September 8, 2025 One Costly Hidden Risk in Government AI Projects

Public sector AI is booming, but without FinOps, cloud costs threaten to stall digital transformation.

By Amol Dalvi, Vice President of Product, Nerdio

As government agencies scale AI initiatives for smarter service delivery, they face a growing challenge: soaring cloud costs without the governance to control them. In fact, 71% of IT leaders report that cloud spend is straining their budgets, yet 87% admit they haven’t implemented FinOps practices to manage this spend.

For public sector CIOs, this disconnect poses a risk to both digital transformation and fiscal responsibility. AI has immense potential to modernize public services, from predictive maintenance to intelligent citizen engagement. But without embedded financial operations (FinOps) strategies, agencies risk runaway costs, inefficient use of resources, and stalled innovation.

AI Momentum in Government

Government IT teams are embracing AI across mission-critical functions – from streamlining benefits processing to improving security through intelligent monitoring. Agencies are leaning heavily on platforms like Microsoft Azure and Windows 365 to support these efforts. However, these cloud-based infrastructures are consumption-based, and without real-time cost visibility and control, AI workloads can become unsustainable.

AI doesn’t just consume cloud compute, it demands it. Training and running AI models requires continuous resource allocation, often spiking during experimentation or peak usage. If this demand isn’t intelligently managed, it leads to budget overruns that slow or even derail innovation.

This is where FinOps comes in.

The FinOps Imperative in the Public Sector

FinOps, or cloud financial operations, is the practice of aligning engineering, finance, and business teams to manage cloud spending effectively. In the context of government IT, it provides the tools and processes to ensure that every dollar spent on cloud infrastructure is delivering measurable value.

For public agencies that operate under strict fiscal oversight, transparency into cloud spend isn’t a “nice to have.” It’s a mandate. FinOps empowers IT leaders to:

• Understand usage trends and allocate budgets more accurately
• Automate scaling based on demand, ensuring resources are used only when needed
• Report on cost savings and operational efficiency, demonstrating ROI for AI and digital transformation investments

Case in Point: The City of Corona

Consider how the City of Corona, California, successfully paired its cloud modernization strategy with FinOps best practices. The city’s IT team was facing a familiar challenge: managing Windows 365 Cloud PCs and Azure Virtual Desktop (AVD) infrastructure across a sprawling environment, while meeting increasing security and compliance demands.

The complexity of navigating Azure, Intune, and other tools led to inefficiencies, delayed troubleshooting, and blind spots in cloud spending. IT staff were juggling security, endpoint management, and budget constraints, often with manual processes and limited visibility.

By integrating IT management and FinOps practices, the City of Corona automated endpoint provisioning, streamlined policy enforcement, and optimized cloud resource allocation. The result?

• Automated scaling that ensured resources ran only when needed
• Real-time reporting on per-user cloud computing costs, allowing budget optimization
• Improved endpoint security and compliance across environments

This shift both reduced IT workload and fundamentally transformed the city’s IT operations, aligning technical performance with financial accountability. In fact, the city saved twice the amount they spend on FinOps practices in productivity gains alone.

What Government CIOs Can Learn

The City of Corona’s experience is instructive for other public agencies. As more governments deploy AI tools, from virtual assistants to intelligent threat detection, they must also adopt FinOps practices that ensure cloud investments remain under control.

Here are three steps to help get started:

1. Automate Resource Scaling
AI workloads fluctuate. Implement automation that scales compute power based on usage, ensuring resources are provisioned only when needed.

2. Improve Cost Visibility
Use cloud management tools that break down spending by user, application, or department. This allows IT and finance to make informed decisions and optimize costs in real-time.

3. Establish Governance Policies
Define who can provision resources, how they’re monitored, and when they should be decommissioned. Align this governance with compliance requirements and financial goals.

AI & FinOps Equals Sustainable Innovation

Without embedded cost governance, AI’s potential is limited by unpredictable cloud spending and strained budgets.

Government CIOs must lead with a dual focus: drive innovation through AI while enforcing financial accountability through FinOps. The agencies that succeed in this balance won’t just improve citizen services, they’ll do so in a way that’s scalable, secure, and financially sustainable.

About the Author:
Amol Dalvi is the VP of Product at Nerdio. With more than 15 years of experience leading product and engineering teams, he is a seasoned software product executive with rich expertise in Microsoft, Cloud, and SaaS. He oversees both Nerdio Manager for MSP and Nerdio Manager for Enterprise products.

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