Cloud ROI: Getting Innovation Economics Right with FinOps
Is
the
cloud
a
good
investment?
Does
it
deliver
strong
returns?
How
can
we
invest
responsibly
in
the
cloud?
Is
the
cloud
a
good
investment?
Does
it
deliver
strong
returns?
How
can
we
invest
responsibly
in
the
cloud?
These
are
questions
IT
and
finance
leaders
are
wrestling
with
today
because
the
cloud
has
left
many
companies
in
a
balancing
act—caught
somewhere
between
the
need
for
cloud
innovation
and
the
fiscal
responsibility
to
ensure
they
are
investing
wisely,
getting
full
value
out
of
the
cloud.
One
IDC
study
shows
81%
of
IT
decision-makers
expect
their
spending
to
stay
the
same
or
increase
in
2023,
despite
anticipating
economic
“storms
of
disruption.”
Another
83%
of
CIOs
say
despite
increasing
IT
budgets
they
are
under
pressure
to
make
their
budgets
stretch
further
than
ever
before—with
a
key
focus
on
technical
debt
and
cloud
costs.
Moreover,
Gartner
estimates
70%
overspending
is
common
in
the
cloud.
The
need
for
cloud
innovation
amid
economic
headwinds
has
companies
shifting
their
strategies,
putting
protective
parameters
in
place,
and
scrutinizing
cloud
value
with
concerted
efforts
to
accelerate
return
on
investment
(ROI),
specifically
on
technology.
New
Parameters
Designed
to
Protect
Cloud
Investments
While
many
companies
are
delaying
new
IT
projects
with
ROI
of
more
than
12
months,
others
are
reducing
innovation
budgets
while
they
try
to
squeeze
more
value
out
of
existing
investments.
Regardless
of
how
pointed
their
endeavors
are,
most
IT
and
finance
leaders
are
looking
for
ways
to
better
govern
cloud
transformation.
That’s
because,
in
today’s
economic
climate,
leaders
aren’t
just
responsible
for
driving
ingenuity,
they
are
held
accountable
for
ensuring
the
company
is
a
good
steward
of
its
technology
investments
with
concentrated
emphasis
on:
-
ROI:
Capitalizing
quickly
on
new
cloud
technology,
recognizing
benefits,
and
taking
ownership
of
IT
assets,
success
measurement,
and
feedback
loops -
Operationalization:
The
ability
to
effectively
use
and
secure
cloud
assets
as
well
as
manage
new
service
providers
and
expenses -
Sustainability:
Ensuring
that
cloud
transformation
can
continue
to
afford
positive
outcomes
with
minimal
impact
on
the
business
for
both
near-
and
long-term
success
If
the
past
three
years
were
dedicated
to
accelerated
cloud
transformation,
2023
is
being
devoted
to
governing
it.
But
it’s
not
just
today’s
tumultuous
times
calling
for
executives
to
heed
to
the
reason
of
fiduciary
responsibility.
The
cloud
also
necessitates
it—particularly
when
companies
want
to
achieve
ROI
faster.
Cloud
ROI
Dynamics:
Understanding
the
Economics
of
Innovation
The
cloud
can
make
for
an
uneven
balance
sheet
without
proper
oversight.
It needs
to
be
closely
watched
from
a
financial
perspective.
Why?
The
short
answer:
variable
costs.
When
the
cloud
is
infinitely
scalable,
costs
are
infinitely
variable.
Pricing structures are
based
on service
usage
fees
and
overage
charges
where
even
marginal
lifts
in usage
can
incur
steep
increases
in
cost.
While
this
structure
favors cloud
providers,
it
starkly
contrasts
the
needs
of
IT
financial
managers—most have
per-unit
budgets
and
prefer predictable
monthly
costs
for
easier
budgeting
and
forecasting.
Additionally,
companies
aren’t
always
good
at
estimating
what
they
need
and
using
everything
they
pay
for.
As
a
result,
cloud
waste
is
now
a
thing. In
fact,
companies
waste
as
much
as
29%
of
their
cloud
resources.
As
companies
lift
and
shift
their
workloads
to
the
cloud,
they
trade
in-house
management
for
outsourced
services.
But
as
IT
organizations
are
loosening
their
reign,
financial
management
teams
should
be
tightening
their
grip.
Those
who
aren’t
actively
right
sizing
their
cloud
assets
are
typically
paying
more
than
necessary.
Hence,
why
overspending
can
easily
reach
70%.
Achieving
Cloud
ROI
in
One
Year
Achieving
ROI
in
one
year
requires
tracing
where
your
cloud
money
goes
to
see
how
and
where
it
is
repaid.
Budget
dollars
go
down
the
drain
when
companies
fail
to
pay
attention
to
how
they
are
using
the
cloud,
don’t
take
the
time
to
correct
misuse,
or
overlook
service
pausing
features
and
discounting
opportunities.
But
cloud
cost
management
is
not
always
a
simple
task.
The
majority
of
IT
and
financial
decision-makers
report
it’s
challenging
to
account
for
cloud
spending
and
usage,
with
the
C-suite
cite
tracing
spend
and
chargebacks
of
particular
concern.
The
key
to
cost
control
is
to
pinpoint
and
track
every
cloud
service
cost
across
the
IT
portfolio—yes
even
when
companies
have
on
average
11
cloud
infrastructure
providers,
nine
unified
communications
solutions,
as
well
as
a
cacophony
of
unsanctioned
applications
consuming
up
to
30%
of
IT
budgets
in
the
form
of
Shadow
IT.
When
you
factor
in
these
dynamics
and
consider
that
cloud
providers
have
little
incentive
to
improve
service
usage
reports,
helping
clients
better
balance
the
one-sided
financials
of
the
relationship,
you
can
see
why
ROI
can
be
slow-moving.
FinOps
comes
in
to
bridge
this
gap.
Managing
Cloud
Cost
Centers:
The
Rise
of
FinOps
Cloud
services
are
now
dominating
IT
expense
sheets,
and
when
increasing
bills
delay
ROI,
IT
financial
managers
go
looking
for
answers.
This
has
given
rise
to
the
concept
of
FinOps
(a
word
combining
Finance
and
DevOps)
which
is a
financial
management
discipline
for
controlling
cloud
costs.
Driving
fiscal
accountability
for
the
cloud,
FinOps
helps
companies
realize
more
business
value
and
accelerate
ROI
from
their
cloud
computing
investments.
Sometimes
described
as
a
cultural
shift
at
the
corporate
level,
FinOps
principles
were
developed
to
foster
collaboration
between
business
teams
and
IT
engineers
or
software
development
teams.
This
allows
for
more
alignment
around
data-driven
spending
decisions
across
the
organization.
But
beyond
simply
a
strategic
model,
FinOps
is
also
considered
a
technology
solution—a
service
enabling
companies
to
identify,
measure,
monitor,
and
optimize
their
cloud
spend,
thus
shortening
the
time
to
achieve
ROI.
Leading
cloud
expense
management
providers,
for
example,
save
cloud
investors
20%
on
average
and
can
deliver
positive
ROI
in
the
first
year.
FinOps
Best
Practices
As
the
cloud
makes
companies
agile,
managing
dynamic
cloud
costs
becomes
more
important.
FinOps
help
offset
rising
prices
and
insert
accountability
into
organizations
focused
on
cloud
economics.
Best
practices
for
maximizing
ROI
include
reconciling
invoices
against
cloud
usage,
making
sure
application
licenses
are
properly
disconnected
when
no
longer
necessary
or
reassigned
to
other
employees,
and
reviewing
network
servers
to
ensure
they
aren’t
spinning
cycles
without
a
legitimate
business
purpose.
Key
approaches
include:
-
Auditing:
The
ability
to
granularly
collect
and
maintain
service
information
across
the
broader
cloud
ecosystem,
analyzing
real-time
usage
data
in
a
central
system
using
AI-powered
analytics -
Cost
Optimization:
The
insights
to
recognize
cloud
waste
and
quickly
reduce
inefficiencies,
adjusting
services
and
reallocating
unused
app
licenses
or
infrastructure
resources -
Vendor
and
Expense
Management:
The
ability
to
validate
spending
and
use
automation
to
reduce
the
management
burdens
of
bill
pay,
chargebacks,
and
allocation -
Professional
Services:
Strategic
and
tactical
help
at
key
moments
including
cloud
migrations,
cloud
service
discovery,
contractual
negotiations,
and
IT
budget
forecasting
and
spending
Is
the
cloud
a
good
investment?
Yes,
as
long
as
the
company
can
effectively
see
and
use
its
assets,
monitor
its
expenses,
and
manage
its
service.
The
cloud
started
as
a
means
to
lower
costs,
minimize
capital
expenses,
and
gain
infinite
scalability,
and
that
reputation
should
payout
even
after
being
pressure
tested
by
the
masses.
With
a
collaborative
and
disciplined
approach
to
management,
companies
of
every
size
can
recognize
quick
ROI
without
generating
significant
waste
or
adding
unnecessary
complexity.
To
learn
more
about
cloud
expense
management
services,
visit
us
here.
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