As organizations scale in the cloud, it’s clear they need a new approach to managing and optimizing cost (in addition to managing security and streamlining operations). The problems of distributed teams, coupled with the rapid pace of change and limited visibility and accountability, are real and painful—especially when they lead to unpredictable cloud bills that eat into gross margins.
Cloud Financial Management — sometimes known as FinOps or Cloud Cost Management — is a function that helps align and develop financial goals, drive a cost-conscious culture through best practices, establish guardrails to meet financial targets, and gain greater business efficiencies. CloudHealth is VMware’s dedicated FinOps solution and First Premier Member of the FinOps Foundation.
How does Cloud Financial Management help my business?
When it comes to driving success in the public cloud, many organizations find that the biggest hurdle they must overcome isn’t related to technology. Some of the most significant challenges organizations face are getting their people, processes, and tools to adapt to a faster-paced cloud-centric world.
To help close this gap, leading organizations are establishing a formalized Cloud Center of Excellence or CCoE. The CCoE is a cross-functional working group that governs the usage of the cloud across an organization and drives best practices across functions. One of the three key areas of excellence is cloud financial management (CFM).
The goal of CFM is to align and develop financial goals, drive a cost-conscious culture through best practices, establish guardrails to meet financial targets, and gain greater business efficiencies.
Capabilities of a mature cloud financial management function
Drive financial accountability and ownership across groups
A cloud financial management function is a small cross-departmental group with representatives from finance, operations, and development leadership (versus individuals). One of the core tenants of FinOps is that engineers should consider cost and margins when they are deploying infrastructure. Developers are the lifeblood of technology organizations. Our goal should be to have as little friction as possible between them and their ability to deliver value for customers. That’s why a mature CFM function establishes guardrails to asynchronously govern costs, while ensuring no sacrifices are made to developer productivity.
Make business decisions based on accurate ROI analysis
Businesses are not exclusively driven by cost savings. If you save costs at the expense of delivering innovation that could drive top line revenue, was that really the right choice? In other words: cost savings are the byproduct of executing a strategy, not a strategy unto themselves. Instead of just focusing on cost, the CCoE’s job is to remove friction to be more efficient, whether these efficiencies come from operations, security. A CFM function starts with identifying business KPIs in the context of your technology stack and what actions you should take.
Identify best practices and scale those across the organization
Documenting and sharing best practices and successes from one function can provide a significant advantage for another. One of the responsibilities of the CCoE, and the CFM arm in particular, is to collect, document, and share best practices across the business. In other words, define governance policies that provide guidance on topics like budgets, unacceptable cost increases, on-demand ratios, zombie infrastructure, and set benchmarks such as cost per customer or cloud spend as a percentage of revenue. All of these governance policies will likely vary from team to team, but it helps to set an organization-wide standard and give teams a starting place for defining standards that work for their group.
With cloud financial management, you can take the tactics of FinOps and apply them as part of your CCoE strategy, which goes broader, incorporating business context, and focuses on all ways to improve efficiency, across cost, operations, and security. The CCoE governs the usage of the cloud across an organization and drives best practices across functions.
Want to learn more on how you can optimize costs with FinOps? Watch our webinar CloudHealth and ISG: Optimize Costs with Multi-Cloud FinOps Platforms to learn how to embrace FinOps Principles to continuously optimize cloud investments.