Why Cloud Financial Management and a Story About Myself
Speaking of cloud financial management, it triggers a flashback to my first-grade days when we were about to embark on the wild journey of abacus enlightenment. In every math class, the teacher rolled out a math riddle like a puzzle from a wizard’s brain. After the ultimate countdown, “1, 2, 3!” the entire class went abacus-crazy, fingers dancing like bees on a honey hunt. Speed is the name of the game. Whoever cracks the abacus code in record time scores some serious stationery swag. Though I couldn’t remember how many times I won, I remember the distinct sound of the wooden beads being swiftly moved up and down; crisp and pleasant, it was impressive and oddly therapeutic to listen to!
Wait for it — a plot twist incoming!
There came a day when I forgot my abacus at home! Unfazed by the pouring rain, my father pedalled several kilometres to deliver the abacus to me. As if by magic, he stood on the other side of the school fence, just in the nick of time for the abacus challenge. Through a gap in the fence, my abacus was passed to me — a triumphant moment as it meant a chance to win even more coveted stationery treasures. However, amidst the excitement, I couldn’t help but notice the fusion of raindrops and sweat on my father’s forehead, and his shirt drenched from the effort. Within 10 seconds, a whirlwind of gratitude swept through me, yet a weighty sense of guilt accompanied it. This emotional rollercoaster etched a memory that remains indelible.
The lesson learned from this soggy abacus saga was profound. From then on, I diligently conducted my nightly school bag inspection, ensuring that every pencil, notebook, and, of course, my cherished abacus, were primed for the challenges of the school day battlefield.
That’s the story.
This story of mine may have nothing to do with this blog, but I’m sure they are somehow related to where I am today. My father has always been my hero in many ways (not just because of delivering the abacus), and I still love numbers and finance, and I love making money (for myself and customers). I think that’s also why I ended up in FinOps — FinOps is about making money.
Now, the actual blog :)
Before we talk about what Cloud Financial Management (CFM) is and whether it is worth investing in a practice of your own, let’s have a look at what’s happening in our digital world:
According to Gartner’s most recent release in April this year, global end-user spending on public cloud services is expected to increase 20.4% in 2022 to reach $494.7 billion. Total spending is anticipated to surpass $600 billion in 2023. It’s fair to say that Cloud is the engine that powers today’s digital organisations.
With the Cloud now being mainstream, it is unsurprising that cost reduction is a key consideration. Some research suggests that organisations can expect to save between 20% and 40% of their IT spend after moving to the Public Cloud. In reality, however, this is not the case for all those who take the leap. “Organisations with little or no cloud cost optimisation plans rush into cloud technology investments end up overspending on cloud services by up to 70% without deriving the expected value from it(Ref).” Which best describes your cloud experience?
Reflecting on these numbers, there are great benefits to using the Cloud, but without some investment in maturity and governance, it may cost you far more than you expected.
“Keep calm and carry on”.
If you’ve ever been involved in managing or overseeing public cloud spending, you’ll likely be familiar with the seemingly straightforward cost model of “pay as you go”. However, delving into the actual billing data can leave you feeling thoroughly perplexed. Over the past six years, I’ve handled AWS billing or cost optimisation for more than 40 customers. I recognise that as organisations’ Cloud investment expands, scaling up in a cost-efficient manner can present significant challenges. You’ve probably also realised that managing cloud costs is far more intricate than initially anticipated. At times, you may find yourself grappling with the delicate balance of competing business, finance, and operational priorities.
You are not alone. Here comes the CFM.
Firstly, for this blog, I would like to define the CFM practice as a discipline that drives cloud transparency, efficiency, and rate optimisation through people, processes, and technology. CFM uses best practices, data analysis, and reporting to achieve the business’s goals. If Cloud is the engine of the digital world, then a CFM practice is the lever that helps you realise the business value in the Cloud. CFM is the megatrend.
Secondly, I’d like to clarify: when we talk about CFM (also known as FinOps), many people may confuse it with CostOps, which focuses more on cutting costs. FinOps, on the other hand, incorporates cloud operations and governance insights into the finance process as well as technical (you can read more about this in Tim Prentice’s blog below).
Lastly, CFM, or FinOps, requires investing time and money. To help you determine if investing in this practice will drive value for you, there are some simple questions you can ask:
Do I have access to near-real-time cost data?
Are cost anomalies identified before I am billed ? And how quickly can I respond to them?
What portion of my Cloud cost can be precisely attributed to a business/product owner?
How many unused resources am I paying money for? And what’s my governance aroud this?
How confident am I that we are securing the most favorable rates from our Cloud providers?
These questions represent the spectrum of your Cloud Financial Management maturity in terms of visibility, transparency, efficiency, optimisation, automation, and governance. If you are confident about most of these items, then that’s great! If not, don’t flip a table yet; it’s time to level up your CFM maturity.
Remember that the CFM or FinOps practice is not a one-off exercise but a cultural shift that takes time, effort, skills, and experience.
To finish off,
Crawl, Walk, and Run are the typical phases of Cloud Financial Management maturity. I’ve come across an analogy that resonates with me even more — Cloud Financial Management is like surfing, as opposed to constructing a sandcastle (forgive me for not recalling the source). This comparison highlights the dynamic nature of this field, where we’re constantly challenged to navigate uncertainties with quick thinking and adaptability, making trade-offs between speed, reliability, performance, and costs, rather than sticking to a fixed plan.
I welcome and value any constructive feedback. If you would like to have a yarn, please don’t hesitate to get in touch.
