As the pandemic has accelerated digital initiatives for companies, many have made the shift to adaptable technology infrastructures and services, such as multi-cloud and SaaS. These types of offerings allow more flexibility to IT departments during times of change, enabling them to scale costs up and down easily.
Mallory Beaudreau is Customer Portfolio Director at Apptio.
This isn’t something that’s set to change any time soon. For example, findings from a Gartner report show that 80% of enterprises would categorize their business strategy as multi-cloud, while SaaS adoption is continuing at scale.
However, while the flexibility of these services has been championed by many IT leaders, a full understanding of the associated costs has not naturally followed. For example, using multiple cloud service providers (CSPs) can complicate cost visibility and allocation, while it is challenging for IT teams to keep up with monitoring usage levels for newly-adopted SaaS products.
This flexibility hinders leaders’ ability to establish a holistic view of the investments made as they struggle to understand whether they’re getting value for money, and how to optimize costs to suit the requirements of the business.
Accurate tracking of tech investments in cloud and SaaS seems to many to be a near-impossible task due to the constant reporting and manpower needed to deliver timely insights. However, a better understanding can be brought on through implementing disciplines such as FinOps and Technology Business Management (TBM). Through these frameworks, leaders can obtain full insights into where investments are being made, whether they are worthwhile, and initiate changes if not.
SaaS
As digital initiatives have become essential to everyday business, software-based services have sharply increased in popularity. SaaS technology introduces flexibility to an organization, which helps with situations like adapting quickly to working from home. Flexibility in the business has proven to be critical in times of uncertainty. Because of its effectiveness over the last year, SaaS is now used across entire businesses - meaning the scale of the total usage and cost is broader than ever before.
This poses a few challenges for IT executives, as business units that are not overseen by the IT department are calling for more SaaS, and sometimes even taking matters into their own hands, purchasing services without IT’s knowledge. This creates more IT financial data spread throughout the business, hindering the ability of IT leaders to make informed technology investment decisions on SaaS, and leading to wasted spend.
There are two clear ways IT leaders can tackle this. Firstly, by introducing commonly-agreed procedures for the procurement and governance of SaaS across the business. Whether this is in the form of chargeback within the business, shared licenses across business units or something else, it’s key that IT leaders have knowledge of where SaaS is being purchased and how to find contract and usage data.
Secondly, IT leaders need tools that can automatically process SaaS-related data and provide insights on how to manage SaaS investment. For example, there may be cases where multiple versions of the same SaaS product are being used within a single business. Disciplines like TBM help leaders to have the right processes and tools in place so that they can can readily understand why two licenses are needed (e.g. is one due to a compatibility issue for a certain team), and automatically assess usage against the contract. Without TBM practices in place, its all too easy for IT leaders to make investment decisions which don’t best serve the overall business needs of the organization.
Cloud
Cloud presents similar challenges due to its data complexity. For example, multi-cloud infrastructure allows IT organizations to use a mix of different services based on what suits a particular workload best. However, billing constructs differ between the CSPs, making it tough for IT leaders to make important direct comparisons that enable them to optimize their cloud investments.
At the same time, most public cloud costs are based on variable usage contracts rather than via fixed costs. In theory, this is beneficial as it allows costs to be reduced when cloud instances aren’t in use, but in practice this requires governance and a culture shift. Otherwise, money is spent on cloud services which aren’t actually in use. All of this leaves IT leaders with incredibly complex cost reports which traditional finance tools aren’t viable for. Manual reports take a huge amount of manpower to collate, analyze and distil actionable insights in order to gain any cost-benefit from the flexibility of cloud.
Frameworks such as FinOps can help businesses simplify the gathering and sorting of this data. This discipline can encourage leaders to treat cloud spend as a driver of business value, applying financial management processes which are specifically adapted to cloud. In practice, this means adopting practices such as tagging and grouping cloud cost information in a consistent way across CSPs. These in turn allow the organization to understand where the cloud spend is going, whilst ensuring less error when it comes to possible blind spots, particularly with the elaborate billing associated with a multi-cloud environment.
From these insights, businesses can ensure that investments in cloud are appropriate to the benefit their flexibility brings. Utilizing FinOps best practices in this way decreases inefficient cloud spend and gives leaders more control over the associated costs. Furthermore, by understanding where investment in multiple CSPs is potentially being used inefficiently, leaders can choose to reinvest these costs in something that may be valuable for business development.
Taking the first step
Given that multi-cloud approaches are the way forward, leaders must understand the importance of technology cost transparency more than ever. With IT investments not only stretching across huge numbers of services, but also across multiple departments, it is now essential for businesses to evolve the way they are managing costs.
Traditional financing methods like spreadsheets cannot feasibly keep up with flexible IT systems, which is why adopting disciplines such as FinOps and TBM should become a priority for IT leaders. Through this practice, IT executives can ensure that their business reaps the benefits of flexible services in a sustainable and efficient manner without obstructing the information needed to make key decisions.
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