Considerations

Key Considerations

Developing an approach for your organization

Centralized vs decentralized budget model: Organizations must decide how they’re going to handle the budgeting. They’ll first need to determine whether to centralize or decentralize their budgeting for cloud infrastructure. For most enterprises, a centralized IT budget is best. But a conglomerate, holding company, or private equity firm might prefer decentralized budgets. The choice will have an impact on finance, operations, and budgeting as well as on how the organization manages the accounts and setupwith the public cloud provider.

Products: The organization’s mix of revenue-generating vs non-revenue-generating products will have an impact on budgeting and reporting. Revenue-generating products should involve a P&L (profit and loss) for reporting, whereas non-revenue-generating products are cost centers but should still report on business value in some way (e.g., number of transactions processed, number of users supported).

In-house vs outsource: At a smaller level of cloud spend, managed services may be an appropriate way for organizations to keep cloud costs in check. But once an organization achieves even a modest level of spend (>$6 million/year), they can likely achieve a worthwhile ROI (return on investment) by establishing a dedicated FinOps team in-house.

How to split shared costs: Not all costs can be directly allocated back to a single product or line of business. Organizations will need to determine how to divvy up shared costs such as a data lake used by multiple teams, or licensing and support costs for end-to-end monitoring tools that cover multiple applications. Generally, organizations will choose one of the following methods for divvying up shared costs:

Proportional: According to the percentage of direct costs.
Even Split: Equally across all the business units.
Fixed: Based on set amounts defined by the organization.