An IT leader on the way to the promised land comes to a fork in the road. There’s a sign up ahead with two arrows. The arrow pointing to the left path says: This way lies oral surgery. An arrow for the right: This way lies calculating the cost of IT assets versus their business value.
The IT leader begs for the drill. That’s what I’d say if I were telling this joke to CIOs.
Regardless of which path you prefer, quantifying the impact of your assets on the business is getting tougher. You are no longer solely managing application workloads and other resources under your own roof but are operating them across multiple clouds and, maybe, everywhere in between.
This broad continuum impacts IT’s ability to boost the bottom line. And frankly it’s the difference between being viewed as a cost center or as a value generator.
Most IT leaders analyze the cost structure of their hardware, software, labor and other resources to help inform decisions about their budgets and resource allocation.
Technology business management (TBM) broadened the scope to help align resources with business goals, followed by FinOps which organizations use to track and optimize cloud software spending.
Multicloud estates heighten cost complexity
However, the IT landscape has become far more distributed of late. Today 86% of organizations use multiple cloud providers and 65% rely on more than two, according to Enterprise Strategy Group.1
And even with top-notch FinOps execution, organizations still find that up to 30% of all cloud spending is wasted, according to IDC.2 That’s in addition to the on-premises systems, private clouds, colocations and edge devices running across the IT estates.
Moreover, there is more crossover between the financial levers IT leaders pull for public cloud and on-premises practices than ever before.
For instance, while public cloud providers popularized pay-as-you-go consumption models that ushered in the broad shift from CapEx to OpEx, more organizations are renting IT infrastructure as-a-Service within their own datacenters rather than someone else’s.
Early analyses of as-a-Service adoption from IDC shows a 39% lower cost of operations over three years, 60% faster IT resource deployment and a 38% bump in efficiency for IT infrastructure teams over other provisioning models.
Today’s financial governance frameworks are not tailored for multicloud environments. This makes it hard for IT leaders to have meaningful conversations with their C-suite coffer bosses about aligning costs to business value.
Tracking IT Assets and Value
Tracking the cost and value of your IT services requires a thorough and focused approach. Your framework should include:
Install a costing leader
One of the more interesting positions IT organizations have filled in recent years has been an expert in cloud cost management. Staff a similar role for all your IT assets. The right choice will create KPIs and benchmarks to track how IT assets translate to business value.
Prioritize cost allocation
Work with your costing guru on a standardized approach to defining cost structures of platforms and services. Collecting such data is critical at a time when more organizations push generative AI services into production, causing data volumes to spike (and costs to soar).
Institute standard reporting
Aggregate data from disparate sources to provide visibility into IT spending. The details should show improvements (or hard truths) about the predictability and granularity in costing, creating a single source of truth. After all, if you can’t measure it, you can’t improve it.
Create governance and policies
Establish governance policies that account for the characteristics of each public cloud and on-premises system to ensure compliance and cost management. Determine how to track variable costs for IaaS and as-a-Service solutions, as well as service level agreements and risk mitigation across all assets.
Incorporate optimization strategies
Master the art of rightsizing instances for public clouds and on premises systems, as well as optimizing and predicting usage patterns. You should also track technical debt instances to catch potential death spirals and curb wasteful spending.
The bottom line
Ultimately, these steps should help you make more informed choices about workload placement, vendor choices and the cost-benefit analyses associated with running resources in-house or externally, ensuring that IT investments are generating value that supports business growth.
This path may help you navigate the forks in the road as you journey to the promised land: Becoming a value-generating partner to the business.
Learn more about Dell APEX as-a-Service solutions.
1 Addressing the Top Three Drivers of Multicloud Complexity, ESG, June 2023
2 IDC, IDC Blog, The Era of FinOps: Focus is Shifting from Cloud Features to Cloud Value, February 2023
3 IDC, Business Value White Paper sponsored by Dell Technologies, August 2023, IDC #US50921623