Ben Allard, Vice President and General Manager for Asia-Pacific at Apptio, explores the challenges presented by a surge in public cloud services spend in Australia and offers strategic solutions to help CIOs overcome the resulting ROI puzzle.
As business objectives change and companies respond to market fluctuations, cloud services have become central to organizations wanting the ability to increase or decrease consumption on-the-fly, expedite procurement, expand data protections and capitalize on geographically dispersed ‘locations’.
Gartner says Australian companies will spend AU$10.6 billion on public cloud services in 2021 – a whole year ahead of the prediction made pre-COVID-19 – as they chase the promise of instant, practically limitless capacity and the ability to scale with the press of a button. Meanwhile, total enterprise technology spend is tipped to hit AU$98.3bn in the same period.
But digitization has brought with it complexity and CIOs continue to face headaches when required to capture and report the return on investment (ROI) of cloud. The most common, according to the 2021 iteration of the State of FinOps Report, are visibility, team empowerment and applying cloud financial management (FinOps) principles beyond public cloud spend.
Tackling the recurring conundrums takes a recipe of best practices, proper tooling and cross-functional business alignment.
Allocating costs for full visibility
Successfully managing cloud spend relies almost exclusively on transparency. As a CIO, you must be able to visualize your cloud cost and usage information. If you can’t see where spend occurs and the value that’s being returned to the business, how can you effectively manage spend or report a ROI?
To gain full visibility, it is critical to have the ability to categorise all public cloud spend and usage. In reality, most organizations struggle to pull together this information from disparate sources and lack a solution to accurately aggregate them into a unified and actionable view. Today, as many as 63% of companies need new IT capabilities and better financial management to optimize their costs and make better strategic decisions.
Craig Wishart, CIO at KPMG Australia, says using spreadsheets to manage costs is like solving one side of a Rubik’s Cube – it’s pretty easy to do with one colour. But with a methodological framework that provides a multi-dimensional view of financial data, business chiefs can complete the full puzzle and don’t find themselves taking their business apart after the fact.
Cloud cost management is complicated by the fact that cloud costs are variable in nature and charged in myriad ways. This has been further amplified by the accessibility of cloud services to line of business owners and teams, with technology spend no longer exclusively funnelled through IT departments.
That makes aggregating charges and understanding costs in a multi-cloud environment extremely challenging. And without that ability, it is nearly impossible to measure the effectiveness of procurement decisions and ultimately, the value cloud brings to the company.
Here’s a typical scenario of cloud cost management at play: a tool automatically normalises detailed information from the vendor billing files, provides capabilities to map spend to organizational constructs, and allocates container and shared service charges. CIOs subsequently receive a trove of accurate, centralized spending data to inform decision-making that improves the unit economics – and increases the business value – of cloud.
Empowering teams and driving accountability
Unfortunately, even with the right processes and tools in place, it takes cross-functional understanding, support and ownership to deliver an effective cloud financial management practice.
Infrastructure procurement decisions are typically dispersed across engineering and DevOps teams, so properly enabling them to take action is critical. This includes not only providing them with relevant insights and recommendations but also well understood workflows and a means to measure the ROI of actions taken.
This requires integration between the FinOps and DevOps tools used every day by engineers and developers – making it seamless to action recommendations and measure realized savings. This is the main challenge burdening FinOps teams today as highlighted by the State of FinOps Report.
Ensuring organizational alignment also requires leaders and operational teams to have access to relevant information wherever and whenever they need it. Cloud cost management and optimization solutions must-have customizable reporting capabilities, with the ability to surface or hide information based on role or permissions.
Reports should be easily shared, provide up-to-date data and analytics and maintain granularity with full data retention across any time period to fully scale accountability across an organization.
Teams should also work together to establish key performance indicators (KPIs) to provide direction to decision-making that balances business objectives with infrastructure procurement decisions. Through this process, teams can agree on key trade-offs – like when to accept higher costs to accelerate a revenue-generating activity – and readily report back on outcomes.
Looking beyond IaaS
Cloud financial management is multi-faceted and to address only Infrastructure-As-a-Service (IaaS) ignores spend across key related areas. Financial management of a full cloud ecosystem must also contemplate non-IaaS spends, like Software-As-a-Service (SaaS) and on-prem commitments.
However, despite the inherent need to validate ROI, many CIOs and CTOs don’t have a clear view of all costs pertaining to SaaS and other applications that staff rely on – particularly those bought up as band-aid measures during lockdowns and intermittently as offices reopened in Australia.
The FinOps practice can be applied across each of these elements and can bring together a holistic management perspective, but it must be supported by the right solution to help teams manage across these different environments.
In a recent pulse survey of CIOs and other technology decision-makers, 78% are only in their first 12 months of establishing a granular model for managing cloud spend across increasingly complex business environments, with only a fraction beyond the one-year mark.
What’s stopping Australian companies from getting this full view of their operations and spend? The survey also showed organizations are predominately struggling with: availability and quality of the data they are analyzing (58%), integration with other internal financial processes (50%), decentralized or multi-agency organizational structure (42%), cultural change and skillset (33%) and technical setup and perceived time-to-value (25%).
CIOs need cloud financial management capabilities, and the ability to analyze, optimize and plan investments across the entirety of their technology portfolio, regardless of service type (including infrastructure, platform or software), provider, delivery model or deployment destination – across public cloud, private cloud or on-premises.
The challenges of cloud are continuously evolving and expanding but are far outweighed by the feats teams are able to accomplish through its use. Smarter cloud spend and its on-going management provides a means of engaging boards, executives and other stakeholders in an informed, data-driven model to ensure business objectives are accelerated.
Based in Brisbane, Australia, Ben Allard is Vice President and General Manager for Asia-Pacific at Apptio, a provider of cloud-based technology business management and IT financial management solutions.
