FinOps in SaaS – What to Look For
It all starts with a simple idea—software that doesn’t sit on your computer, but lives out there in the cloud. You just log in, do your thing, and it works.
That’s Software as a Service (SaaS).
No installation, no fuss, just software available at your fingertips.
It’s been growing fast.
So fast, in fact, that it’s become the backbone of many industries today.
The brilliance of SaaS is how easy it makes life for its customers. Want to use an app? Create a username, punch in an email, and you’re off. It’s easy on the surface,
but underneath, it’s an orchestra.
You’re not just dealing with an app.
You’re managing servers, storage, networks, operating systems, middleware, runtimes—the list goes on. The developers take care of all that complexity for you, and all you’ve got to do is pay for it.
Usually, you don’t even buy the software; you subscribe to it.
But behind that seamless interface, there’s a storm of cost factors.
The Game of Dollars and Data
But while the customer is living the dream, the company running the SaaS is busy watching their costs. SaaS isn’t free to run, after all.
And this is where FinOps comes into play.
Managing the costs of cloud infrastructure and making sure you’re getting value for every cent. If you’re a SaaS business, you’re not just concerned with delivering a great product—you’ve got to make sure you’re not overspending to deliver it.
SaaS Economics—The Devil’s in the Details
SaaS businesses face multiple cost factors, including:
Infrastructure Costs: Cloud providers like AWS, Google Cloud, and Azure host SaaS products, and the cost structures vary based on usage, storage, data processing, and region.
Operational Costs: Beyond infrastructure, SaaS companies also handle customer support, security, maintenance, and scaling.
Development and Deployment: Building new features, testing, and rolling out updates incur costs in cloud instances, persistent volumes, and dynamic scaling.
Running a SaaS business isn’t just about keeping your software alive.
It’s about keeping it profitable.
And for that, you’ve got to track a few key metrics.
Monthly Recurring Revenue (MRR) tells you how much you’re making month to month. As long as that number is steady—or better, climbing—you’re in good shape. But it doesn’t stop there. You’ve got to keep an eye on your churn rate, the percentage of customers dropping out each month.
Too much churn? You’ve got a problem.
And then there’s the Average Revenue Per User (ARPU). The higher that number, the better. Upsell, cross-sell, whatever it takes to get more value from each customer.
It’s a balancing act—keep the customers happy, but make sure you’re getting what you need from them.
But perhaps the trickiest of all is Customer Lifetime Value (CLTV). This is where SaaS companies win or lose. If it costs more to acquire a customer than they’ll ever pay you in return, you’re throwing money down the drain.
But if you can keep your costs low and your lifetime value high, you’re golden.
The real question is, how to manage these?
Granular Observability—Catching the Small Stuff
Most people think they just need basic cost-tracking. "If I know how much I’m spending, I’m good," right? Wrong. In the SaaS world, costs don’t just exist—they hide, creep, and multiply.
And if you don’t have granular observability, you’re missing the entire picture. It’s like playing hide and seek in the dark—you’ll never find all the players.
Granular observability means tracking costs down to the tiniest level—every microservice, every region, every product feature.
Imagine being able to see exactly how much a new feature is costing you, even before you launch it. Or catching anomalies—like unexpected cost spikes—in real-time.
You’re not just reacting; you’re predicting, preempting, and optimizing.
Why does this matter?
Well, say you deploy a new version of your software. You need to know—instantly—if it’s eating up more resources than it should. Maybe there’s a bug causing it to overload, or it’s gobbling up cloud storage without reason.
If you don’t catch it, you’ll end up with a fat bill at the end of the month.
That’s why companies lean heavily on granular observability and anomaly detection, which, in today’s AI-driven world, is smarter than ever.
It learns from your system, adapting and refining its thresholds to avoid crying wolf when there’s nothing to worry about.
But how?
well, you have options..
You can go the open-source route or invest in a commercial solution. The choice depends on your needs and the scale of your operations.
Commercial tools might cost more upfront, but they often come with a wealth of knowledge and best practices built in.
But your solution should identify the main cost contributors, and cost-generating factors has to be defined.
Without a rock-solid FinOps strategy, you could burn through cash without even realizing it.
That’s why FinOps isn’t just a good idea for SaaS companies—it’s essential. You need to know where every cent is going, at every level of your infrastructure.
Otherwise, you're just guessing.
In SaaS, guessing can get expensive. Fast.