Complex invoicing, self-provisioning, automatic scaling… what makes the cloud model strong from a usage point of view can also turn into an economic headache. However, a FinOps approach makes it possible to better track resources, break down costs and understand reporting. All of this while injecting a good dose of budgetary agility,” summarizes Bernard Schmitt.
Bernard Schmitt, president of Lucernys, was interviewed by Alliancy, a media of influence on the transformation of companies in the digital age.
What aspects of IT transformation are putting the most pressure on CIOs today?
Bernard Schmitt: Most of the transformation projects they are leading, from mobility to the digital workplace, via the cloud, all have in common that they have evolved massively in recent years towards a logic, often wrongly presented as simpler, of ” pay as you go “. CIOs are adapting to learn how to manage the financial complexity that these new functions imply. The pressure comes from there. On all of these issues, the cloud in particular is now at the forefront.
Why?
BS: The cloud cost family is potentially the most dangerous, due to complex billing practices, coupled with self-provisioning and almost infinite elasticity, sometimes even with automatic scaling mechanisms. These characteristics make the model strong from a usage point of view, but can make it an economic hell. Moreover, the promise of “pay-per-use” is confronted with the reality of a subscription-based billing system: a server is billed at 100% whether it is used or not.
The promise of “pay-per-use” is confronted with the reality of a subscription-based billing system
In addition to this, the billing elements are complex, as all the machine sizes, load balancers, different types of storage, network traffic between the different zones, etc. are billed. In short, nothing is packaged. It is difficult to get a real readability, and especially to anticipate to really take advantage of these models. Reserved capacities, spot instances, start & stop… In the cloud, we are far from systems that facilitate transparency and serene forecasts.
Beyond these complexity management constraints, are there opportunities?
BS: There are two main ones as the cloud becomes more prominent in budgets. First of all, it must be recognized that it has always been complex for a CIO to assign infrastructure costs to analytical axes, such as cost centers, applications or projects. Unlike ” capex ” investments, the new ” as a service ” billing models allow for greater transparency and granularity with a FinOps approach. Indeed, it is possible to dynamically “tag” the resources used in order to break down the costs at the finest level. It is also, and above all, having the ability to “explain”, by improving its reporting. This is a valuable asset to acquire at a time when the CIO is expected to have a real business proximity and to participate fully in building the vision of the company’s digital transformation.
And the second?
BS: ” as a service” is a major opportunity to support the major cultural transformation that information systems departments are currently undergoing. They have been adopting agility principles at scale for a few years now, crossing business, development and operations. These require a change in budgeting practices: maximum value must now be derived from a global budget. This is complex to achieve when you are struggling with investment levels and depreciation…
The agile budget must become a flow, able to adapt dynamically.
Organizations are redesigning their processes and managerial postures, but if they launch their first release train while budget management is still in the “old world”, trouble will soon appear. To achieve the necessary Lean Budgeting or Beyond Budgeting practices, a FinOps approach applied to the management of the Cloud and its dynamic billing is valuable.
So CIOs need to reorganize to better manage the cloud?
BS: To summarize, the challenge for CIOs is to deal with the huge, dynamic and dangerous financial mass that the Cloud and more generally ” as a service” has become. Historically, financial control functions in organizations have often been scattered and unstructured. Most of the time, it is management controllers who have inherited it. However, they cannot have the responsibility that is expected of so-called “FinOps” functions, which require not only financial knowledge of the subject but also a perfect mastery of the technique and uses. Not to mention that these new control functions become even more important as businesses embrace new IT opportunities due to the ease of access offered by the cloud. Now that the business can “provision” themselves, but the corresponding budget remains with the IT department, the latter risks losing control.
The IT department must integrate FinOps skills.
Are these skills common in the market?
BS: The right mix of business, technical and financial skills that characterize FinOps is very rare. Tools obviously exist (we use them ourselves), but to put it bluntly: technical specialists don’t want to ask themselves financial questions and financiers prefer not to talk about technology. However, the keys to optimization and coherence between technical choices, uses and costs, lie in hybrid skills capable of controlling, optimizing and forecasting in a complex, abundant and extremely dynamic context. CIOs will therefore need help to have these rare skills.
Interview conducted by Dorian Marcellin – Alliancy.
