Opening the Blackbox of Cloud Cost Management

Finance leaders share common complaints about managing cloud costs:

  • We don’t know what we don’t know, so we don’t know where to start.
  • Constantly changing infrastructure means that by the time we figure it out, it’s changed.
  • Even when we know where we’re spending, we don’t know how changing the spending might impact our engineering operations.

Unfortunately, the inability to resolve these challenges is not only costing your company money today, but also having trickle-down effects – inaccurate forecasts, overstated margin assumptions, and uninformed pricing decisions as you scale.

Macro focus misses micro opportunities

Preventing these business- crippling problems is fundamental to Cloud FinOps and starts with a better understanding of how cloud dollars are being allocated.

Many companies do not evaluate their cloud spending at a granularity that aligns with their ability to take action. When companies aggregate cloud costs across their organization, while granular cloud spending decisions are being made by individual employees or teams, there’s a disconnect between the provided data and the people who can affect change.

As a result, when cost concerns arise, there’s no clear accountability for resolving the problem.

Knowing how far to drill down into your cloud bill will depend on the structure and division of responsibility within your organization. Ask yourself these questions:

  1. Are there line items in your cloud bill that are aggregated together in a way that hinders your ability to assess where usage or costs are coming from?
  2. Do you have a clear division in your cloud costs between product/service delivery and investment/R&D?
  3. Can you report unit costs (cost-per-usage/volume) and derive unit margins for all cloud services/products?
  4. Can you forecast unit costs (cost-per-usage/volume) and derive unit margins in scenario planning and what-if analyses?

People will resist. Keep moving.

Answering these questions is a start, but real change will be driven by your people.

However, people think they are too busy for change. When it comes to initiating a FinOps initiative, “too busy” translates into “too afraid of what will be found when you dig deeper.”

This is because most conversations about cloud spending start with questioning why costs are so high and what infrastructure decisions drove the increase. (See 5 Mistakes to Avoid When Starting FinOps). Even if these decisions were planned and justified, people will still react defensively to protect decisions they’ve made to deliver on their assigned objectives.

What they hear is you changing the game by asking about cost and efficiency.

They will resist.

They will resist adding responsibilities that do not align with their current objectives.
They will resist gathering the data that helps you unlock your cloud spending.
They will resist tagging and mapping exercises that reveal how costs are allocated.
They will resist speculation about how future work will impact costs.

None of this resistance is because they don’t believe in FinOps or want more efficient cloud spending. It is because they are afraid that you will tell them that they are wrong, make them jump through more hoops, or ask them to do more with less.

This discomfort is good. Added visibility may lead to added vulnerability, but it also leads to added accountability.

The problem is that, previously, “accountability” was used to criticize and take resources away. With FinOps, accountability equals ownership. You want your people to have the full cost and operational understanding so they can own and be the heroes of the efficiency and cost saving story.

However to get to a point where accountability equals ownership, they need to stop being afraid of the change and get over their resistance. This starts with changing the expectations.

People should be able to see and measure the value that their work is bringing to the organization and its customers.

When they can, these are the people who are recognized for their work. These are the people that are chosen to solve big problems and run critical initiatives. These are the people who are looked at first for promotions.

When others see this, they will be part of the laser-focused goal to create the best cloud financial and engineering ecosystem for today’s needs and tomorrow’s growth. Or, they will find an organization where they can work without being accountable for waste and results.

Accept where you are or change

If your organization is too resistant to FinOps concepts, it may not be possible to start yet. Chances are that cost-cutting cycles and best-guess decision making will allow you to mask the twin realities of increasing costs and shrinking margins, at least for a while.

However, high performing organizations will eventually stop accepting this defeat and welcome the change, as hard as it may be. When they do, FinOps practices will fundamentally alter decision-making and improve margins, turning your cloud infrastructure from a cost center to a profit engine.

About Exstratus

Exstratus offloads the hard work of Cloud FinOps – optimization, reporting, forecasting, discounting, vendor negotiation, and architecting for unit economics. 


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