Cloud computing has revolutionised the global business landscape, and the banking, financial services, and insurance (BFSI) sector is no exception. Financial institutions are increasingly leveraging the scalability, flexibility, reliability and speed offered by cloud technologies to accelerate digital transformation.
Cloud computing (HT Photo)
Adoption of cloud technology is not only driving operational efficiencies but also driving innovation, especially in critical and emerging technologies like Artificial Intelligence (AI), enabling BFSI organisations to rapidly develop and deploy new financial products and services. As per our estimates, more than 80% of financial services firms globally have integrated cloud services into their operations.
While organisations that efficiently transition to the public cloud can potentially drive significant IT cost savings, in the last few years, cloud costs are on the rise, globally and in India. Use of emerging technologies like AI and machine learning workloads would further escalate costs due to their resource-intensive nature.
Cloud cost optimisation is not just a technical exercise; it is a strategic imperative. Without actionable oversight, unexpected expenses can erode the financial benefits of cloud adoption. India’s BFSI sector is already feeling the impact of surging cloud costs on its bottom-line. Between FY13 and FY23, IT costs have grown at a Compound Annual Growth Rate (CAGR) of 17%, while income has increased by only 11% during the same period (Source: BCG Analysis). Cloud costs have surged faster. Indian BFSI CIOs must urgently reassess and optimise their cloud strategy to stay competitive.
A five-step strategic FinOps framework can help Indian BFSIs optimise cloud costs by 20-25%.
· First, not all applications benefit equally from being moved to the cloud. BFSI players must strategically decide which applications to move to cloud versus keeping on-premise by evaluating cost, need for flexibility and operational criticality. Inefficient lift-and-shift migrations (rehosting) often lead to inflated costs without leveraging the full potential of the cloud. Instead, refactoring, which is developing or acquiring cloud-native applications using microservices and containers, ensures scalability, agility, and cost-efficiency.
· Second, developing accurate forecasts for cloud spending is critical for optimising cloud costs. Utilising real-time data and predictive analytics can help in anticipating future workloads and associated costs. Efficient forecasting and planning can enable the organizations to leverage reserved instances at high discounts (upto 72% discount vs on-demand instance). We believe that 70% of instances for Indian BFSI can be reserved instances.
· Third, establishing a clear view of resource utilisation across compute, storage, and networking services is crucial. A cost driver tree helps identify primary expense areas and optimisation levers. Some practices that help include scheduling non-critical workloads during off-peak hours and automating the shutdown of idle resources (e.g., turning off unused instances outside of working hours can yield over 60% savings). Storage costs can be optimized through efficient data lifecycle management. Strategically transitioning data through various storage tiers—starting with high-performance storage for frequent access, then moving to lower-cost options after 90 days, and finally archiving rarely accessed data—significantly reduces expenses while maintaining necessary accessibility.
· Fourth, mapping expenses granularly to business units through chargeback or showback mechanisms encourages accountability. Departments gain visibility into their consumption patterns, enabling better budget adherence and promoting responsible usage.
· Fifth, on-going monitoring and governance is key. Indian BFSI players should regularly assess their cloud environments to right-size resources, ensuring that they match actual demand without overprovisioning. User-friendly dashboards provide real-time insights into consumption patterns, helping identify inefficiencies dynamically. Advanced FinOps automation tools can detect cost leakages proactively and implement fixes automatically.
Effective cost optimiszation requires more than technical fixes. It also needs cultural change. Collaboration across IT, finance, and business units ensures cloud spending aligns with strategic goals. Setting KPIs specific to cloud costs promotes accountability across teams. Appointing a dedicated FinOps team led by a Cloud Cost Champion with executive backing ensures sustained focus on optimisation goals.
It is clear that the journey to the cloud offers immense opportunities for growth and innovation in India's BFSI sector but also necessitates vigilant cost control measures. A structured FinOps framework and ensuring organisational alignment around these principles can help Indian financial institutions unlock sustainable value from their investments in the cloud ecosystem, thus positioning them competitively in an evolving market landscape.
This article is authored by Vipin V, managing director and partner and Tirtha Chatterjee, partner, BCG.
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