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Accenture research found that a gap is emerging between planned and actual delivered value, with only one in three companies (35%) reporting that they have achieved the expected cloud benefits, with cost 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 overspending in the cloud. From complex pricing and invoicing to a lack of accountability and transparency to reviewing supplier costs in isolation, overspending is quite common.
Furthermore, technology leaders in organizations are increasingly being asked to demonstrate how their cloud spending supports business strategy and is aligned with related goals. How can I solve this? Let’s dig deeper.
Show ROI for cloud investments
Cloud investment and usage across industries is ubiquitous, growing, and constantly evolving. In fact, global spending on cloud services is expected to reach nearly $500 billion this year. Although companies are implementing cloud migration strategies, many are not yet achieving the benefits they originally envisioned.
The answer lies in the fast-growing field of cloud financial operations (aka finops), a methodology that advocates a working relationship between devops, finance and business teams to mitigate cost overruns and close the value gap.
The basic principles of finops include:
- Teams must work together
- Everyone takes ownership of their cloud usage
- Reports should be available and timely
- Decisions must be driven by the business value of the cloud
- Everyone should take advantage of the cloud’s variable cost model
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 with business metrics and supporting strategic decision-making.
To be successful, finops requires a change in behavior and culture that encourages collaboration between devops, finance and business teams. By building financial control, transparency and accountability into the cloud operating model, companies can attribute the true financial costs of the cloud to every relevant part of the organization. This transparency is vital to optimizing cloud usage and ensuring that individual business units and application owners take responsibility for their own cloud usage and cloud costs, aligning spending decisions with the business value delivered.
In short, the entire organization is better aligned around the total cost of ownership of cloud assets. What would you say if your cloud costs suddenly doubled? Well, if revenues have quadrupled on that, cloud spending has doubled is great news. Finops enables this level of business visibility.
Adoption of finops model
How can leaders set finops? It requires internal alignment of IT and business together to manage and optimize the cloud. We recommend that companies take the following actions:
- Create the ability to accurately estimate, forecast and allocate cloud costs back to the business units using them (unshared and shared costs). For example, at one technology hardware company, simply showing cloud consumers where the money was going resulted in the termination of several abandoned sandbox environments.
- Enable real-time, forecasted cloud cost tracking, monitoring and reporting for rapid problem detection and resolution. One financial services team saw daily spend on a serverless feature go from $0.12 to over $14,000 due to a misconfiguration pushed into production. Early detection of such errors is crucial.
- Continually optimize cloud usage by reducing unnecessary spend, as well as purchasing liabilities where appropriate to reduce unit costs, and reporting on savings achieved. The State of FinOps 2021 survey found that the average finops team size at the “Walk” maturity level was seven full-time people. Tracking savings is how this team demonstrates measurable value in addition to the soft benefits of improved visibility, accountability, and realization of technology value.
- Leverage the continuous innovation of cloud services to evolve and reimagine workloads to increase speed, improve value, and reduce costs. Collectively, hyperscale cloud providers invest $10 billion each month in opportunities for their customers.
- Get started with the carbon footprint tools now available from cloud service providers. Cloud use has the potential to be a powerful force for good or bad for sustainability, and more and more companies are setting public carbon targets and reporting them to the stock market and stakeholders.
Overall, finops is an increasingly urgent business imperative across all industries. Its value is continuously proven by enabling an organization to instantly mitigate unnecessary costs and increase business value.
Mike Eisenstein is Accenture’s cloud optimization practice lead and Dean Oliver is cloud finops lead for Accenture Technology Strategy & Advisory
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