How FinOps and unit economics are transforming IT cost management

David Harding, CEO, Magic Orange

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In the ever-evolving landscape of IT, organisations are now realising that managing technology costs is about more than just cloud spend. It’s about seeing the bigger picture, too – the convergence of IT financial management (ITFM) and FinOps practices. This union provides a holistic view of the entire IT cost base, extending far beyond traditional expense tracking. It’s a shift that’s driving smarter, more data-driven decisions across enterprises, allowing companies to focus on the total value chain.

 

Transparency as a business asset

 

For the non-technically-minded C-suite, IT has traditionally been seen as mysterious necessity. IT spending, accounting for up to 15 per cent of total organisational budget, has often been hard for business leaders to understand. They know they need technology, but fail to grasp its full financial impact – or, indeed, what they get for their investment.

 

Enter transparency. Transparency isn’t just a reporting tool – it’s an asset that unlocks accountability across departments. When businesses understand the cost of delivering a service – whether IT or a broader business function – they can make informed decisions that align with strategic priorities. Transparency turns cost analysis into a competitive advantage.

 

The convergence of ITFM and FinOps

 

Over the past five years, FinOps has emerged as a discipline to manage cloud costs, which are accelerating but still represent only a fraction of overall IT expenditure. For most organisations, cloud spend is a small part of the total IT budget. This is where the convergence of ITFM and FinOps becomes critical. Managing just the cloud without understanding broader IT financials presents a fragmented view. By integrating FinOps into ITFM practices, companies gain an overarching view of their IT costs – both in the cloud and on-premises.

 

The convergence of these two disciplines provides CIOs with the tools to measure, optimise and explain technology investments. MagicOrange, with its cloud-native platform, is leading the way by offering a solution that delivers a consolidated view of both IT and cloud costs in one place, simplifying the complexity of managing diverse technology spend.

 

Moving beyond cost management to unit economics

 

The real opportunity for CIOs and the business leaders they support lies in the evolution from traditional cost management to unit economics. In many industries, understanding the total cost of ownership of IT assets is no longer enough. Businesses now need to know how those costs translate into individual units of value. For example, in an insurance company, it’s not just about managing technology costs but knowing what it costs to process a claim or write a policy. Essentially, it implies incorporating costs outside of technology – other shared services – into a broad, all-encompassing cost model to get to true total cost of ownership.

 

This shift to unit economics helps organisations identify where technology investments are driving value and where inefficiencies exist. It moves the conversation beyond simply squeezing budgets to improving performance at a more granular level. By tying financial transparency directly to business outcomes, unit economics offers a path to driving better decisions.

 

Accelerating business performance

 

The convergence of ITFM and FinOps is more than a financial alignment; it’s a strategy that accelerates business performance. Companies can now run budget cycles faster, leveraging tools such as MagicOrange that allow IT and finance leaders to recalibrate financial plans in real time. No longer are budgeting processes tied to slow, overnight runs. Instead, businesses can iterate their financial models multiple times a day, adapting to market changes on the fly.

 

The future of IT cost management

 

The next frontier of IT financial management will extend beyond technology into broader business operations, incorporating the cost of shared services that occur outside of technology. With the integration of ITFM and FinOps, companies are poised to create flexible, dynamic financial strategies that cover all aspects of the business, from product development to service delivery.

 

In this future, the conversation shifts from technology spend to business outcomes. Organisations will be able to calculate the true cost per transaction, per service or per customer – a level of insight that transforms decision-making and drives profitability and growth. This focus on unit economics allows for not only better IT decisions in the context of more strategic and holistic business planning.

 

Converging towards a more strategic future

 

The convergence of ITFM and FinOps marks a turning point in how companies view and manage their technology investments. It offers a comprehensive understanding of the entire IT cost base, beyond just cloud services. By moving toward unit economics and tying IT spend directly to business outcomes, companies can unlock new levels of financial and operational transparency.

 

The future of IT financial management is bright, with businesses equipped to make faster, more informed decisions that drive profitability and innovation. MagicOrange is at the forefront of this movement, helping organisations bridge the gap between technology costs and business value.

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Embrace the convergence of ITFM and FinOps – achieve full transparency with MagicOrange!