Why Financial Governance is key to a successful cloud strategy.

When we first started our journey over four years ago, we spent the first 12 months seeking to understand our customer’s concerns around cloud and the perceived barriers to entry. During this time, we came to understand that cloud was not so much a technical problem, but a financial and operational one. To solve this problem, we endeavoured to create a complete 360° approach to cloud management.

The disaggregated nature of cloud represented a tipping point for many customers. We noticed many were unable to effectively implement and support a multi-sourcing model. The same levels of concern existed when it came to a ‘pay-as-you-go’ cloud model. The horror stories of ‘bill shock’ and budget overspend were rampant and were undermining the confidence levels needed to adopt a progressive cloud strategy.

Today we announce the latest edition of our Buttonwood Cloud Exchange, Release 2.2 which offers enterprises a complete 360° approach to cloud management. The whole Buttonwood team are ecstatic to be able to share with you the new features and capabilities of Buttonwood. These features will help you build your cloud strategy, and renew your confidence.  To capture the essence of how radically simple, yet powerful these new capabilities are, we created several videos demonstrating the newest features of Buttonwood Cloud Exchange. The three-part video series will be released over the coming week and can be found here.

Seek First to Understand, then to be Understood

Dr Stephen Covey wrote a book titled 7 Habits of Highly Effective People, many of which resonate with me personally. None more so, however, than Habit 5 that encourages to Seek First to Understand, then to be Understood.  A simple idea, but one that we often tend to ignore.

Why?

Because people are impulsive by nature, favouring action over understanding.  I honestly believe this is why, as a body, IT fails, more often than not, to deliver on business expectations. I don’t doubt this is a controversial claim, but with so many business units sidelining IT for cloud solutions, it is one that is difficult to refute.

So, why do I raise this point? Because, if the team at Buttonwood had not spent the time to understand the true nature of cloud and the barriers to entry as described by the business, we would have developed a very different product offering. One that would have solved some very difficult technical challenges, but ignored the critical financial and operational concerns that were keeping the senior executives awake at night.

Financial Governance in the Cloud

Financial governance is a critical business discipline that organisations need, to ensure a smooth and confident transition to a consumption (OPEX) based model.

While a few products exist to assist with aspects of cloud management and help make sense of your cloud bill, they ultimately rely on data from the provider. This data is often only available AFTER the money had been spent. Executives we spoke with were desperate for a way to regain control when it came to authorising and consuming cloud services across their organisation.

Three things were desperately needed:

Cost Centre Alignment:

Traditionally finance systems were designed to support procurement activities that are governed by well-defined processes. Whether by delegation or tender evaluation, the CFO could control organisational spend by issuing a Purchase Order (PO) only once all the checks and balances had been satisfied. This PO was then coded to a specific Cost Centre to ensure good governance, project reconciliation and internal management reporting.

However, as IT and business units alike start to use cloud services, the CFO’s ability to govern the process is severely undermined. When organisations consume cloud services, they almost always pay for them in arrears, so the true cost of a service is often unknown for weeks and even months. And when the bill does arrive, it is complex and almost impossible to reconcile.  Enterprises need a better solution.

Accurate and Transparent Cloud Costings

If you have ever tried to estimate the cost of a simple cloud workload, then you understand just how complex a process it can be. Hyperscale providers, such as AWS and Azure, offer hundreds of thousands of services across dozens of sites around the world, all with different pricing models.  Compound that with daily and weekly rate card adjustments and it becomes an exercise in futility.  But we must be able to accurately cost cloud services. Without financial transparency, organisations will be unable to budget and, more importantly, manage cloud expenditure through life.

Through Life Budget Management and Reporting

As organisations transition workloads to cloud, the ability to manage and report on cloud consumption is of critical import. From CFO to CIO to Project Manager, all expressed a need for greater control and visibility in order to manage the lifecycle of a project or service against a defined budget.

However, to achieve this end we cannot simply rely on guestimates to govern our cloud initiatives. We need a way to achieve financial transparency by delivering a fully costed Bill of Materials (BOM) for every workload we want to move or create in cloud. With this insight, we are able to provide through life cost accounting of cloud spend with strong governance pinned to budget management and reporting services.

A complete 360° approach to cloud management with Buttonwood Cloud Exchange

One of Buttonwood’s greatest assets is its ability to provide financial control at every stage of the journey. When asked what is our biggest differentiator over other products on the market, I always reference the tight integration between Broker, Workspace and Analytics. Delivering complete 360-degree financial management in cloud wasn’t easy. We needed to develop a broad range of capabilities and then seamlessly interlace all the elements into a complex multi-cloud orchestration process.

The Original Solution: Cloud Workspace

Workspace has been continuously updated over the last 3 years to ensure a seamless transition to cloud. Our unique framework provides users with complete financial governance over cloud consumption and spend to deliver true cloud transparency.

In the video series, we cover some of the key governance features of Workspace. Through this post, I wanted to give you an in-depth explanation of some of these features, including:

Delegations

In Workspace, users can use delegations to authorise individuals within their organisation to create and manage Cost Centres and Budgets respectively. Pre-defined limits control how much individuals can set in their budgets, or manage on behalf of a Cost Centre owner.

Cost Centres

Users can use Cost Centres to capture cloud usage for internal cost reporting. An organisation can also establish a series of budgets under each Cost Centre to help reconcile cloud spend as well as govern consumption over a defined period, a financial year for example.

Budget Manager

By default, the Cost Centre Owner is also the Budget Manager. However, the Cost Centre owner can delegate any authorised individual to be the Budget Manager, as long as their delegation that is equal to the set budget.

The Budget Manager has the day-to-day responsibility for managing all aspects of the budget, including alerts and users. Budgets managers can also close a budget at any time, providing a final governance lever to control costs.

Figure 1. Cloud Workspace – Budget Management Dashboard

Figure 2. Cloud Workspace – Individual Budget Management

Adding IaaS to Buttonwood: Cloud Broker

Our Cloud Broker offers multiple governance and control capabilities for simple 360° approach to cloud management. I am constantly in awe of the features and capabilities the team deliver week in and week out. Some of my favourite Broker governance features include:

Cloud Costings

The biggest challenge of establishing a governance framework for cloud was understanding what a service costs BEFORE committing to it. To solve this issue, we built a global index of every cloud resource in every region around the world.  This index allows us to accurately cost any cloud service for AWS, Azure and Oracle, providing consumers with the Lowest Cost Conforming Bid every time.

Exchange Rates

Some cloud providers, such as AWS, use a single currency (USD) rate card for all regions, regardless of user’s locations. To address this, we built integrations that support currency conversations for a preferred currency.

Custom Rate Cards

To provide financial control across both on-premises and cloud, we engineered a cost reporting and reconsolidation process for on-premises services such as VMware, Nutanix AHV and OpenStack. Using a Custom Rate Card, organisations can now incorporate both operational chargeback and showback capabilities, as well complete budget management and reporting functions.

Budget Reservations

Finally, to govern deployments across hybrid cloud, we implemented a budget reservation process. Before a workload can be deployed a reservation for the quoted lease period must be approved. If sufficient funds are available in the specified budget, a reservation is created to avoid budget overspend and approval issued.

Figure 3. Cloud Broker – Cost Centre Alignment

Figure 4. Cloud Broker – LCCB Recommendation

Figure 5. Lowest Cost Confirming Bid Process – LCCB Options 

The Final Piece of the Puzzle: Cloud Analytics

Cloud Analytics is the most recent addition to Buttonwood product portfolio.  Design to provide a detailed analysis of cloud spend, Cloud Analytics offers immediate value at a very low cost and risk profile. This solution is the final piece needed to give users a complete 360° approach to cloud management.

We designed Cloud Analytics to ensure organisations were able to streamline their cloud operations and reduce costs through detailed reporting and data analysis. Some of these features include:

Forecasted spend

Cloud Analytics uses a sophisticated ARIMA model to forecast cloud activity, helping you become proactive in managing your cloud consumption.  With detailed analytics and data visualisations, users can deliver increased financial transparency across the organisation and help control spend.

Multi-cloud reporting

Cloud Analytics supports data analytics for all the market-leading cloud providers AWS, Azure, Oracle. The new release also supports Custom Rate Cards for VMware, Nutanix and OpenStack. Through Cloud Analytics, users can understand spending trends over time across multiple cloud environments. Users are also able to generate detailed reports of specific resource groups and identify underutilised resources.

 

Figure 6. Cloud Analytics – Accounts Dashboard

Figure 7. Cloud Analytics – Invoice Analysis

Figure 8. Cloud Analytics – Resource Breakdown

Figure 9. Cloud Analytics – Individual Resource Breakdown

 

These three cloud solutions and capabilities work together to form our complete 360° approach to cloud management.

I would love to hear how you optimise and manage your cloud environment. Leave me a comment, and make sure you follow us on Facebook, Twitter and LinkedIn so you don’t miss out on our upcoming 360° approach to cloud management video series