Currently, most enterprises don’t have a formal cloud computing finops program. They may have loosely coupled manual processes, such as cost accounting connected to cloud use, but no accurate monitoring and governance value yet.
Finops should not be optional. Although I understand that it’s another cost of using cloud computing that most enterprises are reluctant to pay for, it pays for itself rather quickly. I’m talking about a few months to a year. You can’t find better IT investments than that.
So, looking at the few companies with a finops program in place, how do they know it’s working? I have a few ways to know that you got finops right (or that you got it wrong). Let’s look.
The cloud architects are nervous
As I covered in my last post, bad architectural decisions are the fundamental building blocks of mounting technical debt. It could be poor architecture because IT leaders picked the less efficient path to a solution. Perhaps they went with a specific vendor, even a cloud provider, for the wrong reasons, such as a preexisting relationship.
It’s not that easy to know if this is your case. You need to understand if the architecture is close to optimal, given the available technology. Sound finops systems should tell you about your solutions’ efficiency and how it compares with your peers.
What improvements might you consider? Usually, it’s picking one cloud provider or service over another, or a type of technology that may be a bit more complex but is a much better-optimized solution or architecture. It could be just a few databases to complete cloud deployments. It depends on the specific domain. Most IT deployments will have many of these domains, allowing you to focus on portions of the solution or its entirety.
If your finops solution runs as it should, inefficiencies should be outed quickly. In many instances, you’ll find that these poor architectural decisions cost the company two to three times more than it should in value that was removed from the business or just overall waste in cloud spending.
I suspect that some of these discoveries will get a few people fired. Maybe that’s a good idea.
The CFO’s team is finally silent
One of the most important aspects of a well-functioning finops program is the accuracy and timeliness of financial reporting. This includes financial statements, profit and loss reports, balance sheets, cash flow statements, and other reports. Things that CPAs love.
The best way to measure this is to look at the effectiveness of the people using this information. Workers in the CFO’s office often complained about visibility into cost and value delivery reporting before implementing a finops program. If the number of grumbles you hear is reduced or eliminated, your finops program functions correctly.
No one has been arrested
A successful finops program should ensure compliance with applicable financial regulations and industry standards. These change across industries, but a few industries, such as finance and health, are more constrained by rules than others.
A good finops program will help your company stay current with relevant laws, rules, and regulations, such as GAAP (generally accepted accounting principles) or IFRS (International Financial Reporting Standards). Regular audits and reviews should be conducted to ensure that financial processes and practices align with the required standards and laws.
These are often overlooked by cloud engineers and cloud architects building and deploying cloud-based systems since most of them don’t have a clue about regulations and laws beyond the basics. If done well, finops should take the stress off those groups and automate much of what needs to be monitored regarding regulatory compliance.
I was early money on finops, and for good reason. We need to understand the value of cloud computing right after deployment and monitor its value continuously. Now that we finally have a way to do that, every company should have a finops program that is deployed and running well. How are you doing?