devopsy.kinsta.cloud

Tag: FinOps

  • Aligning Cloud Spend Management With Cloud Transformation

    Aligning Cloud Spend Management With Cloud Transformation

    The cloud transformation movement is well underway, with more than half of enterprise organizations moving to a cloud-native approach this year, according to Forrester Research. Spending on cloud infrastructure is rising accordingly – more than $21 billion in Q4 2021, up 13.5% from Q4 2020, according to IDC. The cloud offers economies of scale and connectivity that companies can leverage to optimize operations, make better use of their data and identify opportunities. However, if a company’s cloud infrastructure investment isn’t well planned, they can end up spending more than expected due to unplanned access costs, applications consuming more resources than expected and underperformance caused by inefficient architecture or lack of maintenance.

    Spending governance–creating and managing a budget that supports the company’s cloud goals–also helps to maintain cloud security by ensuring that there are adequate solutions in place to prevent phishing, ransomware and other attacks that can disrupt or disable an organization’s cloud operations. Financial monitoring allows organizations to accurately evaluate the cost-efficiency of the apps in their cloud ecosystem. This can help control costs and avoid situations where different groups add their own apps without first leveraging what’s already available or correctly gauging associated cloud spend. Unchecked app proliferation in the cloud can create a cycle that includes overconsumption of resources and security issues. 

    Cloud governance can address sustainability concerns, too, as executives increasingly focus on reducing their organizations’ carbon footprint. It’s important to benchmark the organization’s on-premises servers’ carbon impact, so you can quantify how moving workloads from on-premises to the cloud impacts sustainability progress. As with spending, cloud sustainability measurement requires adequate planning, execution, organization-wide visibility, effective monitoring, and efficient use of cloud resources. 

    Planning for Effective Cloud Spend Governance

    Spending management processes have always been crucial for business, but governance of cloud initiatives is playing catch-up to technology advances and an accelerated digital transformation. We see many organizations that are relying more heavily on cloud infrastructure because of the speed it offers to deliver new products and experiences through innovation. But without financial controls, there can be an element of inefficiency that affects cloud spending decisions—something that we’ve seen as an increasing issue for companies over the past decade. 

    Whether an organization is preparing for the transition to the cloud or seeking to make existing cloud spending more visible and accountable, the financial governance aspect requires readiness. Assessing this readiness starts with cataloging the tools and expertise available in the organization to build a cloud budget, put monitoring tools in place, setting threshold levels that trigger notifications when spending exceeds certain levels and providing organizational controls to remedy any spending excesses. 

    It’s also helpful to define the goals and potential benefits of implementing better spending controls. First, no one wants to deal with unplanned costs that create budgetary problems and have a negative impact on the business. Second, spending accountability allows you to identify the internal groups that are knowledgeable enough about both cloud operations and spending management to take ownership of their role in the move to the cloud. At the same time, you can also identify the groups that need more training, guidance, and resources to get the most value and beset employee experience from their cloud transformation. Third, proper cloud governance can help companies avoid scenarios where cloud-related issues such as security, budget or over-proliferation of apps in the cloud ecosystem lead to customer experience problems. 

    All these planning requirements are more complex for organizations with an existing or planned multi-cloud environment. Because each cloud provider has its own processes and features, the organization will need to understand–and financially manage–a diverse set of tools and resources to analyze what happens across their cloud network. For example, it’s relatively simple to pull two similar reports from a single-cloud environment and synthesize them to create a summary report. When the reports are coming from two different cloud platforms, there can be format differences that make synthesis more challenging, time-consuming and costly to aggregate that data and present it in a dashboard for leaders. 

    Platform differences also mean that simply comparing previous on-premises spending to proposed cloud spending may not be a good model for accurate cost planning for multi-cloud environments. For all of these reasons as well as technical ones, multi-cloud governance often requires creating a team or task force to collaborate and share knowledge for effective technology and budgetary decision-making. 

    Cloud Spend Governance in Practice

    Like cloud technology and applications, cloud spend governance is a continually evolving practice, not a one-and-done task. That’s because proper financial visibility and management require monitoring to identify any emerging issues in terms of capacity, cost and security. For example, a manufacturer might analyze their cloud usage data and find they’re underutilizing some resources, which enables them to turn those resources off to save costs. 

    Financial governance also allows companies to find opportunities for optimization–something that can be as simple as identifying potential configuration changes that make cloud operations more efficient and secure. In the end, the promise and potential of the cloud for companies depend on smart, properly planned use of cloud resources and spending governance is a critical part of that smart planning. 

  • Exploring the Emerging Role of FinOps

    Exploring the Emerging Role of FinOps

    Cloud overspending is becoming a top-of-mind budget item for the modern CFO. To direct resource utilization in the cloud, some organizations are turning to increased automation and more diligent cloud procurement processes. As part of this momentum, new roles are emerging to oversee cloud financial operations.

    Amid rising cloud costs, FinOps is emerging as a helpful discipline. It is not always a specific role but more often a culture that blends engineers, finance and business areas to participate in dynamic cloud cost management. But getting all these players on the same page isn’t always easy — new findings say influencing developers to actually make optimizations is a top challenge.

    The FinOps Foundation recently released The State of FinOps 2022 report, a deep exploration into the role and the state of FinOps adoption across 1,000 companies worldwide. Below, I’ll highlight the key insights from the report to understand current trends and consider how organizations might implement similar tactics to better operationalize their cloud impact.

    Who Is Practicing FinOps?

    What type of person is involved in FinOps? Well, folks come from diverse backgrounds, spanning cloud financial management, IT or DevOps or consultants. Many are also new to the practice in general—the average career tenure is roughly three years. FinOps tends to be a well-paying field—45% of practitioners report salaries of over $100,000 annually.

    FinOps also tends to be associated with larger enterprises—45% of respondents came from organizations with 10,000 or more employees. In terms of industry, it is most common in financial services and IT companies, although studies show the practice is proliferating in many other sectors too. Geographically, FinOps is most adopted in primarily adopted in North America and Europe.

    Team Dynamics

    The average team size is five people, although many feel they’re a “one-person show.” Interestingly, more mature adoption tends to involve a larger team, upwards of 20+ members for established teams. There’s also a notable increase in FinOps within organizations managing between $50 million and $500 million of cloud costs.

    FinOps must interface with many levels of the company, sharing projections with both development and executive leadership. Most FinOps teams report directly to the CTO or other C-suite members. This makes sense, as an executive directive was found to be the most common way to promote a FinOps culture, followed by organic and grassroots adoption.

    Technology and Tools

    In general, FinOps tends to be achieved through cloud awareness and dedicated tooling. The most mature practitioners are “all-in on cloud.” The largest subgroup (24%) runs 1,000 to 5,000 computing instances in the public cloud, hosting technology like virtual machines, containers and serverless functions. Simply put, the average FinOps practitioner has a lot on their plate.

    In terms of tooling, there’s not one cloud cost management suite to rule them all. Teams use an average of 3.7 tools. A variance of tooling here is likely due to rising hybrid multi-cloud architectures and the need to manage costs separately within each cloud environment.

    As such, FinOps tooling includes a mixture of native cloud provider tools and other middleware. Surprisingly, after AWS Cost Explorer, the second most common tool is a homegrown tool. After that, Cloudablity, CloudHealth and Azure Cost Management rank as popular primary tools.

    Top Challenge: Collaboration

    The top barrier has to do with interdepartmental collaboration. Getting engineers to take action on cost optimization was the biggest challenge, cited by 30% of respondents. Other common challenges included accurately forecasting cloud spending (29%), convincing the organization to adopt FinOps (22%), enabling automation (20%) and reducing waste or unused resources (19%).

    Developers in the flow likely don’t want to be burdened by new cost optimization rules, so FinOps may encounter an uphill battle trying to affect low-level change. It will probably take a combination of shift-left IDE-based cost projection tooling and a decree from upper management to jumpstart this change.

    Besides getting everyone on board, FinOps is often tasked with chargeback models—48% of respondents report using chargeback to report cloud costs, the report found. Yet, correlating cloud costs to a single department or team is challenging with so much shared infrastructure. As such, shared costs remain a challenge; so much so that many practitioners don’t even split them up.

    There is also the need to resolve unexpected anomalies and increases in cloud costs, and it can be hard to distinguish between the two. As a result, 53% of respondents said it takes days for their FinOps teams to respond to unexpected cost increases. In the future, finding ways to shorten this timeframe will help save the company money.

    Next Goal: Getting Engineers to Take Action

    The vast majority (94%) of organizations are wasting money in the cloud, according to the 2022 HashiCorp State of Cloud Strategy Survey. Idle or overprovisioned resources can unnecessarily increase the cloud budget, making the need for FinOps evident. Investing in cloud optimization is also another tactic to meet sustainability pledges.

    FinOps is an emerging role that can help forecast spending and reduce waste. But the practice does require time and resources to reach an ROI. For example, a mature team only has a 5% deviation comparing forecasted spend and actual spend, whereas a less mature team can have as high as a 20% deviation. To improve, teams will require automation for evaluating and communicating cloud projections and more established anomaly management best practices.

    But above all, organizations must grapple with the number-one problem: Getting engineers to take action. Perhaps this is due to the fact that most respondents share cost data with technical teams monthly. Instead, more frequent cost transparency would match the pace of agile development and might empower more engineers.

    The State of FinOps 2022 surveyed 1,056 respondents on their FinOps roles. The yearly study is conducted by The FinOps Foundation, a Linux Foundation program. For more details, you can read the entire report here.

  • Myth Busting: 5 Misconceptions About FinOps

    Myth Busting: 5 Misconceptions About FinOps

    Over the years, moves to the cloud have happened in several different ways and at various speeds. The reality is that today most enterprises are spending massive amounts on their cloud environments, and many teams are struggling to contend with the governance implications of this reality.

    Fundamentally, teams struggle with an either-or proposition: Either they give development and engineering teams free rein in terms of how they use cloud models, and, in the process, they leave the business exposed to a wide range of risks or they try to enforce central controls and restrictions on cloud usage and, in the process, stifle speed, flexibility and innovation.

    FinOps is a Necessary Discipline

    Teams are struggling with cloud governance in general, and one particularly vexing aspect of governance relates to cloud cost management. Quite simply, the procurement models and approaches that worked in the days of on-premises data centers simply don’t cut it today. At all.

    For these reasons, FinOps is emerging as a necessary discipline. At its root, FinOps is about establishing the people, process, and technology for establishing financial accountability in pay-as-you-go cloud environments.

    Here’s how the FinOps Foundation defines it:

    “FinOps is an evolving cloud financial management discipline and cultural practice that enables organizations to get maximum business value by helping engineering, finance, technology and business teams to collaborate on data-driven spending decisions.”

    Recently, I started preparing for the FinOps certification, and in the process, I have had the chance to talk with quite a few practitioners. Along the way, I’ve heard several misconceptions about the discipline. I’ll list and dispel a few of the most common myths in the following sections.

    Myth: FinOps is a Buzzword, not a Discipline
    While the term may still be new to some, the need for FinOps is clear, real, and not going anywhere. Consider that in a survey of more than 800 professionals, the FinOps Foundation found FinOps team sizes grew 75% in the last 12 months, and respondents are expecting 50% more growth in the next year. Today, the FinOps Foundation has more than 5,300 members. Further, on any given day, a search on career sites for roles specifically referencing FinOps will typically yield hundreds of opportunities.

    Myth: The Sole Goal of FinOps is Saving Money
    More than just tracking and controlling spending, FinOps offers a way to optimize spending, so each dollar invested ultimately yields the most business value. Rather than simply helping save money, FinOps is about making money.
    FinOps teams should advocate and lead with value-based discussions rather than focusing on cost. For example, if additional spending on a certain cloud service increases marginal value, FinOps teams help justify that additional investment.
    FinOps helps teams reduce wasted spending, but it also enables teams to invest more in services that allow the business to innovate, adapt, and scale. Ultimately, it offers teams a way to capitalize more fully on the advantages of cloud pricing models.

    Myth: FinOps Teams are Responsible for FinOps
    To be successful, organizations need to build a central FinOps team. These teams establish guidelines and best practices and facilitate unified reporting and visibility. However, FinOps doesn’t start and end with a single team.

    Those that succeed with FinOps are the ones that effectively break down silos. Individuals from leadership, finance, operations, development, and more all have a role to play. In a FinOps-driven organization, a range of teams collaborate, and in the process, they all benefit. For example, development teams can innovate more quickly and make more intelligent, data-driven decisions around balancing speed, quality, and cost.

    Through FinOps, everyone takes ownership of cloud usage. Cross-functional teams work together to establish more effective management of cloud vendors and rates. Ultimately, rather than creating conflict, friction is reduced. The end goal is to establish alignment around business objectives.

    Myth: FinOps Teams Stifle Innovation

    With traditional procurement models, central teams retained visibility and control over expenditures. While this would add layers of time and effort to purchases, this was accepted as a worthwhile tradeoff.

    Part of the reason for FinOps has come into existence is that it enables teams to break away from the rigid, centrally controlled procurement models that used to be the norm.

    Rather than having a finance team that acts as a central gatekeeper and bottleneck, FinOps enables teams to fully leverage opportunities available for automation in the cloud. Compared to rigid, monthly, or quarterly budget cycles—and being blindsided by cost overruns long after the fact—teams move to continuous optimization.

    Real-time reporting and just-in-time processes are two of the core principles of FinOps. Fundamentally, FinOps is about removing obstacles, and the focus is on enabling development teams to speed up their ability to deliver new features and capabilities.

    In the cloud, the reality is that teams can spin up a cloud resource with the click of a mouse. FinOps is about bringing real-time visibility to teams so, along with this instant access, there can also be informed decision making and ultimately accountability—all while fostering agility.

    Myth: FinOps is Only for the Largest Enterprises With the Biggest Cloud Budgets

    Clearly, the larger the business’ cloud investments, the larger the stakes. In addition, the larger investments, the bigger the problems that silos between technology, finance, and procurement can create.

    The goal for FinOps is to establish the people, processes, and technologies that enable more intelligent decisions about cloud investments. Ultimately, FinOps enables teams to ensure that each dollar spent in the cloud is delivering the most business value. Given that context, it is clear FinOps is invaluable for any organization making investments in cloud services. This is particularly true as organizations become more reliant on more cloud vendors and service types and more internal teams begin to access services.

    Establishing a strong FinOps practice can support growth in cloud investments while equipping teams to ensure better those bigger investments will yield maximum business value.

    In my experience, it seems that most organizations take on the creation of a FinOps practice after encountering significant issues, such as massive cost overruns or major snafus that impede operations. It is far better to make this move proactively before issues and obstacles arise. Further, the sooner the move is made, the sooner the business benefits.

    Conclusion

    As organizations’ investments in cloud services continue to grow, FinOps is becoming an increasingly vital discipline. FinOps offers teams a way to make more informed cloud investments and ultimately ensure those investments yield maximum business value. Consequently, FinOps represents a key aspect of cloud governance, which also requires teams to ensure security, compliance, and operational policies are constantly adhered to.

  • Four Steps to Avoiding a Cloud Cost Incident

    Four Steps to Avoiding a Cloud Cost Incident

    The recent Flexera 2022 State of the Cloud Report found that organizations waste 32% of their cloud spend, up from 3o% last year. This can be due to cloud cost incidents triggered by unused resources, malicious activity or overambitious projects and which have a massive financial impact if not found and corrected promptly.

    As an organization’s cloud infrastructure footprint matures, mapping cloud resource use and costs accurately to product lines, teams and business units becomes progressively more complicated and problematic. However, accurate cloud cost attribution is vital to understanding team resource use and determining accurate cost of goods sold (COGS) margins and is imperative to budgeting and forecasting. Organizations need reliable, granular views of the cloud environment to attribute costs back to departments and optimize a meaningful budget.

    Cloud cost spikes can blow up an organization’s budget fast and can be hard to track down, but enterprises can help protect themselves from a cloud cost incident with just a few simple steps.

    Have a Strong Tagging Strategy That Attributes Cost Granularly

    The cloud operations team needs to identify what is important to business reporting, which will help define and create a strategy for tagging. For instance, when an organization has two teams managing a particular service, the teams should safeguard the services tagged with a team identifier. Also, the teams should add another tag for the environment in which they’re running so they can allocate cloud costs across teams and environments.

    When an application uses numerous resources, like a database and storage, teams should consider adding a specific application tag and break down costs by each application. It should be noted that there is no one-size-fits-all tagging solution, so enterprises will need to determine what works and try out different strategies by adding and removing tags later.

    Understand Cloud Cost Ownership to Avoid Chaos

    Ask yourself how well your organization has attributed cloud costs to teams, applications or COGS. If the answer is “Not well,” then you are missing vital information about how your cloud costs relate to your business.

    The lack of this context or visibility into resource allocation makes it unmanageable and impossible for cloud operations owners and senior leaders to agree on who is responsible for varied expenses and resources. Manual cost attribution doesn’t scale accurately or account for shared cluster resource use across teams and applications. This creates confusion that can escalate when users arbitrarily slice data and claim ownership without accountability or clear visibility.

    What happens is that costs can sometimes be double-counted with two owners—or even missed completely with no owner whatsoever. The resulting data emerges as an inferior quality that is untrustworthy and not actionable. The inability to visualize resource use in context can dilute, hinder and even defeat cost improvement initiatives and optimization.

    Cloud costs should have an owner who can ensure that cloud spending is tied to business value. Understanding who owns which pieces will help pinpoint the cause.

    Establish and Monitor Cloud Budgets

    Historical data on cloud spending is gold—it can help forecast and budget for what should be happening with the cloud’s cost footprint. If that’s not happening, then it should be flagged and investigated.

    Once you get cost data under control, organizations can get an accurate picture of where cloud spending is taking place. However, does this match the expectations of spending? By establishing and monitoring budgets at every stage of a project, organizations can have guardrails to cloud spending and prevent costs from soaring out of control when engineers overallocate on performance “just in case.” Once budgets are in place, organizations can monitor spending and right-size resources to balance actual usage, rather than estimated usage at the start of execution.

    Over time, right-sizing resources will allow for optimal spend, as well as identify unused resources that can be shut down. Organizations should identify development and test instances left running when no longer needed and shut them off.

    Implement Cost Anomaly Detection

    Organizations can shield themselves from cost anomalies by continually monitoring and optimizing cloud costs. Cost anomaly detection can help act as a barrier to early recognition before they become problematic. This is especially effective when prompt, actionable alerts can be delivered directly to resource owners via Slack or email when their forecast exceeds the set budget. The best option would be adopting a cloud cost monitoring and optimization (CCMO) tool that gives alerts in real-time when a cost anomaly occurs. These tools must be able to detect anomalies and analyze their root cause, while also allowing visibility into what went wrong to avert similar future errors.

    Executing continuous cost monitoring and anomaly detection tools for dynamic cloud environments is essential in identifying any activity that doesn’t align with expected expenditure or diverges from an established pattern. With proper monitoring, organizations can take corrective measures before the fact.

    Unwanted and unexpected cost incidents can clean out an enterprise’s budget quickly, especially as its cloud infrastructure grows. Organizations need to practice these steps to gain a full picture view of their cloud environment.

  • How FinOps Can Optimize Cloud Costs and Drive Innovation

    How FinOps Can Optimize Cloud Costs and Drive Innovation

    Two mainstays drive most application migration and modernization initiatives. First, organizations are moving workloads to the cloud as an innovation catalyst. Achieving their strategic goals requires the speed, agility, reliability and advanced technical capabilities available to them in a hyperscale cloud.

    Second, they’re intent on ensuring the return on investment (ROI) through cost optimization, which is different from the abstract “cost savings” that was part of many early cloud pitches. It’s a recognition that attaining ambitious strategic goals depends on ruthless attention to the bottom line. Cloud enables the capabilities described above not just by making them available at the click of a button but via a finance and business model far more palatable to CFOs and boards than if the company were to build everything in their own data centers – including the data centers themselves.

    Cloud Usage Costs

    Therein lies a fundamental problem—and one of the major application modernization trends we’re seeing in 2022: Cost optimization in the cloud is far more challenging than many organizations first expect. And as cloud use bills balloon, the costs begin to undermine the benefits of migrating there in the first place.

    Identifying cost savings in the cloud isn’t really the problem. Doing so isn’t easy, per se, but there are various ways to go about it—such as changing a storage type, instance type, or retention policy, among many possibilities.

    Implementing those cost savings is the real issue. Companies know where and how to optimize utilization and spending but struggle for various reasons to make the changes needed to realize these gains. This challenge is why we’re seeing the growth of FinOps in 2022. FinOps is the culture and practice of creating visibility and accountability to manage cloud spend throughout an organization.

    FinOps responds to two significant problems that hinder cloud cost optimization measures.

    The first is conflicting incentives. The IT team or a consultant or managed services provider may identify opportunities for saving money in a company’s cloud bill, but that same IT team—the ones typically responsible for the “keyboard work” needed to implement the changes—may not truly own the application in question. Moreover, the business unit or team that does own the application may not, in fact, have any financial accountability for the infrastructure that powers that app. They don’t have any skin in the game and are often reluctant to approve changes especially if the app is meeting their performance goals.

    Second, many organizations migrate to the cloud only to realize they lack dependable visibility into how they are allocating costs in their new environment. A CFO or even CIO with a multi-million-dollar cloud spend may have very little visibility into who in their organization is spending that money—much less why they’re spending that money.

    These are significant issues that can spiral into runaway cloud bills—and ultimately suffocate the business value that the cloud was supposed to unlock in the first place.

    FinOps is to Dollars What DevOps is to Code

    Enter FinOps: FinOps is to dollars what DevOps is to code. It is essentially about driving awareness of cloud spending throughout a business, from C suite to a junior developer. In doing so, FinOps makes possible the kinds of cost optimizations required to attain the cloud’s transformative potential.

    Just as DevOps fosters values like shared responsibility and visibility (without playing the blame game) to sustainably increase development velocity, systems reliability, and other priorities, the FinOps framework brings a similar approach to cloud resource utilization. DevOps is ultimately concerned with that first mainstay cloud goal I described above: Achieving speed, agility, reliability, etc. FinOps focuses on the second mainstay: Cost optimization.

    In this way, FinOps is becoming a vital trend in application modernization because you cannot have innovation without cost optimization. (If you think otherwise, invite your CFO to lunch and see how they feel about it.)

    FinOps engenders cost optimization in various ways, but there are two key facets I’ll highlight here. The first is that FinOps culture and practices typically entail implementing “showbacks,” a system that clarifies who is using (read: spending) what in the cloud.

    Showbacks take some time to set up—they involve things like resource labeling and tagging and creating a reporting structure, for example—but are well worth it. They form the foundation of shared visibility into resource utilization and spending. With showbacks in place, you can see who is spending what and optimize accordingly. For example, you might discover a business unit that uses a high percentage of overall spend for a relatively low percentage of revenue. There might be a good reason for that, but you may have uncovered an opportunity to reduce spending if not.

    Chargebacks are the second phase, in which application owners, teams and business units – virtually any org structure can work here – become directly responsible (via their budget) for their cloud spending. With showbacks and chargebacks, you have visibility. You can also reduce or eliminate misaligned incentives since there is more granular control and responsibility for spending down to the engineering level if desired.

    It can even create healthy competition among cross-functional teams or the broader organization—who can decrease their spending the most, who has the best spend-to-income ratio, etc. At 2nd Watch, we use an “innovation score” model to assess cloud spending in a client’s organization, for example, that factors costs into the overall score.

    FinOps enables everyone to speak the same language, not just about cloud but about cloud spending.

    It’s worth noting that the showbacks and chargebacks aren’t new concepts at all. Yet we’re seeing growing interest in them in the industry—and a corresponding increase of tangible goals attached to implementing them, such as “implementation of showbacks and chargebacks by Q1 2023.”

    This is a reflection of the FinOps movement—and the fundamental necessity of optimizing cloud costs.

    You don’t have to call it FinOps, but you do have to address how you allocate and use your resources in the cloud. All of the cloud’s good stuff—the outsized benefits and business value it creates—depend on it.

  • Elevating Agile With Financial Discipline

    Elevating Agile With Financial Discipline

    A corporate axiom is changing, shifting from “Big eats small” to “Fast eats slow.” But change doesn’t happen overnight.

    While Agile and lean methods continue to chip away at the status quo, making gains and increasingly moving beyond pockets of teams to the portfolio and then enterprise-wide adoption levels, waterfall approaches to delivery persist.

    Rumors of waterfall’s demise, it seems, have been somewhat exaggerated. A survey conducted by the Scrum Alliance (2017) of Scrum practitioners revealed that 78% of respondents said they used Agile-Scrum practices in parallel with waterfall practices. Mixed waterfall/Agile environments are complex. For many large companies, this is the norm. This is when the cohabitation challenges of agile and traditional workstyles become more glaring.

    Importantly, as IT finance management (ITFM) leaders know, becoming “more agile” doesn’t give you a pass when it comes to financial discipline and oversight. Agile organizations are still responsible for their ROI and saying you’ve adopted lean methods doesn’t automatically make you lean. Or fiscally responsible. Or well-governed. Or profitable.

    ITFM Leaders are Under Pressure

    Technical organizations are in the midst of evolving from being project-centered to product-oriented solution delivery and scaling Agile from the team level up to the portfolio/enterprise. In these evolving, hybrid working environments, faced with larger and more vocal agile communities, ITFM managers are facing increasing process dissonance between traditional and agile methods, wreaking havoc with their reporting, planning, budgeting and oversight.

    In a blended traditional/agile financial portfolio, understanding the true cost of projects, portfolios, value streams and OKRs helps companies make better use of their financial resources to drive profitable outcomes.

    And with interest in the value of IT spreading beyond the CIO to the rest of the C-suite, integrated reporting and decision-making that combine Agile work with traditional IT projects, the ITFM role itself is even more essential.

    Technology Business Management: Accurately Measuring the Cost of IT

    For many ITFM leaders, a focus on the discipline of technology business management (TBM) has improved their ability to better understand IT costs and influence governance and behavior through targeted analysis of real-time reporting (and chargeback) for IT resources. TBM provides a decision-making framework to help leaders understand the true costs involved in the delivery of products and services to customers. That has worked well, particularly in industries where project-centric, traditional waterfall projects are the norm. As it turns out, it works very well for supporting Agile, too.

    As agile gains momentum, finance is where it collides with P&L statements, budget dollars and fiscal quarters. With the seemingly irreconcilable Agile release trains and program increments, story points and cycle times, it can be difficult to see an integrated path forward. Fortunately, for teams that have embraced it, TBM provides a well-tested, proven framework that is easily extended to support enterprise Agile transformation.

    Agile transformation and scaling initiatives occur as teams of teams seek to reap the rewards of end-to-end enterprise agility.

    And, as enterprise agility expands, ITFM leaders will likely encounter process improvement initiatives that are key to an Agile transformation and that directly influence IT finance. Central among them are lean portfolio management (LPM) and value stream management (VSM). Due to their direct influence on ITFM and their intertwined agile characteristics, these two especially deserve early focus. And, while there are certainly more dimensions to enterprise agility, this is a good place to start.