I’m a Mature Cloud Adopter. Now What?
Many enterprises have already become proficient with the cloud. They’ve migrated a substantial portion of their workloads, learned the necessary cloud skills, established an aggressive security posture, and developed at least an initial workable operating model. What’s next? How do you build on that foundation to maximize the value of the cloud? Here are some suggestions.
Financial Management with FinOps
In the cloud, financial management is a continuous process. You control your costs through ongoing adjustments, with many cost-reduction levers available. The discipline of Cloud FinOps supplies practices you need to become mature in financial management. Among other factors, you’ll want to make decisions about how to allocate cost management responsibilities. For example, technologists—generally working in distributed teams—can often architect their systems to reduce their operational costs. They can learn to treat cost as just one more engineering parameter to optimize. Centralized financial oversight teams, on the other hand, are in a good position to negotiate supplier agreements with the aggregated purchasing power of the entire organization, make decisions or recommendations on using reserved instances and savings plans, and provide the entire enterprise with visibility into costs.
It’s not just about costs. With cloud resource tagging strategies, you can gain insight into the economics of your business and your digital interactions with customers. Essentially, you can slice and dice your costs to a tiny granularity and examine how customers are using the digital features you offer. In an earlier blog post, we even talked about doing activity-based costing within your digital transactions to get unprecedented insight into your unit economics.
Some additional resources: Unlocking the Business Value of Machine Learning—With Organizational Learning; Strategy for Efficient Cloud Cost Management; Financial Liberation: Taking Control of Costs in the Cloud; FinDev and Serverless Microeconomics: Part 1; FinDev and Serverless Microeconomics: Part 2—Impacts; Introducing FinOps—Excuse Me, DevSecFinBizOps; Micro-Optimization: Activity-Based Costing for Digital Services?; Decisions at the Margins
Environmental Sustainability and ESG
Similarly, you can do a lot to manage your carbon footprint—in fact, doing so often overlaps with your cost optimizations, since when you reduce by making your computing more efficient, you’re usually also reducing your carbon emissions. Once again, engineering and architectural decisions made by your technologists play a role in determining your carbon footprint. Our Well-Architected Framework now includes a pillar on how to engineer for sustainability.
The cloud can play a role in many of your organization’s ESG (environmental, social, and governance) initiatives—in particular, you might want to look at issues around diversity equity, and inclusion (DEI) and areas where you can have an impact on the communities where you do business.
Additional resources: IT and Environmental, Social, and Corporate Governance (ESG), Part One: A CEO and Board Concern; IT and ESG Part Two: How IT Can and Must Further the Company’s ESG Efforts; Engineering for DEI: Tapping IT Creativity and Technique to Address Diversity, Equity, and Inclusion; Addressing the Digital Workforce Gap through Diversity and Inclusion; Diversity, Equity, and Inclusion: ADP on Making DEI a Priority Internally and in Its Products
Who knows what major disruptions we might face in the future? Over the last few years we’ve experienced a pandemic and some significant climatic disruptions, but businesses are also vulnerable to wildfires, floods, earthquakes, and other unexpected natural disasters—and human-created disruptions like wars, trade wars, supply chain problems, terrorist activities, new techniques discovered by hackers and…well, who knows—that’s the point!
How can you make sure you’re prepared for all of these things? You probably can’t, but there are some general principles that increase your agility so that you can respond more nimbly to the unexpected. The cloud provides architectural patterns and tools for building resilience into your data and computation. During the COVID pandemic, many companies took a big step toward this type of agile resilience by enabling workplace flexibility—not just work-from-home but work-from-wherever-necessary based on the type of disruption. Enterprises that are mature in their use of the cloud can test themselves against different disaster scenarios—verifying both their technical resilience and their continuity of business operations—and work to continually improve their survivability.
Additional resources: Resilience, Part One: Preparing for Unknown Unknowns; Resilience, Part Two: Focusing on People
Disasters aside, are the company’s IT systems continuously available? Think about both planned and unplanned downtime—today, with automated infrastructure and deployment, planned downtime is rarely necessary. We used to assume that each additional degree of availability was going to be expensive, but in the cloud, it may be far less costly than you expect. Often, it’s just a matter of modernizing particular system components or increasing your use of automation. Measure your availability and see where there might be very cost-effective ways to improve it.
Time-to-Market and Leanness
The cloud is a powerful tool for gaining speed. But the kind of speed we’re talking about doesn’t come from asking employees to work faster—it comes from making processes leaner and removing waste. Think about your lead time for creating new products or making changes to your business as circumstances change in your market environment. What can you do to shorten that time now that you have your foundation in the cloud? Often the key is to use the cloud to release new products and features incrementally, thereby reducing risk in a way that lets you reduce burdensome governance and oversight as well. You can also use high-level services available in the cloud—machine learning, edge computing, and so on—to quickly assemble new products and deploy them. If you map out what it takes to get from a new idea to a deployed product or feature, you can find ways to use the cloud to remove wasteful processes from that map. We find that a lot of the slowness to market results from continuing to use governance processes from the old waterfall world, where risk and consequently administrative overhead were necessarily higher because of the multi-year big-bang release cycles.
Additional resources: Governance in the Cloud and in the Digital Age: Part One; Governance in the Cloud and in the Digital Age: Part Two; Experiment More, Fail Less; Does Your Technology Organization Have a Nimbleness Metric?; The Future of Faster Enterprises; CFO Series: An Executive View of Lean and Agile IT
Risk Assessment and Remediation
Traditionally, we’ve assessed and funded IT initiatives based on their projected returns in either increased revenue or decreased costs. But there’s another important angle to consider: reducing risks. These potential investments are harder to evaluate, since they might or might not prevent incidents that could lead to revenue loss or increased costs—or might even threaten the very existence of the company. Risk management is especially important to boards of directors. An important but often neglected part of conversations between CIOs and CFOs should be the identification of risks and formulation of plans to mitigate them. Compliance risks? Security risks? Risks around new government regulations? Risk from disruptive competitors? Technical risks? Many of these are amenable to IT solution, especially with the cloud at your disposal. Think especially about risks you bear that come from your use of legacy technologies, places where your compliance could be improved through automation, and ways you can mitigate risks by being able to respond quickly.
Additional resources: The CIO-CFO Conversation: Capturing the State of IT
Once your cloud environment is in place, you’ll have some advantages that allow you to unleash innovation in your organization. In the cloud, you can create sandboxes to try out new ideas. You can experiment with new technologies and products, and build products incrementally. You can try out new features and products on subsets of your customers (with A/B testing, for example), and incorporate emerging technologies as they become available in the cloud. And you can do all of these things at low risk and low cost because the cloud uses a pay-as-you-go model—when you first test an idea, you’re using cloud services at a very low volume, and thus paying very little. You can let new ideas prove themselves out before you commit resources to them. If you’re not yet taking advantage of the cloud to foster innovation, see what impediments you might have, cultural or otherwise.
Congratulations—with the cloud basics in place, and some maturity in your practices, you can now focus on reaping the benefits of the cloud. You’ve made the investment in your platform and skills and can now take advantage of the agility and control the cloud offers. Typically, the benefits to shoot for in that next phase include optimizing costs with FinOps, managing unit economics with granular transparency into digital costs and revenues, aligning governance processes with technology to support innovation and rapid time to market, reducing risk through resilience measures, and improving environmental sustainability. For most enterprises, the potential is enormous.