Cloud FinOps, 2nd Edition

Chapter 13. Accurate Forecasting

Forecasting is the practice of predicting future spending, usually based on a combination of historical spending trends and an evaluation of future plans. It is done to understand how future cloud infrastructure and application lifecycle changes may impact budgets and to aid in evaluating cloud investment decisions. And it’s one of the hardest things to get right in FinOps.

Forecasting is hard because it requires an intersection between engineers, finance, and procurement, where finance has financial reporting responsibilities, procurement has accounting responsibilities, and both need assistance from engineers and executives to meet these obligations and understand planned changes to infrastructure. Collaboration between these stakeholder teams is critical to build agreed-upon forecast models and KPIs from which to establish budgets that align with business goals. When these teams build models to forecast cloud spend reliably and accurately, cloud cost forecasting will inform investment and operational decisions to accelerate an organization’s growth.

In this chapter, we discuss forecasting, explain why forecasting is so difficult, and go over the key concepts needed to improve its accuracy.

Traditional IT forecasting—prior to cloud—was mostly done for annual budget processes. For equipment in the data center, forecasts for the total cost of ownership (TCO) are calculated up front when performing system enhancements or net new system builds. As ...