How to prevent your cloud finances from sinking you during economic turbulence
How to establish and maintain a successful cloud financial management (CFM) strategy
COVID-19 has changed – and will continue to change – how the world operates. During these times, products and services need to continue to be delivered during times of economic turbulence where operational and financial efficiency is paramount.
People are increasingly relying on technology to work, communicate, shop, access information, receive healthcare, and more. A majority of these technologies are built, run, and managed in the cloud, which puts immense pressure and urgency on tech leaders. How do we ensure that their cloud infrastructure continues to operate smoothly?
One solution for IT leaders is to establish (and maintain) a successful cloud financial management (CFM) strategy. CFM – sometimes known as FinOps or cloud cost management – is a function that helps organisations align and develop financial goals, drive cost-conscious culture through best practices, establish guardrails to meet financial targets, and gain greater business efficiencies.
A mature CFM function will allow you to make business decisions on accurate return on investment (ROI) analysis, understand how all the components of your cloud environment contribute to total cost of ownership (TCO) and your company’s bottomline, and teach your organisation how best to not waste spend. Right now, continuing to deliver products and services to customers and to help ensure business longevity is the goal.
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?
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 comes from top business objectives: 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 prioritising cost-consciousness now more than ever. So what does this look like?
Ways you can create a culture of financial accountability
Some specific tactics organisation’s with successful CFM functions are using today to build a cost-conscious organisation involve gamification, relying on showback/chargeback for more accurate financial reporting, and increasing financial transparency by enhancing visibility into project/resource consumption and spend.
- Gamification
Many organisations have seen success by gamifying optimisation. An example of gamification could be setting up a contest where teams that take the most optimisation steps for cost, security, and operations can win a prize. At one large manufacturing enterprise, the head of its Cloud Center of Excellence (CCoE) reports that some teams have cut costs in half by gamifying spend.
- Showback/chargeback
Showback shows teams how much budget they’re using and which resources they’re consuming. Chargeback assigns charges to anyone utilising the services.
It’s recommended to start implementing showback first to get teams acquainted with their new responsibilities, metrics, and implications. Once teams have direct financial responsibility for their actions, behaviour changes rapidly. This will help build a culture of financial responsibility.
- Enhance visibility into spend
Another effective tactic for changing behaviour is to show teams when and where there is an opportunity to optimise for financial success.
For example, a change in behaviour 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.
But right now? Yes – right now.
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 bottomline, is the only way to successfully build a culture of financial responsibility.
Agility, flexibility of costs, and innovative technology are some of the primary reasons people adopt the cloud in the first place. The cloud can enable you to reap immense benefits, but in a time like this, where economic uncertainty lingers around the corner, the cloud might be the greatest lifejacket your organisation has – as long as you’re able to manage it.
Learn more about how to build a successful CFM practice and help ensure the longevity of your organisation in the cloud.
