is nearly impossible to measure.

Adopting unit economics means to stop implementing budget and target measures such as, ‘optimise application XXX by 10%’ or ‘have an effective savings rate of 35%’, and instead focus on outcomes. Performance goals, not cold numbers, can motivate teams more to extract more value from cloud. You could look at this through the lens of Douglas McGregor’s ‘Theory X and Theory Y’ from The Human Side of Enterprise.

Do you lean towards Theory X? This believes that people naturally avoid work and responsibility, so they need to be closely managed and controlled. In cloud terms, that might mean charging teams for their cloud usage and telling them exactly how to optimise, or risk waste piling up. Or do you prefer Theory Y? This puts forward the argument that people are motivated to do a good job if you trust and support them. That might mean teaching teams how to manage cloud costs and trusting them to build their own cost models and keep improving over time.

From cost control to cloud value

Hire smart people, enable them to achieve by removing barriers and trust them to perform. Ditching cloud budgets and adopting unit economics enables this and gets the most value from cloud spend. (This blog post was inspired by Implementing Beyond Budgeting, by Bjarte Bogsnes. A book recommended to me by someone far smarter and more experienced!)

How We Can Help

If you’re ready to go beyond traditional cloud cost management, we can help you build a unit economics framework tailored to your cloud environment. We can help connect technical performance to real business value. Whether it’s identifying the right cloud cost metrics, enabling your teams with actionable insights, or evolving your FinOps strategy beyond reporting, we’ve helped organisations shift from cost control to value realisation.

Talk to us about how we can help modernise your FinOps practice and unlock greater return on your cloud investment.