The US government is no stranger to cloud. In fact, the federal government was among the first adopters of public cloud going back to the first federal CIO, Vivek Kundra, who mandated a cloud-first approach to IT as part of the 2012 budget process. Although his motivation to adopt cloud was instrumental in transforming government IT, Kundra mistakenly assumed that it would save billions of dollars.

The early promise and hyperscaler marketing hype of cloud as a cost-savings mechanism has been disproven. Despite this, the cloud is a transformation and innovation accelerator and a necessary part of modern IT strategies. The rush to the cloud, particularly following the pandemic years, led to an alarming spike in costs that required attention. Enter FinOps. The practice has existed for almost a decade but has only recently been adopted at scale — especially in the US government.

Aligning Cultural Practice With Political Pressure

Contrary to popular belief, government leaders have always been mindful of cost optimization. The Federal Acquisition Regulation is designed to prevent malfeasance, abuse, and waste, but there are gaps. In 2019, the US Government Accountability Office discovered that of the 16 agencies reviewed, roughly one-third had inconsistent reporting in cloud investments, even though most agencies had a 10-point or more increase in spending. These agencies had saved $291 million but had also identified issues in reporting and tracking cloud spend and savings. This was due, in part, to a lack of consistent processes.

Today’s cost-cutting pressure and implementation of mass-scale efficiency, particularly with the Department of Government Efficiency (DOGE), is not new to IT leaders. FinOps practices and investment value maximization were already in play; DOGE just accelerated that mission. What has changed is the increased scrutiny of cloud spending decisions. This has traditionally been a safe haven for procurement, as public cloud contracts envelop not just the acquisition of cloud services but also the SaaS solutions that can be purchased through their marketplace. This has been displaced as DOGE increased scrutiny on SaaS spend.

Still, FinOps practices are rising to this pressure. Up until recently, FinOps practice scopes did not encompass SaaS spend or any other costs outside public cloud infrastructure and services — this has changed. The new FinOps Foundation framework has changed in terminology to include cloud but also “technology.” Increased scrutiny on all tech spend will place a greater onus on FinOps teams to provide cost optimization outside of the public cloud.

Overcoming The Structural Challenges Of Budgeting And Procurement

Federal acquisition lifecycles are unlike traditional enterprise processes. Government entities typically drive procurement in the public space. Flexibility on spend and methods is highly limited, as these are generally based on earmarked money. In other words, public procurement budgets are more likely to be delegated preemptively and are therefore tougher to alter in distribution.

In the federal space, the Antideficiency Act (ADA) presents a huge obstacle to cloud purchases. Agencies are required to obtain appropriations and declare their entire projected cloud consumption in advance. The ADA also prohibits obligating or spending money before it’s received from Congress and does not allow the redistributing of funds to a different purpose than the one declared. This limitation provides little resilience, if any, on managing spend anomalies. It also means that overcommitment is a common occurrence.

Securing Savings Through Commitment And Consolidation

To combat this, government FinOps teams will employ tactics such as commitment-based discounts (e.g., reserved instances, reservations, savings plans, and commitment-use discounts). Cloud cost management tools are also in play, though common burn-down tactics of penalties on overages are not allowed with these contracts, thus limiting options on tools.

Some agencies struggle to benefit from the cost levers available to commercial-side teams. While the federal government is a big spender in IT, its efforts are typically federated, and individual PMOs rarely have the negotiating power to move the needle for big tech negotiations. Without the prerequisite purchase volume or procurement flexibility, substantial committed use discounts are a pipe dream.

One proven model that works (for agencies with the executive buy-in to pull this off) is a consolidated procurement. The DoD’s Joint Warfighting Cloud Capability vehicle is a leading example of government cloud. By aggregating requirements across multiple branches of the military, the DoD was able to negotiate discounts and favorable terms that would not likely be available to individual PMO buyers.

And like other verticals, government teams should also implement the key tenets of FinOps: individual accountability (though showback is more common, since chargeback is easily resisted), cross-functional collaboration (though standard procedures must be followed versus organic watercooler conversations), timely and accurate decision-making, and cost. For more detail on implementation and execution, Forrester clients can use the Forrester Solution Blueprint, Optimize Your Cloud Costs With FinOps.