Cloud spend spinning out of control
As we are coming out of the "Covid" era, which dramatically accelerated cloud migration, digital transformation and other buzz words that will surely change soon, some of us are waking up to a new era of accelerated Cloud related spending that no one expected or conveyed accurately to decision-makers, resulting in a budget breach that needs to be sealed like a dam that has an ever-growing crack in it.
When I ask how we got to this situation, the standard answer is that increased spending is the price of moving forward, creating business agility with the priority to provide the organisation with a competitive advantage in an ever-changing global market, no matter the cost!
Well, that is one hell of a statement, but is that the correct way to look at it, forward motion at any cost? I believe no, forward motion is critical for an organisation to flourish. Yet, it needs to come with the correct financial management framework that today does not exist to meet the new Cloud spend era!
So what has changed from standard best practice budget planning and spending control? Until the cloud era, organisations purchased hardware, software, floor space, electricity and services to manage everything. Budgeting was straightforward: fixed costs and multiple vendors to choose from. You budget, purchase and operate, simple!
Yet today, in the cloud era, you choose only one of the major vendors – Microsoft, AWS and Google – to provide you with all the above services, moving from multiple vendors (all competing for your business) to one mega vendor. In addition, traditional CAPEX purchases mixed with OPEX that you can control have turned into 100% OPEX, based on continuous ever-growing consumption of virtual services billed monthly and cannot be stopped or easily controlled. Welcome to the nightmare of the CFO in the cloud era, loss of control and no easy way to regain it!
There are no easy solutions to this increased challenge, but the first step, like in any journey, is the realisation that something is wrong and needs to change. CFOs need to adapt and re-educate themselves.
Going back is not an option, but gaining financial control over cloud spend is just as critical to the organisation's survival as the digital transformation is to IT.