Why our heads are in the cloud - 3/3

While our roots are on-premises

In today’s episode

This is the third article of a series explaining why I Love My Local Farmer has decided to embrace the cloud (part 1, part 2).
Below, Inès Abderrahmane, CTO of I Love My Local Farmer will disclose how the engineering team won CFO support for the cloud.

Disclaimer
I Love My Local Farmer is a fictional company inspired by customer interactions with AWS Solutions Architects. Any stories told in this blog are not related to a specific customer. Similarities with any real companies, people, or situations are purely coincidental. Stories in this blog represent the views of the authors and are not endorsed by AWS.

How do we prevent our CFO from fainting with every invoice?

During our IT team discussions about how can we move from our first two successful projects in the cloud to full adoption (Working from Home Infrastructure on AWS, Serverless Java Solution for Deliveries on AWS), we realized that we need to win CFO, for our cause.
I have thought immediately about a friend of mine whom I have worked with and respect, Priya Burns the CFO of a global company which adopted cloud in 2016. I have organized a call between Priya and our own CFO, Sebastien Feldmann, so he can hear about the experiences and lessons learned from another CFO first hand. I also tuned in, to listen and learn as well.

It was a fantastic conversation with a lot of insights as well as some advice of what not to forget about. Priya told us her company’s story and left us with a better understanding of what we are up to and of course, some homework we should probably address soon.

CAPEX or OPEX, that is the question?

We have started our virtual coffee with the capital expenditure (CAPEX) vs. operational expenditure (OPEX) discussion, and as you can imagine, we got to hear the oldest consulting answer… “it depends”.
Every company is different. She explained to us that their motivation was based on an IDC study. According to it, 70% of IT cost on premises are consumed by keeping the lights on. When you’re in the cloud, it is only 20%.
This means, you can have up to 50% of the IT cost back, and so you can decide what to do with it. You can book it as a saving, you can free it up as an investment - it is your call. There are caveats that only financial consultants can help us with, and we will absolutely get some involved. The biggest argument to consider this topic is the flexibility of choice.

World of flexibility

Priya told us that in her opinion, the biggest challenge of her work is to make investments bets on correct assumptions. In current times as COVID-19 turned everything upside down, it is much more difficult to make assumptions. Being comfortable with uncertainty has become the new normal.
With the flexibility of the cloud, you can revert a decision as soon as you notice that it was not the best investment based on your ROI. You do not need to wait to the end, to discover that there was a large cost. You can stop the cost as soon as the project isn’t working, or for those that are successful, quickly expand. You can scrap a disaster earlier.
We all make decisions, and mistakes are part of the journey. It is much better for the company, if the consequences are manageable sooner rather than later.

Key takeaways:
- CAPEX vs. OPEX is a topic worth looking into, as it opens new possibilities to minimize operational and investment risks, because there is no upfront investment
- be comfortable with uncertainty, and improve your reaction time to unexpected situations

Scientific approach

The experimentation topic got us into data driven decisions. Data is patiently waiting for you. Data is your friend. You need to understand it and analyse it. We all somehow address analytics, starting with spreadsheets, to fully automated reporting systems. It is the baseline for our businesses, and being able to add additional capability to get the reports as needed in minutes instead of hours (or even days) can make a huge difference.
Creating a central place for all this data, a single source of truth, simplifies the process. The analytics options that cloud services are making available to us are virtually limitless. The good old database queries can now be extended with life insights from customer interactions and analyzed with addition of Artificial Intelligence and Machine Learning.
It is not a Sci-Fi movie anymore, it is here and waiting for us to take advantage of it. My friend also explained to us, that they started with understanding the spend on their infrastructure, then correlated this information with business insights and customer interactions, in order to realize what is the cost on a per customer basis.
Now they use real-time dashboards and they’re currently thinking about improving it even further with forecasting. They want to understand leading indicators vs lagging indicators. They have started with understanding the sources of the information, identifying owners and setting governance of the data.

Key takeaways:
- investigate enabling a single source of truth solution
- unlock near real-time insights and strive for forecasting
- don’t forget data governance!

Cold shower

The next topic we discussed was like a cold shower for them. Priya shared lessons learned and encouraged us to get finance and controlling involvement into understanding cloud spend as soon as possible. Creating a base governance and iterating over it on a regular basis is crucial.
They started quickly, without thinking about governance, on how they want to monitor spend. The finance department wanted to understand what hides behind the numbers in their newly received invoices.
Obviously, they wanted to understand what they are paying for. After many back-and-forths, they realized that the expectations of what must be measured were never defined. If you want to do some cost mining, you actually need to define the data you want to collect.
To address it, they have trained the complete financial team in basic understanding of cloud and cloud benefits. She recommended us to dive deeper into a movement known as FinOps as well. She warned us with a joke saying “do not let it to be a beast on its own”.
I can completely understand, what she meant. Cost management is important to us. We have learned some lessons already (Do you really know what your cloud apps are costing you? - set up tagging strategy in order to do cost analysis, and in the second part - how to actually do the cost analysis using cost explorer).
I am proud of my team, that we have identified it and picked it up immediately. We are still struggling with making this data available to our complete organization. With proper involvement of the financial team, we will be able to address our spend from a technical and also a commercial angle. We will also close then the loop to better understand which information is needed for the big picture to further include our analytics approach.

Key takeaways:
- invest energy into governance and billing transparency (tagging strategy)
- unlock near real-time insights and strive for forecasting
- understand how to report, measure, allocate KPIs for cloud

Highlight

We have also asked about their biggest highlight so far. She explained to us, that all the benefits that are known (as in the IDC report) are achievable, and to be honest - expected. Her favourite highlight was the turn around and reaction time as the COVID-19 hit everyone. After solving the challenge of setting up work from home capabilities, they found themselves needing to reactivate their contact-center solution (surprise, surprise!! ;-)). From the time of the decision that they needed to act, to a successful complete implementation, it only took them 3 weeks. At that point, the entire team could work from home and have access to their virtual communication center, like in AWS references. Again, no upfront cost were needed, which helped to lower the risk and accelerated the implementation of that project. Leveraging the ability to try out something without strings attached, helps increase the appetite for experimenting with new ideas.

How to get it done?

At the end of the meeting, we explained our own situation and talked about our plans to completely migrate to the cloud. We do not want to be in the hardware business anymore. We asked our final question about her advice on how to tackle this challenge.

She gave us a very practical advice:

• get a foundational level of understanding cloud and what benefits cloud could bring you
• think about all the required skills, knowledge and governance upfront and iterate
• be bold, learn, investigate and repeat
• do no let cloud become a beast, tame it
• inject your finance team into your IT setup and migration project
• and finally - be comfortable with uncertainty, or to put it differently - be comfortable, being uncomfortable.

That was definitely a very intense call and I have noticed that Sebastien wants some time to digest all the input. I was absolutely curious about his thoughts and waited with excitement for our sync call. The call was scheduled the very next day. The goal was to make a decision on next steps and agree on our approach.

Outcome

I was completely overwhelmed with the enthusiasm and all of his ideas about how we as one team can achieve the bespoken capabilities. He asked me to extend our training plan and include all financial and controlling specialists. Sebastien confirmed his complete support on the cloud journey and proposed setting up a brainstorming session with our CEO, so we can clearly define our strategical goals. On top of that he even proposed his personal involvement in working on the business case. “If we are doing this, we must apply our hearts to it. We will need a communication strategy and a transformation owner, so we can take everyone with us!”- he said. That was the moment where I understood that there is no turning back. We are all in! The roller coaster is ready to start!

Key takeaways:
- personal CFO involvement on the business case
- transformation owner had to be identified
- need for a communication strategy

Where are we going now?

COVID-19 shortened our decision timeframe. At the beginning of 2020, we were still hesitant to start our journey to the cloud. The Working From Home project and the Delivery project we shared with you in other posts, had proven that the cloud could bring benefits to our company.
I was struggling with the decision, if I want to run it purely as an IT project, or if we should extend it to a complete company transformation. After we have won full CFO support, this question has answered itself.
Our adventure has now started and the board has decided, that we are ready to advance on our journey. We are going to move all-in to the cloud. Our next major milestone will be migration of the heart of our e-commerce platform to AWS cloud.

Stay tuned for the story.

As final words, do not hesitate to comment or ask questions. We will be happy to answer and share with you.