The cloud has captivated executives for a number of years, with many investing in a broad range of solutions that had the potential to change how their business operated in the future.
Nowadays, increasingly cost-conscious CFOs are more concerned about what value cloud investments can bring to their business, turning their spending focus from the technology’s broad potential to instead pinpoint how it can be applied for specific business use cases.
Leaders are moving away from a period where “the answer was cloud all the time without a lot of discipline around what it’s delivering,” said Kurt Shintaffer, co-founder and CFO for cloud-based technology business management software provider Apptio.
One way companies and their CFOs can manage such a shift is by creating a disciplined “FinOps” practice, which can help companies create a cloud spending strategy that best fits the particular needs of the business, Shintaffer said.
“The idea here is to bring people from different parts of the business together with the right technology so they can collaborate and make data-driven decisions on how best to manage their journey to the cloud,” Shintaffer said of FinOps. “And so that's sort of the financial and governance piece that then allows you to invest in the right thing.”
Changing the tech spending approach
A veteran of Ernst & Young, Shintaffer has served as the Bellevue, Wash.-based Apptio’s CFO for 16 years, according to his LinkedIn profile. The company’s software solutions are aimed at helping businesses optimize IT spending and forecasting.
The term FinOps refers to an emerging cloud financial management practice in organizations, which aims to foster better communication and collaboration between the finance, technology, engineering teams and business teams, according to the FinOps Foundation. A good FinOps practice will help businesses achieve a balance between spending and saving, ensuring the business is investing in the right technologies while also making certain the company is not wasting money on unneeded services, he said.
“CFOs, in this case, are really important constituents because their job is to make sure capital is allocated really smartly across the business,” Shintaffer said of FinOps practices. This means finance leaders are in a “unique position to be able to collaborate with the technology folks on what the right mix of investments are,” he said.
Inflation and other macroeconomic trends are causing finance leaders to reevaluate their overall costs and especially their technology budgets. Variable costs like cloud computing are a natural place for CFOs to look when it comes time to shearing down expenses, Shintaffer said.
However, when making those kinds of decisions, finance leaders “first have to really be confident that you know what those costs are,” he said. Leaders then have to weigh those costs against the potential expenses of implementing new technologies, which go beyond simply integrating these solutions.
“What's the infrastructure cost? What are the people costs?” Shintaffer said, pointing to operating costs as well as additional considerations like cybersecurity. More technology investment also means “more surface area” that leaders have to think about in terms of cyber risk, he said.
Making space for growth
Having a dedicated FinOps practice or cloud spending strategy in place can be critical for businesses as they look to get ahead of the curve; especially as investment in the cloud does not appear to be slowing down so much as changing focus.
Cloud spending is still expected to surge this year, outpacing overall IT spending growth. Research by Gartner predicted total enterprise IT spending will grow by 2.4% to reach $4.5 trillion in 2023. Meanwhile, spending on the cloud is expected to grow by 20.7% to reach $591.8 billion in 2023, compared to $490.3 billion last year, according to October research from the company.
“Hopefully a year from now we're in a different economic cycle, a lot more focused on growth, but we'll still have these FinOps practices instituted that will lead us to continue to make really good decisions even when the pressure might be off,”Shintaffer said.