Beyond cost savings: maximising IT spend
by Sandeep Bhargava, MD, Asia Pacific Japan (APJ), Rackspace Technology
Cost reduction across all aspects of business is top of mind in today’s economic climate. Other than managing workforce costs, business and technology, leaders are looking for other methods of reducing expenses such as downsizing office space, reducing office consumables, and outsourcing some of the back-end processes to shared services and help desks.
While these steps help in maximising resources, short-term cost reduction is just part of the equation. For more significant cost savings and lasting cost control, companies need to examine how their whole organisation consumes its resources. This is where cost governance comes in.
With the recent disruptions, businesses are becoming more receptive to cloud technologies. Thus, spending on multicloud and hybrid cloud solutions is expected to increase going forward. Many are asking themselves: How can my organisations tackle cloud costs for the long haul? How can the business we are extracting the best value from our cloud investments?
Here are a few tips to consider when building a cloud investment cost governance framework:
Establish a cross-functional cost governance board
A team should be comprised of members from various parts of the business including finance, IT operations, security and compliance. Application owners should be assigned and a C-level leader should be appointed as the executive sponsor to hold the team accountable to the cloud budget goals and help clear potential roadblocks.
Meet frequently
The cost governance board should meet weekly at first, to generate momentum. Virtual meetings are acceptable, of course, as long as there is a clear agenda and a good attendance is maintained. The cadence can be changed to twice-a-month or monthly once the team is established.
Define spend targets for the cloud
The cost governance board’s finance representative can set expectations around budgets and define key metrics for cost savings goals. They can also address issues like contract terms and how much the business can invest up-front to reduce operational expenditures. The board should be able to set realistic budgets for the next financial reporting period. To keep the company's cost saving efforts intact, the team should also try to avoid vendor lock-ins.
Review wasteful spending and execute quick wins
The first starting point around cost savings should be looking at quick wins such as eliminating unused, over allocated or misconfigured resources. Engaging with experienced cloud operators can rapidly accelerate this phase. A careful evaluation of the organisation's application architectures can establish and help accelerate long-term cost optimisation projects.
Introduce processes and policies to prevent runaway costs
Once the initial cost savings measures have been implemented, the next step is to create enforcement policies around cloud cost, usage, security and governance. With third-party tools, IT teams can easily stay on top of these policies and be alerted to any violations.
The value of strategic cloud and IT investments
Inventory of resources, detailed billing reports, cost tagging and budget threshold status reports are key pieces of information that can help business leaders make decisions and strategic IT investments. To ensure that the right information and controls are available to the right people in the organisation, processes should be defined and implemented.
There is no question that the COVID-19 crisis has substantially impacted business performance, requiring the swift implementation of measures to respond to business needs. The crisis highlighted the need to establish strategic cost transformation plans, not only to mitigate the impact of the pandemic in the short term but more importantly, to recover and be ready for the next wave of disruptions in the future. A cost governance framework can glue all the pieces together and provide a full picture of what a profitable IT investment should look like.
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| Source: Rackspace. Bhargava. |
While these steps help in maximising resources, short-term cost reduction is just part of the equation. For more significant cost savings and lasting cost control, companies need to examine how their whole organisation consumes its resources. This is where cost governance comes in.
Cost governance aims to develop a business-focused and sustainable programme for cost-reduction and managing spending.
With the recent disruptions, businesses are becoming more receptive to cloud technologies. Thus, spending on multicloud and hybrid cloud solutions is expected to increase going forward. Many are asking themselves: How can my organisations tackle cloud costs for the long haul? How can the business we are extracting the best value from our cloud investments?
Here are a few tips to consider when building a cloud investment cost governance framework:
Establish a cross-functional cost governance board
A team should be comprised of members from various parts of the business including finance, IT operations, security and compliance. Application owners should be assigned and a C-level leader should be appointed as the executive sponsor to hold the team accountable to the cloud budget goals and help clear potential roadblocks.
Meet frequently
The cost governance board should meet weekly at first, to generate momentum. Virtual meetings are acceptable, of course, as long as there is a clear agenda and a good attendance is maintained. The cadence can be changed to twice-a-month or monthly once the team is established.
Define spend targets for the cloud
The cost governance board’s finance representative can set expectations around budgets and define key metrics for cost savings goals. They can also address issues like contract terms and how much the business can invest up-front to reduce operational expenditures. The board should be able to set realistic budgets for the next financial reporting period. To keep the company's cost saving efforts intact, the team should also try to avoid vendor lock-ins.
Review wasteful spending and execute quick wins
The first starting point around cost savings should be looking at quick wins such as eliminating unused, over allocated or misconfigured resources. Engaging with experienced cloud operators can rapidly accelerate this phase. A careful evaluation of the organisation's application architectures can establish and help accelerate long-term cost optimisation projects.
Introduce processes and policies to prevent runaway costs
Once the initial cost savings measures have been implemented, the next step is to create enforcement policies around cloud cost, usage, security and governance. With third-party tools, IT teams can easily stay on top of these policies and be alerted to any violations.
The value of strategic cloud and IT investments
Inventory of resources, detailed billing reports, cost tagging and budget threshold status reports are key pieces of information that can help business leaders make decisions and strategic IT investments. To ensure that the right information and controls are available to the right people in the organisation, processes should be defined and implemented.
There is no question that the COVID-19 crisis has substantially impacted business performance, requiring the swift implementation of measures to respond to business needs. The crisis highlighted the need to establish strategic cost transformation plans, not only to mitigate the impact of the pandemic in the short term but more importantly, to recover and be ready for the next wave of disruptions in the future. A cost governance framework can glue all the pieces together and provide a full picture of what a profitable IT investment should look like.
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