Traditionally, enterprise technology spend has been centralised and quite tightly controlled by IT. However, with modern trends such as the shift to cloud computing and SaaS, technology decisions are devolved across the business and are more likely subject to variable consumption based pricing and Opex budgeting.
For instance, in the Infrastructure-As-A-Service world such as that provided by AWS or Azure, individual developers are often granted the rights to create infrastructure at the click of a button. At enterprise scale, you can therefore end up with thousands of people creating and destroying infrastructure and exposing the business to costs without the benefit of centralised oversight or controls.
This ultimately exposes the organisation to financial risk, as costs can increase with limited visibility, transparency and controls and with inadequate cost allocation to correct budgets. By the time someone realises there is a problem, the systems and processes can become critical to the business and difficult to migrate away from, so the costs become embedded.
As cloud based spend is increasing rapidly and becoming the norm, and as cloud environments are becoming more complex and dynamic, this is a growing problem for organisations who need to become much more proactive and put better guardrails in place.
Though this would all concern many executives, we have to remember why organisations are moving to the cloud. The main driver is typically about improving innovation and reducing time to market, specifically by devolving control away from central IT. Therefore, what we need is a solution and an operating model which allows for the good things associated with cloud whilst also improving financial controls.
Cloud Cost Management
Cloud Cost Management is a maturing set of tools which has evolved to provide visibility, controls and governance around cloud costs.
Over time, the cloud providers themselves have improved their native capabilities in this area. In addition, there are a number of third party solutions such as CloudHealth, Cloudability and Cloudcheckr which focus deeper on this specific problem.
By combining features of the cloud platform with third party tooling, enterprises can get to a state where they can continually monitor how cloud resources are being used within the business, and provide solutions to keep costs transparent and in check.
Many of the tools in this space go beyond simple visibility and reporting towards higher level advisory about how to make your consumption more efficient. This could include advising which instances are being under-utilised, which ones could be auto-scaled, which ones can be right-sized, and where there is scope for pre-payment agreements to reduce the cost profile.
Beyond basic reporting and monitoring of cloud spend, other capabilities and areas of innovation include:
- Cloud Native Services - Though the obvious unit to monitor is the virtual server, increasingly, people are consuming cloud services higher up the stack. These include databases, storage, messaging, and serverless platforms, which are all subject to consumption based pricing and therefore need to be monitored, controlled and governed;
- Security & Compliance - After monitoring servers from a cost perspective, it’s an obvious adjacent move to look into areas such as security and compliance, including who is creating and accessing resources, and whether compliant resources are being created (for instance, created with the necessary encryption, with no code known to be vulnerable and supportive of e.g. GDPR or HIPPA compliance);
- Cost Analytics - As environments become more complex, the tools and visualisations which we need to understand the cost profiles likewise need to improve. Therefore, the analytics in the cloud management space are becoming more real time and beginning to incorporate predictive analytics, forecasting and anomaly detection;
Though Cloud Cost Management tooling has been around for some time, I think only now is it really reaching the point where it’s ahead of the game in how enterprises are using cloud, such that we can feel really in control and on top of spend.
As with many things, technology is only half of the solution.
Moving to consumption based OpEx devolved across the business is a fundamentally different way for businesses to pay for things. If we are going to avoid friction, it therefore means that the processes by which the business, IT and finance need to work together also need to be revised. Accountability for budgets need to change, transparency has to increase, and culturally, we need to move towards collaboration, trust, accountability and outcome orientation as per the broader digital transformation journey.
FinOps.org is a good starting to point to learn more about this emerging field.
To conclude, the parallel adoption of FinOps processes and the technical side delivered through modern cost modern management tooling are both necessary. By doing this, businesses will be able to to strike the right balance between capitalising on the opportunity of the cloud whilst remaining cost efficient.