⭐ Repository → 💼 AWS Well-Architected → 💼 Cost Optimization → 💼 Practice Cloud Financial Management

💼 COST01-BP02 Establish a partnership between finance and technology

• ID: /frameworks/aws-well-architected/cost-optimization/practice-cloud-financial-management/bp02

Description

Involve finance and technology teams in cost and usage discussions at all stages of your cloud journey. Teams regularly meet and discuss topics such as organizational goals and targets, current state of cost and usage, and financial and accounting practices.

Level of risk exposed if this best practice is not established: High

Implementation guidance

Technology teams innovate faster in the cloud due to shortened approval, procurement, and infrastructure deployment cycles. This can be an adjustment for finance organizations previously used to running time-consuming and resource-intensive processes for procuring and deploying capital in data center and on-premises environments, and cost allocation only at project approval.

From a finance and procurement organization perspective, the process for capital budgeting, capital requests, approvals, procurement, and installing physical infrastructure is one that has been learned and standardized over decades:

• Engineering or IT teams are typically the requesters
• Various finance teams act as approvers and procurers
• Operations teams rack, stack, and hand off ready-to-use infrastructure

With the adoption of cloud, infrastructure procurement and consumption are no longer beholden to a chain of dependencies. In the cloud model, technology and product teams are no longer just builders, but operators and owners of their products, responsible for most of the activities historically associated with finance and operations teams, including procurement and deployment.

All it really takes to provision cloud resources is an account, and the right set of permissions. This reduces IT and finance risk; teams are only a few clicks or API calls away from terminating idle or unnecessary cloud resources. It also allows technology teams to innovate faster – the agility to spin up and then tear down experiments. While variable cloud consumption may impact predictability from a capital budgeting and forecasting perspective, cloud provides organizations with the ability to reduce the cost of over-provisioning and the opportunity cost associated with conservative under-provisioning.

Establish a partnership between key finance and technology stakeholders to create a shared understanding of organizational goals and develop mechanisms to succeed financially in the variable spend model of cloud computing. Relevant teams within your organization must be involved in cost and usage discussions at all stages of your cloud journey, including:

• Financial leads: CFOs, financial controllers, financial planners, business analysts, procurement, sourcing, and accounts payable must understand the cloud model of consumption, purchasing options, and monthly invoicing. Finance needs to partner with technology teams to create and socialize an IT value story, linking technology spend to business outcomes.
• Technology leads: Technology leads (including product and application owners) must be aware of financial requirements (budget constraints) and business requirements (service level agreements) to implement workloads that meet organizational goals.

The partnership of finance and technology provides the following benefits:

• Near real-time visibility into cost and usage.
• Standard operating procedures to handle cloud spend variance.
• Finance stakeholders act as strategic advisors on capital use for commitment discounts (e.g., Reserved Instances or AWS Savings Plans).
• Existing accounts payable and procurement processes are used with the cloud.
• Collaboration on forecasting AWS cost and usage to align budgets.
• Better cross-organizational communication through shared language and financial understanding.

Additional stakeholders to include:

• Business unit owners: Understand cloud business model, forecast growth, and guide purchasing decisions such as Reserved Instances or Savings Plans.
• Engineering team: Encourages engineers to follow best practices and take action on Cloud Financial Management (CFM).
• Third parties: Ensure alignment with financial goals, ROI, and contribution to reporting and analysis.

Implementing CFM and achieving success requires collaboration across finance, technology, and business teams, with a shift in how cloud spend is communicated and evaluated. Include engineering teams in cost and usage discussions and encourage them to follow best practices and take agreed-upon actions.

Implementation steps

1. Define key members: Verify that all relevant finance and technology members participate. Finance members typically include CFOs, controllers, planners, business analysts, procurement, and sourcing. Technology members include product and application owners, technical managers, and representatives from all cloud-building teams. Other members may include business unit owners (e.g., marketing) and third parties (consultants) for alignment and reporting support.
2. Define topics for discussion: Identify topics requiring shared understanding. Track cost from creation to bill payment, noting members involved, organizational processes, and associated information, including pricing models, tiered pricing, discount models, budgeting, and financial requirements.
3. Establish regular cadence: Set a recurring communication schedule to maintain alignment. Regular meetings should review organizational state, ongoing programs, and financial and optimization metrics. Then, key workloads are reported in greater detail.

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