Cloud infrastructure has steadily become the de-facto standard for the IT industry. The Wall Street Journal predicts that 80% of enterprise IT will move to the cloud within 5 years. Its benefits are clear and many– minimal capital expenditure, rapid agility and scalability to fluctuating business demands, and the ability to pay-per-use.
Despite the obvious benefits, the change has led to mixed outcomes. Some businesses realize immediate and highly material savings, while others spend more than they did with an on-premise model. In 2018, Intuit, a financial software company, paid $145 million to AWS for cloud services, an increase of 93% from the previous year. To Capital One’s surprise, its cloud bill increased by 73% to $220 million over the same period.
Unexplained high costs for cloud
The primary reason for these costs is that traditional financial management practices do not apply to the Cloud. The financial cycle in the cloud is shorter and monthly or quarterly IT financial reviews fail to balance the dynamic demand-supply equation required by highly elastic cloud services. If the on-premise architectures are not optimized during or post-migration, they carry inefficiencies of excess memory, database compute, or storage into the cloud. Additionally, the price-to-value ratio of the myriad cloud products is dynamic and it is humanly impossible to track and optimize.
Transitioning to the cloud successfully
We recommend the following 3 principles to build the financial management capability for your cloud.
- Start with the basics: The practice of accounting, budgeting, and secure payment for business units for services rendered continue to form the bedrock of finance management in the cloud.
- Incorporate the characteristics of the cloud paradigm: The cloud has several nuances that influence the finances. E.g. Due to the dynamic pay-per-use model of the cloud, the infrastructure of the financial planning model must shift from CapEx-based to OpEx-based.
- Use an integrated multi-departmental approach: Effective resource management of the cloud starts with proper stewardship, which is possible when the technology works together with finance and business.
These principles form the basis of Infosys Consulting’s cloud finance management framework with six core competencies. This framework, when executed in a cycle across technology, finance, and business, provides effective cost control for the cloud.
To learn more about this framework and how we have helped our clients to save millions in cloud transition costs, please read our whitepaper here.
Senior Principal, CIO Advisory
Satsang leads the cloud advisory services at Infosys Consulting. He has over 17 years of experience at shaping strategy and driving transformation in the areas of cloud adoption, portfolio rationalization, infrastructure modernization and IT service management for global clients in financial services and retail industry.
Principal, CIO Advisory
Guillermo has 20 years of experience as a technology strategist with a focus on IT infrastructure, IT finance, FinOps and technology operations. Has run multiyear infrastructure and IT finance transformation programs for top telco and media corporations in Europe, and Latin America. Has also consulted on cloud adoption and infrastructure strategy for multinational corporations in diverse industries. Guillermo holds an MBA from Wharton School of Business and an Informatics Engineering degree from the Universidad Catolica of Peru.