Finance teams aren’t always in the decision-making room for RI purchases, but at CloudHealth Technologies, our finance team is anything but ordinary. CFO Larry Begley and I recently sat down with our Business Development Team to share our perspective as finance leaders at a tech startup.
A Finance perspective on cloud spend
At re:Invent 2016, I had the chance to demo the CloudHealth platform and speak with finance professionals at other tech companies. A common grievance I observed was difficulty allocating costs to different business units and functional areas within an organization.
Just like any other organization’s finance team, our #1 priority is to ensure that cloud spend is properly allocated to different budgets. For example, we regard Reserved Instances as assets which amortize over time, and we count pay-as-you-go charges as operational expenditures. In order to keep track of everything, we rely on CloudHealth cost management reports, such as the Cost History Report.
Platform adoption is only half the battle
The CloudHealth platform can save finance teams a great deal of time and gray hairs, if—and that’s a big if—the platform is leveraged to its full potential. To get a grasp of how finance leaders are leveraging the CloudHealth platform, Larry meets with customer CFOs whenever possible. Larry has observed that it’s a challenge to get finance teams to leverage the full breadth of the platform to track and allocate costs, amortize RIs, and optimize resource procurement. Whenever this feat is achieved, Larry sees it as a victory for CloudHealth.
The trouble with spreadsheets
While it’s true that finance leaders view cloud spend differently than engineering or operations leaders, we too need a unified platform like CloudHealth for tracking costs and optimizing spend. I shared the story of one company whose monthly cloud spend quickly ballooned up to $100k, after they adopted AWS, without an established way of budgeting or allocating costs.
To track these expenditures, the company’s Finance team built their own “optimizer” using complex Excel models to reflect nine purchasing options (e.g., all upfront RIs, partial upfront RIs for both three- and one-year terms, etc.). Since these models were created manually, they became outdated whenever AWS would update their service or price offerings. Moreover, they were unable to track data continuously in real time. This lack of automation ate up a great deal of employee hours, with each report requiring up to eight hours of working in Excel and Access. Had that company had CloudHealth, they could have saved time and simplified their Reserved Instance planning by using the CloudHealth RI Optimizer.
Stop letting cloud costs eat your margins!
Like all finance leaders, Larry and I are primarily concerned with maintaining strong margins, and we understand how CloudHealth benefits finance teams because we use it ourselves. To prevent cost escalation, we enforce a goal of ensuring that RIs comprise at least 80% of CloudHealth’s own infrastructure. This target is enforced through monthly RI planning meetings, with engineering and product management, where we discuss resource procurement and figure out a remedial course of action for when RIs fall below the 80% target.
