Cloud arrived with promises. The technology could liberate enterprises from the rusty chains of on-prem data centers, freeing engineers from the grind of servicing technical debt and unleashing innovation.
Cloud also loosened the CIO grip on IT spend, as access to on-demand storage and compute spread across business units.
But variable pricing goes both ways — up and down. In the rush to enable cloud, many companies neglected to put spending guardrails in place, according to a February report published by KPMG.
CIOs overcame security concerns and sold cloud to their boards as an efficiency upgrade over on-prem, but a lot of these cloud initiatives are coming back with operating costs that are almost two times as originally projected, Will DeMille, CIO advisory managing director at KPMG, said in an interview with CIO Dive.
As economic forecasts sour, CIOs have had to rethink cloud strategy, scrutinize cost and develop new strategies that align governance structures with enterprise demand for storage and compute.
“There are consequences if you have no controls in place,” DeMille said. “You don’t want to stifle innovation, but CIOs are waking up to the economic realities of decentralized decision-making.”
Shadow IT emerges in the gaps between oversight. Complex billing structures are compounded as companies contract with multiple providers for the sake of hybrid cloud deployments. Finance teams may not understand the technical specifications, and technical teams can delay financial considerations until the bills pile up.
“It's such a shift in governance that companies just aren't used to it,” Len Epelbaum, CIO advisory director at KPMG, said. “They're just so used to paying the bill and forgetting about it. That doesn’t work very well with cloud.”
Tying cost to value
FinOps, a useful term associated with cloud cost control protocols, can obscure the inner workings of a form of governance that requires enterprisewide commitment and participation across business functions.
Nearly three-quarters of companies had a central cloud governance structure in 2022, according to Flexera’s recent State of Cloud report, up from two-thirds in 2019.
Governance can be managed through a cloud business office or a cloud center of excellence. It can also be initiated more informally, said DeMille.
“Given the economic times, some organizations are starting small,” DeMille said. “If you don’t have a formal team just yet, but you’ve got people in finance and IT, maybe some cloud engineers, and they're starting to look at usage on a biweekly basis — you can use that without creating a large, formal structure.”
Visibility into cloud usage, clear lines of reporting and optimizing are core tenets of FinOps.
“You have to create cost transparency that you probably didn’t have before,” Epelbaum said. “Once you can see and measure it, then you can decide on the incentives you want to provide and the behaviors you want to drive. But until you know the cost and can compare that with what you used to pay, it’s hard to connect the dots between value and costs or make good decisions about optimization.”
Transparency can be boiled down to measuring consumption and cost. The next step is to communicate that data in business terms and then construct a plan that ties cost to value.
Without the relevant data, it’s difficult to craft a sensible business plan.
"You have to measure and report first, and then you can get into a continuous cycle of realistically planning what your spend should be, how you should move to the cloud, if you should move to the cloud and what your cloud costs should be,” DeMille said. “That's your nirvana.”