COVID-19 has changed—and will continue to change—how much of the world operates. Over the last few months, we’ve seen how people around the world are increasingly relying on technology to work, communicate, shop, access information, receive healthcare, and more. But what most consumers probably fail to realize is that a lot of these technologies are built, run, and managed in the cloud, which puts immense pressure and urgency on tech leaders to ensure their cloud infrastructure continues to operate smoothly. And in order to ensure that products and services continue to be delivered during times of economic turbulence, operational and financial efficiency is paramount.
One solution for IT leaders? Establish (and maintain) a successful Cloud Financial Management strategy. Formally, Cloud Financial Management (CFM)—sometimes known as FinOps or Cloud Cost Management—is a function that helps organiations align and develop financial goals, drive cost-conscious culture through best practices, establish guardrails to meet financial targets, and gain greater business efficiencies.
As an IT leader, you're probably wondering why you should be thinking about whether or not you have an established CFM function, when COVID-19 has shifted, reshifted, and will likely reshift again, all your plans for the next few quarters? Informally, a mature CFM function will allow you to make business decisions on accurate ROI analysis (so you don’t waste spend), understand how all the components of your cloud environment contribute to TCO and your company's bottom-line (so you don’t waste spend), and teach your organization how best to not waste spend. And right now, to continue delivering products and services to customers and to help ensure business longevity, you better not be wasting spend.
Do I already have an established CFM strategy?
To be quite frank, you probably don’t. A critical component to the success of a CFM initiative is establishing, and more importantly maintaining, a culture of financial awareness and accountability—and that’s not easy to do. For many traditional engineering teams, the priority has always been speed and agility, with often little weight being given to understanding and managing cost. This prioritization isn’t necessarily something these teams should be blamed for, as it’s common for executives to distill to their organization that enabling developer productivity is a top business objective: innovate and bring-to-market faster, or lose to your competitors.
But there are ways to increase awareness and accountability related to cost without sacrificing productivity, and business leaders need to focus on prioritizing cost-consciousness now more than ever. So what does this look like?
Ways you can create a culture of financial accountability
Some specific tactics organization’s with successful CFM functions are using today to build a cost-conscious organization involve gamification, increasing financial transparency by enhancing visibility into project/resource consumption and spend, and relying on showback/chargeback for more accurate financial reporting.
Many organizations have seen success by gamifying optimization. For example, you might set up a contest where teams that take the most optimization steps for cost, security, and operations can win a prize. At one large manufacturing enterprise, the head of their Cloud Center of Excellence (CCoE) reports that some teams have cut costs in half by gamifying spend.
Enhance Visibility into Spend
Another effective tactic for changing behavior is to show teams when and where there is an opportunity to optimize, and what the outcomes—especially the financial ones—would be for taking action. For example, a change in behavior is much more likely if you show an engineer that by selecting a smaller VM or instance, they could save the company 50% in cost and still have more than enough performance to run their workload, compared to if you just told them that over-provisioning is a bad practice.
So how do you get this done? It starts by enhancing the visibility these teams have into their day-to-day work—subscribe them to reports that show resource utilization metrics and spend (projected, budgeted, etc.) for their current projects or applications. But don’t stop there, build policies that alert them when their project is expected to go over-budget or when there is an opportunity to optimize their resources, and integrate those alerts and reports into familiar tools that are already in use, such as Slack or Jira.
Many organizations start by implementing showback first, which show teams how much budget they’re using and which resources they’re consuming. While showback introduces teams to new metrics they were unlikely to have seen before, showback also introduces a new level of responsibility for team, project, or application performance. Make sure you give time for your teams to adjust to these new implications before advancing towards chargeback—which assigns charges to anyone utilizing those services. Once teams have direct financial responsibility for their actions, behavior changes rapidly.
In a time where transparency has arguably never mattered more, showing—not just telling—teams what they can do to improve both their performance and cost efficiencies, and how their actions ultimately contribute to the company’s bottom-line, is the only way to successfully build a culture of financial responsibility.
Start with an action plan (here’s the first few steps)
With everything going on in the world today, with all the new distractions for your remote and distributed workforce, your company’s evolving business strategies, the shift in day-to-day operations—all this to say nothing of the changes in your personal life—it would be ignorant for me to assume that developing your CFM function is at the top of your priority list. I would understand if your initial reaction was to put this on the back burner, turning your attention to focus on keeping those teams and projects deemed ‘business-critical’ afloat. But that’s the beauty of a developed CFM function… it’s success is crucial to the success of your organization as a whole.
To be clear, building a successful CFM won’t happen tomorrow or next week; this isn’t a project that just happens overnight—its creation needs to be purposeful to ensure a strong foundation, as well as collaborative and cross-functional so that it represents all facets of your business. But that doesn't mean you can’t—and more importantly shouldn’t—start now. Even as stakeholders from across your organization work to balance computers and kids on their laps, you can be taking next steps to transform the way your organization manages it’s cloud finances.
Here’s an action plan to help you get started:
Establish. Kickstart your program with a well-defined charter. For example, identifying key stakeholders, cloud services to use, cloud budget, and strategy on improving financial transparency, etc. can all happen right this second.
Collaborate. Form a cross-functional team that includes members from engineering, finance, and management teams (at the very least).
Partner. Identify a proven cloud management platform to serve as a trusted partner.
Measure. Establish KPIs to track progress and report out to stakeholders (we’ve got a list of KPIs you should be tracking at each stage of your cloud journey here). Ensure you are getting the right data to your users.
Document. Build a library of best practices and processes to be adopted across teams. Share what’s been successful (and perhaps what’s failed) to other teams across your company so they can follow in your footsteps.
Automate. Manual optimization is not scalable at the speed of cloud growth and change. Start by identifying where teams are spending their time and investigate how automated governance policies can free up their workloads.
But right now? Yes—right now.
Agility, flexibility of costs, and innovative technology are some of the primary reasons you went to the cloud in the first place. The cloud can enable you to reap immense benefits, many of which help improve the experience of both your customers and your internal teams and process. But in a time like this, where economic uncertainty lingers around the corner, the cloud might be the greatest lifejacket your organization has—as long as you're able to manage it.
Learn more about how to build a successful Cloud Financial Management practice and help ensure the longevity of your organization in the cloud.