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Taking control of your cloud finances is now more important than ever and there is no room for wasted spend. More organizations are shifting to cloud-based infrastructures. According to forecasting done by Gartner last year, worldwide public cloud revenue is expected to grow 17.3 percent in 2019. While this is good news for technology innovation, elastic infrastructure poses a challenge for the finance side of the table. CFOs need to ensure that IT and development departments are optimizing spend while encouraging innovation and growth.
The Challenge When it Comes to Cloud Finance
Finance departments continue the search for capital optimization by lowering costs while prioritizing business models that transform and expand with flexibility worldwide. With this flexibility, though, comes complexity that is difficult to manage, deploy, and, most frustrating of all, to forecast.
With rapid growth comes rapid responsibility. If an organization is not cautious, cloud spending can spiral out of control, and using the cloud might seem counterproductive. Finance and IT departments must work together to achieve key business goals and connect the disconnect to avoid a cost control strategy that becomes a project instead of an actionable and executable plan.
Smart Questions CFOs Should Be Asking
With the struggle to control cloud spend, CFOs need to address cloud finance questions and understand how financing impacts operations. After all, most organizations cite lowering costs as one of their primary reasons for moving to the cloud. In order to make sure that financial teams and IT departments are on the same page, here are three smart cloud finance questions CFOs should ask.
1. Are we thinking about the cloud cost model correctly?
Out of habit from the on-premises mindset, many organizations moving to the cloud purchase far more capacity than they actually need. The major benefits for moving to the cloud are flexibility, to allow you to use the cloud based on your real-time needs, and capacity, to match in theory the physical space an on-site data center would provide. Unfortunately, the latter is not true. The majority of companies overspend in cloud resources they are not using for much or all of the time.
So, when CFOs talk to their IT counterparts about cloud spending, they need to ensure that everyone is now in an OpEx mindset, rather than the on-prem model of CapEx.
2. Are we wasting cloud spend?
The answer is most likely yes. To further explain why this happens we need to look at the factors that contribute to this waste. A huge contributing factor is idle resources. The cloud runs 24/7, but most non-production resources used for development, testing, staging, and QA are only needed during the work week. Putting things in perspective, if you work a 40-hour week and only need to use resources during that time, you are paying for resources to stay idle after work hours. Assuming a twelve-hour workday window five days a week, that means 65% of the time you’re paying for resources that sit idle.
Another contributing factor is oversized resources. We recently found that the average CPU usage of resources managed in our platform is only 4.9%. That points to a trend of massive underutilization when resources can easily be sized down for 50 to 70% cost savings.
3. What steps are we taking to control and reduce cloud spend?
IT and development departments will be focused on growth, so it’s often the role of finance to ensure that these teams are putting cost control measures in place for the public cloud. Ensure that your technical departments have an actionable – preferably automated – plan in place to combat wasted cloud spend. Ask for reports broken down by project or team over time, and research cloud optimization platforms that the technical teams should take advantage of. Furthermore, using a cloud optimization platform with automated and analytical capabilities will help you discover cost-savings opportunities and enable more efficient workflows between departments.
The Bottom Line
Finance departments can push the cloud conversation toward optimization of resources, ensuring that IT departments are both innovative and remain within budget. Create a competitive cloud finance strategy to include visibility, flexibility, and governance so that there is an opportunity for the business to function effectively across departments. This will increase ROI, reporting, and fundamentally, the implementation of better solutions to thrive in the cloud.