Share this
by Grant Simpson on 08 July 2025
In today's variable cost era of cloud computing, the relevance of unit economics has never been greater. Understanding the cost and value of delivering a single unit of service is central to making smart technology investments.
Unit Economics aligns cost to value
Drawing on my own experience with a utility computing service in the 1990s, it's clear that applying unit economics to cloud infrastructure enables organisations to align technology usage with business outcomes in powerful ways.
Back in the 1990s, we pioneered a model that would be familiar to anyone working with cloud services today: delivering mainframe-based applications as a service. Rather than charging customers a flat fee, we billed them based on the number of business transactions they processed. For a rental car company, we charged per booking. For a medical provider, it was per diagnostic test. This approach offered our customers a predictable cost structure tied directly to their revenue-generating activities.
This model provided immense clarity for both our customers and us. From their perspective, it made the cost of technology highly transparent and controllable. It transformed IT from a sunk cost into a variable cost that scaled with business demand. More importantly, it helped them understand the true cost to serve each product or service. This insight allowed for better pricing, improved margins, and more informed strategic decisions.
How Unit Economics applies to cloud
Fast forward to today, and the same principles apply with cloud infrastructure. Microsoft Azure, AWS and Google Cloud offer fine-grained usage metrics and pricing models that align with resource consumption.
But to truly leverage this, organisations must understand their own unit economics. How much does it cost to serve a customer? What is the cost to deliver a single transaction, data query or report? These questions are not just financial—they are strategic.
Cloud technology amplifies both the risks and the opportunities. Without a clear grasp of unit economics, businesses can over-provision, overspend or underinvest in areas that drive value.
With a strong handle on these metrics, cloud infrastructure becomes a lever for innovation and growth. It enables teams to experiment quickly, invest in automation where it pays off, and optimise operations continuously.
Reflecting on my early experience, I see a direct line from that utility computing model to the value-driven cloud strategies of today. By charging based on business outcomes, we helped our customers focus their investments where they mattered most. That same mindset—aligning IT costs with value delivered—is what modern FinOps practices now promote in the cloud era.
Unit Economics drives real cloud value
Unit economics is not just a finance concept; it is a lens through which to view the entire technology landscape.
When applied to cloud infrastructure, it empowers organisations to make smarter decisions, drive efficiency and focus on what really matters: delivering value to their customers.
Whether in the 1990s or the 2020s, the principle remains the same: when you understand what it costs to serve, you gain the power to grow intelligently.
Getting started
To get started, begin by identifying the core business transactions that matter most to your organisation. Link your cloud costs to these activities using available usage data and cost allocation tools.
From there, calculate the cost per unit and compare it with the value each unit delivers. Even a simple first pass can reveal opportunities to optimise and reprioritise. Over time, this approach will build the foundation for more strategic and outcome-focused technology investments.
The FinOps team at Equinox IT specialises in guiding organisations through this journey, improving your practices, optimising cloud investments and supporting a sustainable FinOps culture. Partner with us to accelerate your FinOps maturity and unlock the full potential of your cloud strategy.
Grant Simpson, Principal Consultant with Equinox IT and Certified FinOps Practitioner.
