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Accenture research found that a value gap is emerging between planned and actual value realized, with only one in three companies (35%) reporting that they have achieved expected cloud benefits, with cost being cited as a key barrier to achieving this.
As the cloud becomes the digital core of business today, organizations often encounter common problems that can lead to cloud overspend. From complex pricing and billing to a lack of accountability and transparency to reviewing supplier costs in isolation, overspend is quite common.
Furthermore, technology leaders in organizations are increasingly asked to demonstrate how their spend on cloud is supporting the business strategy and how it is aligned to the associated targets. How can they solve this? Let’s dig deeper.
Showing ROI for cloud investments
Investment in cloud and usage across industries is pervasive, growing and constantly evolving. In fact, global spending on cloud services is expected to reach nearly $500 billion this year. Although companies are executing on cloud-migration strategies, many are not yet achieving the benefits they originally imagined.
The answer lies in the rapidly advancing domain of cloud financial operations (aka finops), a methodology that advocates for a collaborative working relationship between devops, finance and business teams to mitigate the cost overruns and close the value gap.
The fundamental principles of finops include:
- Teams need to collaborate
- Everyone takes ownership for their cloud usage
- Reports should be accessible and timely
- Decisions need to be driven by the business value of cloud
- Everyone should take advantage of the variable cost model of cloud
Deploying finops capabilities in an organization typically has the immediately measurable benefit of reducing cloud spend by 20-30% while enabling better alignment of cloud spend to business metrics and supporting strategic decision-making.
To be successful, finops requires a change in behaviors and culture that fosters collaboration between devops, finance and business teams. By building financial control, transparency and accountability into the cloud operating model, companies can assign the true financial cost of cloud to each relevant part of the organization. This transparency is vital in optimizing the use of cloud and ensuring individual business units and application owners take responsibility for their own cloud usage and cloud costs, aligning spending decisions with the business value being provided.
In short, the whole organization is better aligned around the total cost of ownership of the cloud estate. What would you say if your cloud costs suddenly doubled? Well, if revenues quadrupled connected to that, twice the cloud spend is great news. Finops enables this level of business visibility.
Adopting the finops model
How can leaders put finops in place? It requires internal alignment across IT and the business working together to manage and optimize cloud. We recommend companies take the following actions:
- Create the ability to accurately estimate, forecast and allocate the costs of cloud back to the consuming business units (non-shared and shared costs). For example, at one tech hardware company, just by showing cloud consumers where the money was going resulted in decommissioning several abandoned sandbox environments.
- Enable real-time monitoring, tracking and reporting of cloud costs in line with forecasts to quickly detect and resolve issues. One financial service team saw daily spend on a serverless function go from $0.12 to over $14,000 due to a misconfiguration that got pushed to production. Catching mistakes like these early is crucial.
- Continuously optimize cloud usage through reduction of unnecessary spend, as well as purchase of commitments, where suitable to lower the unit costs, and report on achieved savings. The 2021 State of FinOps survey uncovered that the average finops team size at “Walk” level maturity was seven full-time people. Tracking savings is how this team shows measurable value in addition to the soft benefits of improved visibility, accountability and tech value realization.
- Leverage the continuous innovation of cloud services to evolve and re-imagine workloads to increase speed, improve value and lower cost. Collectively, the hyperscale cloud providers are investing $10 billion each month into capabilities for their customers.
- Get started with the carbon footprint tools now available from the cloud providers. Cloud use has the potential to be a powerful force for good or for ill for sustainability, and more and more companies are setting public carbon goals and reporting them to the stock market and stakeholders.
All in all, finops is an increasingly urgent business imperative across industries. Its value is proven continuously by enabling the organization to instantly mitigate unnecessary costs and increase business value.
Mike Eisenstein is the cloud optimization practice lead for Accenture and Dean Oliver is the cloud finops lead for Accenture Technology Strategy & Advisory