Editor’s note: The following is a guest post from Susannah Warfield, managing director of financial strategy at AHEAD.
Increasingly murky economic conditions make it difficult for IT leaders to determine technology strategy, budget allocations, and staff resourcing.
Executives are challenged daily to provide technology solutions that support business outcomes, find the most favorable mix of on-prem, private and public cloud, and stay current on the latest technological advancements.
A volatile market is the last variable that anyone wants to add to the balancing act, but it’s now the reality.
Every CFO, CIO and CTO is focused on spend optimization and financial transparency. Most are asking, ‘How do we harvest from existing spend and invest those funds into more innovative solutions?’
Access to financial data is changing
Cloud applications power more daily operations than ever before, and the cloud is forecasted to account for more than 50% of IT budgets by 2025.
But, as cloud usage grows, leaders can begin to lose financial transparency. Purchasing decisions — once centralized in procurement teams — have shifted to a wide range of cloud consumers, causing best practices, consistent data management and visibility into cloud costs to fall by the wayside.
By adopting best practices from the outset— like proper tagging and budget workflows — it’s possible to regain control of cloud spend. FinOps is the framework for establishing cloud best practices, governance and culture to promote financial transparency.
It is common to associate FinOps with just public cloud. But most companies still have some workloads on-prem, which makes FinOps essential for the entire enterprise. Smart investments begin with having the right financial data in the right hands at the right time.
Access to sound financial data helps enterprises answer a host of business-critical questions.
Is this the right strategy? Is it financially viable? Is it the right time to execute considering asset lifecycles and contracted spend? When is a positive return on investment expected? How is success measured?
FinOps can answer these questions and more, but first, it must be implemented in the right way. Follow these steps to achieve financial insights through FinOps.
1. Build the foundation
The best decisions are made when the cost of no change (business as usual) is understood.
Whether examining the full enterprise or just a subset, it’s critical to have a strong financial baseline to compare a shift in strategy against.
This baseline is not always easy to establish, but it serves as the jumping off point (and scorecard) for all strategic initiatives thereafter. It’s worth the effort.
2. Put the data to work
Once a baseline has been established, consider running a chargeback or showback model for the application set. Or create models comparing the various financial outcomes of a specific project.
Timing is not to be ignored. The baseline model should give great insight into contracted and projected spend and should be a key consideration on when and how to move forward.
3. Report and optimize with frequency
More data is always good — but it isn’t effective if it is modeled in a vacuum.
Communication is key as FinOps becomes part of company culture. Share information, successes and best practices to promote adoption. If one business unit successfully executes on a strategic project that was formerly unfunded in a backlog, shout it from the rooftops.
It might cause another business unit to turn over a similar rock. When followed and applied globally, the benefit of a FinOps strategy compounds.
Wherever an organization currently sits on the continuum of cloud and financial transparency, the work is never done. It’s important to regularly assess the FinOps strategy, take advantage of new technology and tools, and pivot accordingly.
Optimization efforts now will pay dividends later, regardless of — and especially during — uncertain economic conditions.