Do you stick to a budget in December? From parties, festive get-togethers and presents, your budget gets a hammering… Spending freely is fun until the bill arrives and when it does the fun is soon forgotten. But putting on your Scrooge hat, staying Home Alone and counting your money is no way to live either! There is a balance to be struck here.
Just as there is plenty of festive fun available in December, there is plenty of innovation value in the cloud. Just as you can overspend in December, you can overspend in the cloud. We can’t help you strike your December fun/spend balance, but we can help with your cloud spend/value.
Tracking your cloud budget
Managing your cloud budget can seem complicated and overspending in the cloud is more common than you think… McKinsey estimates that enterprises are overspending in the cloud by a staggering 30%! Luckily, there are many solutions available that can help you to optimise your costs, monitor your spend and identify anomalies.
The first secret to tracking your cloud spend accurately is that you can’t track what you can’t see. Cloud cost management software helps you to control your cloud services by monitoring your usage, notifying you when you’ve exceeded your budget via spend alerts and highlighting any wastage and redundancies.
Bridging the gap between technical and finance teams
Knowing how to act on what you see means you need to bridge the gap between your technical and finance teams. When migrating to the cloud, technical teams have lots of resources available for support and external consultancies to help them find their feet in the cloud. The help available to finance and business teams are not always so obvious. All too often, organisations work at the pace of the technical team and when new technology is ready, the rest of the organisation must immediately follow suit. This can be overwhelming with finance teams struggling to feel in control and able to answer questions on spend that has already been incurred.
Automated, real-time views on cloud spend, who is accountable for it, understanding what drives it and where it is changing is crucial to finance teams. Such views should also provide a clear link to the technical detail. This allows finance teams to ask specific and relevant questions in a way that engineering teams can understand and explore to provide answers.
Using unit economics to manage your cloud budget
Viewing cloud costs as a driver of business value rather than as out-of-context isolated operating expenses is one of the most important concepts of FinOps. For example, a well-tuned retailer whose cloud spend grows directly with spend will welcome a large spike in their cloud spend on Black Friday!
A unit economics model assesses your cloud costs against your business metrics. You can choose from different business metrics that are relevant to your business model including revenue, users and customers. Once you have defined your business metrics at an organisational level, FinOps experts must institute processes including tagging, cost allocation, chargeback and showback. This will allow your organisation to have informed conversations and to evaluate the effectiveness of your cloud costs. These common business metrics allow for much more intelligent and effective decision-making across your organisation. The more accurately you can account for spending vs the value it brings, the greater your confidence in growing in the cloud.
Watching and understanding your spending isn’t always enough. Our first blog in this Festive FinOps series discussed ways to address overspending.
Do you need help managing your cloud budget? For more advice on how to better understand your cloud usage, click here.