With on-prem, the mentality is around allocation and sunk costs. In this model, software engineers are not motivated to keep costs down because they think of the allocation as a tax. ‘My LOB paid the tax, so it doesn’t matter if I waste money.’
But in the cloud, that mindset needs to change. Software engineers should know how much the cloud costs for their area, have visibility into where they spend money, and be equipped to manage those costs, because the cloud is a land of opportunity. Allocation doesn’t work in the cloud.
Can you walk through an example of FinOps in action?
Our on-prem software testing labs were running different operating systems and hardware combinations, because every customer is unique. We had to test each combination, and we were allocating those costs to the software businesses.
When I moved the labs to the cloud, I told the engineers to move only what they are working on right now. When they need more cloud services, they are empowered to get them; they don’t need to ask my permission.
But I also gave them financial goals and visibility into the costs of the tools. I do control the costs. I govern the costs. When we were in data centers, IT would buy the hardware, and because they knew they needed headroom, they would overbuy and allocate those costs to the businesses. Today, the engineers themselves are empowered to buy only what they need, and to hit their own financial goals. Those savings are a part of the P&L and have a positive impact on the engineers’ bonuses.
FinOps has helped to change the sunk cost mentality. The engineers know that if they bring cloud costs down, they are contributing to their business’s P&L and their bonus goes up. They are excited by the new model. ‘As long as I save money and align with my business model, I can use the cool services in the cloud. I don’t have to ask permission.’
What are other mistakes companies should avoid when moving to the cloud?
Companies should avoid the lift-and-shift approach and understand that you cannot refactor every application on day one. To rightsize your move to the cloud, you need people who know the cloud, but these are not the same people who have been managing your on-prem environment for the last 20 years.
It is also important to understand that in your first year in the cloud, your costs will be higher than in years two, three, and four, but you will be able to do incremental innovations. With on-prem data centers, you innovate once in five years because that’s how data center technology refresh works. With the cloud, you innovate every quarter, month, and week. That’s the beauty of the cloud.
What is your advice to companies moving to the cloud?
Moving to the cloud is all about changing the culture, rightsizing your approach, and having a roadmap to get into a dynamic architecture that scales up and down during the week, and comes way down on the weekends when people are not working. That’s how you can scale.
But you cannot put the same wine in the new bottle and call it new wine. You need to develop a cloud-conscious culture by bringing in new leaders who have a FinOps mindset and a focus on security. It is also important to bring the software groups together. We have consortia for DevOps, security, and cloud, so that the developers can talk to each other and not reinvent every time. Developers love to build their own tools, but that’s not necessary in the cloud.
We bring the developers together so that they can be proud of what they are doing and share it. With FinOps, we shift their pride to saving money and contributing to customer outcomes. It’s not about showing them a PowerPoint that says, ‘Cloud Conscious Culture.’ It is about showing them the outcome of their work.
