When no one’s budging over the cloud budget

When no one’s budging over the cloud budget

While cloud disruption has several benefits within an organization, it can also be argued that its integration has made it difficult for other areas like budgeting. Usually, management draws up an annual budget for overhead and other operating expenses, but due to the cloud’s intangibility and instant scalability, the process is no longer as straightforward and has even led to arguments between IT and finance departments.

A typical scenario during a budget meeting pans as follows:

Finance rep: You’ve placed another procurement request for additional 1TB of storage from our cloud provider, which is the third time this month. Before I approve this, you have to give a compelling reason why.

IT rep: We’re developing an internal communication app to be used by the company and we need the additional storage to get it to work optimally since we need it to support the amount of data being transferred.

Finance rep: We already have social media and Gmail. Isn’t that enough?

IT rep: An internal communication tool can help protect data because we keep it locally. Using social media and third-party communication platforms increases the chances of data breaches.

Finance rep: But you’ve already overshot your budget. Can’t you put that off ‘til next year?

IT rep: You have to bring it up with management then since the project is already approved.


IT department requesting more funds to buy new laptops for gaming work.

While the hypothetical example above may be specific, the chances of the IT department going overboard on cloud use isn’t surprising. In fact, Densify revealed that 75 percent of organizations don’t know exactly how much they spend on the cloud, which is a nightmare to the finance department.

This mostly comes from the cloud’s ability to scale computing resources in an instant as this feature allows users to develop and run software to be used for a variety of functions. It is often hard to reduce costs given the way cloud services are currently offered which is on a pay-per-use basis, making it difficult to pinpoint exactly how much money is needed. The uncontrolled usage and spending usually leads to a phenomenon called cloud sprawl.


...said every finance staff at budget deliberation.


Cost optimization through teamwork

When we get right down to it, arguments come from the fact that the IT department doesn’t have the final say in how much budget they are allocated. They can only cajole the finance department into agreement, which can go either way as the latter’s objective is to make sure that the company is efficiently spending its resources. To avoid clashes, management can form a special team composed of members from both departments to achieve a system of checks and balances that considers both perspectives when ironing out the ideal budget.

The specialized team can also work together to regularly audit spending. Together, they can consolidate, evaluate, and analyze the company’s cloud usage. They can determine if spending and usage are aligned by identifying which instances are idle, seasonal/peak usage, etc., leading to companies knowing exactly what they need. Additionally, auditing can help rightsize the whole cloud infrastructure as it helps identify and track the usage of specific cloud resources.

The ease and elasticity of the cloud makes it a double-edged sword. While spinning up new instances is effortless, it may lead to overspending when left unchecked. Both teams working hand-in-hand can serve as the foundation of a company-wide cloud governance policy which controls the time of day that cloud resources may be leveraged, the number of virtual servers that may be provisioned, and the amount of money a department may spend in any given month or week.

 

Budget affects all facets of an organization and companies that don’t manage it properly may end up paying in several ways, with the possibility of bankruptcy and closure of operations included. Both the IT and finance departments must work together to make the most out of the cloud in a cost-efficient manner. Only then will a company be assured of effective use of IT that enables the organization to achieve its goals.