Accelerating digital transformation
Digital transformation is what propels businesses and industries forward. Organizations of all sizes—from startups to global enterprises—focus on digital transformation not only to make scaled improvements, but also to drive significant change and fully embrace the digital age. The pandemic has jump started and pushed many organizations into full gear to digitize their business models and transform with increased business agility, resiliency, and velocity, while driving new innovation and business values for the customers.
However, according to the Boston Consulting Group, only about 30% of companies navigate a digital transformation successfully1. Many large scale digital transformation programs failed because of lack of clear business priorities, top-down executive sponsorship, or dedicated resources and commitment to see it through.
Laying the foundation for digital transformation success
Digital transformation drives foundational change in how an organization operates, optimizes internal resources, and delivers value to customers; however, this doesn’t just happen overnight. Digital transformation requires a programmatic approach through an incremental yet agile, cost-effective, value-driven, and sustainable strategy to drive successful transformation across the organization.
One of the critical factors foundational to success is Cloud FinOps (Cloud Financial Operations). Cloud FinOps is an operational framework and cultural shift that brings technology, finance, and business together to drive financial accountability and accelerate business value realization through cloud transformation. In the context of Digital Transformation, it requires new ways of working and operating models to drive behaviors and cultural change that foster cross-functional collaboration, drive accountability, provide greater cost transparency, and promote a blameless culture.
Most importantly, Cloud FinOps serves as an enabling function to drive successful digital transformation programs and enable business agility by breaking down the boundaries between technology, finance, and business teams. Through this cross-functional team collaboration, technology leaders partner with finance and business leaders to better understand the technology investments to create sustainable business outcomes. By doing so, business priorities become more clear and the focus shifts to value creation, customer-centricity, and innovation.
As such, companies are reinventing their business models to fund value streams and connect cloud technology investments to strategic business outcomes. With the increased visibility of the cloud costs, finance teams are also gaining greater accuracy in tracking cloud spend against budgets. Organizations can align the TCO of the technology services to the value metrics to make better informed future investment decisions and forecast demand.
Cloud FinOps to accelerate business value realization
The successful deployment and implementation of Cloud FinOps building blocks will enable organizations to accelerate digital transformation beyond cost savings, including the ability to:
Accelerate business value realization and innovation
Drive financial accountability and visibility
Optimize cloud usage and cost efficiency
Enable cross organizational trust and collaboration
Prevent cloud spend sprawl
Break down of departmental silos
Organizations that are successful in digital transformation most often have established processes to measure and track business value. One of the key building blocks of Cloud FinOps is “Measurement & Realization.” By establishing a robust value measurement approach to track and monitor the business value metrics toward business goals, we are bringing technology, finance, and business leaders together through the discipline of Cloud FinOps to show how digital transformation is enabling the organization to create new innovative capabilities and generate top-line revenue.
Business value metrics fall across several factors: cost efficiency, resiliency, velocity, innovation, and sustainability. We suggest assigning KPIs to the following metric categories:
Cost efficiency: Measure cost efficiency through infrastructure savings, migration, and support costs. Customers will commonly start with metrics such as cost of compute and storage per day-week-month, and evolve to unit metrics such as cost per customer served or cost per transaction, where the cost of an application stack is aligned to customer drivers.
Resiliency: Enhance operational resiliency with improvement in service quality and security risk posture. Traditional measures such as system service level and the frequency and duration of critical downtime events are effective measures of IT durability. Customers can also augment these metrics by associating a cost per minute of downtime events, reflecting not only the direct impact of these events but opportunity costs as well.
Velocity: Decrease time to market by accelerating fluidity in product and service delivery. By moving to a cloud-based microservices architecture, customers commonly achieve benefits of increasing software release frequency, as well as being able to run many more test scenarios prior to release, resulting in higher quality code. As an example, our recent Google’s State of DevOps Report 2021, shows that elite performers have 973x more frequent code deployment and release frequency than the low performers.
Innovation: Enable a culture of rapid experimentation to drive innovation and cloud transformation. With cloud technology, companies can avoid the financial constraints of fixed cost investments and lengthy procurement lead times. As a result, the marginal cost of experimentation and time from ideation to experimentation can drop significantly while the number of experiments per unit of time can grow dramatically.
Sustainability: Embed true environmental and social sustainability metrics across the organization by adopting a circular economy strategy and building sustainability into everything we do – from running applications on zero net emissions virtual machines to reducing carbon footprint with enhanced productivity and collaboration services. According to Accenture, companies with average on-premise to cloud migrations can drive 65% energy reduction and carbon emission reduction of 84%1.
The Cloud FinOps journey starts with defining or updating your metrics. Since business goals and strategic imperatives will likely change over time, it is important to review the Cloud FinOps metrics whenever the goals change. The review of metrics should include the changes in business goals when there are changes in the internal priorities of the team. Executive leaders need to identify dependency relationships between technology and business outcomes to improve the impact of metrics on decision making and to better prioritize and invest in evolving business and technology capabilities. Defining good metrics is not just about aligning to business goals and demonstrating value. It is also important to help prioritize strategic initiatives, guide effective resource allocation, and generate awareness across the organization to drive a shift in mindset with the new way of operating in the cloud.
The pandemic has accelerated the need for companies to modernize their digital capabilities. With technology-driven disruptions across all industries, it has never been more important for organizations to transform themselves, embrace an agile mindset, and make bold investments in cloud technology and capabilities to achieve sustainable business outcomes.
So, where are you now in your cloud FinOps journey, and how do you move beyond the challenges ahead? Google can help you start the conversation and accelerate your path to maximizing business value with the cloud.
No matter where you are on the cloud transformation journey, through an interactive session with Google, we can bring executives across the organization together to work toward a shared vision and a plan to accelerate and realize business value in the cloud. If you are interested in more information, please contact us.
Special thanks to Pathik Sharma, Bruce Warner, Jon Naseath, and Nihar Jhawar for their contributions and sharing their domain expertise to this important Cloud FinOps topic.
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