Cloud costs and elephants: creating a cost-conscious culture
Put a group of blindfolded people in a room with an elephant and ask them to describe it. One will feel the side and say it’s a wall. Another will touch the trunk and say it’s a snake. Someone encountering a tusk might think it’s a spear.
The reason they can’t identify the elephant in the room is that each person is only seeing their part. They’re not working together.
The elephant in the room is runaway cloud costs. And the blindfolded people are cloud engineers and developers, finance people, and the business unit budget holders who own the cloud-based system.
These people need to start understanding each other and communicating better so they can understand cloud costs from each other’s point of view and collaborate to optimize them.
Why is culture an issue in controlling cloud costs?
What makes culture so important in controlling cloud costs is that everybody’s job is changing. In the past, finance only had to deal with IT that was acquired through capital purchase, amortize it, and forget about it. Now they have to manage costs incurred on an opex model that can fluctuate widely month to month.
This is a big cultural change for them. Finance people don’t generally understand the technical choices driving the cost structure or why ongoing usage costs vary so much. Crucially, without a better understanding of what their technical and business colleagues are doing, they can’t tell whether these costs are justified, how they should be allocated, or whether they’re producing a return.
In the capex world before cloud, developers never had to worry about how much things cost. They just developed applications however they saw fit and it was someone else’s problem to pay for the infrastructure.
Now they have unlimited cloud resources at their fingertips – and with great power comes great responsibility. They need to put a finance hat on and think about the financial impact of their decisions.
For example, a developer’s designs can easily inflate cloud logging costs. At the beginning of a project, they might simply turn everything on and work out later what they really need. For one US public sector organization we worked with, 75% of these costs were completely unnecessary.
Finally, the business unit stakeholder also needs to start thinking in a more collaborative way.
Say a marketing department is planning a campaign and expects to generate 5 times the normal amount of web traffic. That’s great because it’s going to make more money. But they need to inform the technical team of their plans in case they’ve put a cap on usage and excess costs get charged at a premium rate. And they need to inform finance that although usage costs are going to spike next month, they’re justified by the additional revenue.
What does cultural change look like?
You need to set up a project or center of excellence to look at cloud costs. It needs to have a high-level executive sponsor, a clear set of objectives, and the means to communicate across the team and report on its progress.
The technical team needs to start giving finance visibility into cloud costs which aligns with how they understand the business. This means structuring and labeling cloud costs in the same way that finance usually thinks about their cost centers.
Technical, finance, and business owners need to work together to establish standards, e.g., for logging not to exceed a certain proportion of overall cloud costs. If a cloud resource is only used by one department, it’s easy to allocate it. But many cloud resources are shared, and the organization needs to decide how it wants to allocate these costs; on a linear basis or pro rata according to usage.
Every organization is different and is at a different stage in how they’re managing cloud costs, so initiatives need to be right-sized for each organization. This is not a one-time exercise – launch dates slip, scopes change, and usage varies – so cloud cost monitoring and forecasting needs to be done not only collaboratively, but continuously.
How do you overcome resistance?
Resistance usually arises from a difference of opinion driven by different teams valuing different things: developers value speed and freedom; finance values predictability and control; business unit owners value adherence to budget.
To avoid disagreements, come to the table early with a set of standards and processes that make cloud cost management a bit less ad hoc and a bit more formal. This helps the group as a whole determine which costs are adding value and which are just waste.
The ideal is to arrive at some key unit cost measure, e.g., cloud costs per average sales transaction, which relates cost to value. This will give all the departments involved a common language and a reference point on which they can all agree.
A key element in achieving a cloud cost-conscious culture is to make it someone’s job. We recommend appointing a technical advocate for finance – someone in the IT department with a formal responsibility for cloud costs. They need to have skin in the game. Their objectives should be aligned with achievement of the organization’s agreed upon KPIs, e.g., the minimum acceptable utilization of a cloud resource.
Is it easy – or will you need help?
You need someone to come into that room and tell the blindfolded people what the elephant looks like. The main reason why an organization brings in a consultant is because an outsider can see what they can’t.
A neutral third party is very useful in helping bring together a group of people who don’t normally communicate and don’t understand what information each other needs to do their job.
Some mutual education may be required: finance people may benefit from a basic understanding of agile development methodology; and it might help an engineer to understand finance’s month-end and year-end processes.
An independent facilitator can help one department find ways to embed the other in its processes. To prompt a developer to consider the cost implications of their design decisions. Or to give a finance manager enough of an understanding of cloud costs to know when costs are acceptable and when to push back.
An independent advisor also helps avoid conflict by attending to the psychological aspects of the project. Moving the group from a sense of “us against them” to a shared understanding, a common language, and cultivating a sense of “we’re all in this together”.
For a deeper dive, read our white paper FinOps 101 – Making the most of your cloud technology spend. Or, to get in touch with a cloud FinOps advisor, contact firstname.lastname@example.org.
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