In this post, I’m going to discuss the shock that switching from traditional CapEx spending to cloud/OpEx spending causes. I will discuss how to prepare yourself for what is to come, how to govern spending, and how to enforce restrictions.
Most of you who will read this article have been working in IT for a while, that is, you are not a “cloud baby” (born in the cloud). You’ve likely been involved with the entire lifecycle of systems in organisations. You’ve specified some hardware, gone through a pricing/purchase process, owned that hardware, and replaced it 3-10 years later in a cyclical process. It’s really only during the pricing/purchase process which happens only every 3-10 years in the life of a system, that you have cared about pricing. The accountants cared – they cared a lot about saving money and doing tax write-offs. But once that capital expenditure (CapEx) was done, you forgot all about the money. And you’re in IT so you don’t care about the cost of electricity, water, floorspace, or all the other things that are taken care of by some other department such as Facilities.
Things are very different in The Cloud. Here, we get a reminder every month about the cost of doing business. Azure sends out an invoice and someone has gotta pay the piper. Cloud systems run on a “use it and pay for it” model, just like utilities such as electricity. The more you use, the more you pay. Conversely, the less you use, the less you pay.
Have you ever wandered around a shop, seen something you liked, had a look at the price tag and felt a shocked at the high price? That’s how the person who signs the checks in your organisation starts to feel every month after your first build in or migration into Azure. Before an organisation starts up in The Cloud, their fears are about security, compliance, migration deadlines, and so on. But after the first system goes live, the attention of the business is on the cost of The Cloud.
There is a myth that The Cloud is cheaper. Sometimes, yes, but not always – large virtual machines and wasteful resource sizing stand out. In CapEx-based IT, you paid for hardware and software. Someone else in the business paid for all the other stuff that made the data centre or computer room possible. In The Cloud, the cost includes all those aspects, and you get the bill every month. This is why cost management becomes a number 1 concern for Cloud customers.
I have seen the effect of sticker shock on an organisation. In one project that I was a lead on, the CTO questioned every cost soon after the bills started to arrive. The organisation was a non-profit and cash flow was intended for their needy clients. Every time something was needed to enable one of their workloads, the justification for the deployment was questioned.
In other scenarios, the necessary (for agility) self-service capability of The Cloud provides developers and operators with a spigot through which cash can leave the organisation. I heard a story when I started working with Azure about a developer that wrote a bad Azure SQL query and left it to run over a long weekend. The IT department came in the following week to find three years of Azure budget spent in a few days.
Dec, Ops, And … Fin?
You’ve probably heard of DevOps, the mythical bringing together of eternal enemies, Developers and IT Operations. DevOps hopes to break down barriers and enable aligned agility that provides services to the business.
Now that we’ve all been successful at implementing DevOps (right?!?!) it’s time to forge those polar IT opposites with the folks in finance.
Finance needs to play a role:
- Early in your cloud journey
- During the lifecycle of each workload
The Cloud Journey
The process that an organisation goes through while adopting The Cloud is often called a cloud journey. Mid-large organisations should look at the Cloud Adoption Framework (a CAF exists for Azure, AWS, and Google Cloud) because of the structure that it provides to the cloud journey. Smaller organisations should take some inspiration from CAF – a lot of the concepts will be irrelevant.
A critical early step in a CAF is to work with the people that will be signing the cheques. The accountants need to learn:
- Developers and operators will be free to deploy anything they want, within the constraints of organisation-implemented governance.
- How the billing process is going to change to a monthly schedule based on past usage.
- About the possibilities of monitoring and alerting on consumption.
The Lifecycle of Each Workload
In DevOps, Developers and Operators work together to design & operate the code and resources together, instead of the historical approach where square code is written and Ops try to squeeze it into round resources.
When we bring Finance into the equation, the prediction of cost and the management of cost should be designed with the workload and not be something that is tacked on later.
Architects must be aware that resource selection impacts costs. Picking a vCore Azure SQL database instead of a lower-cost DTU SKU “just to be safe” is safe from a technical perspective but can cost 1000% more. Designing an elastic army of ants, based on small compute instances that auto-scale while maintaining state, provides a system where the cost is a predictable percentage of revenue. Reserved instances and licensing to use hybrid use benefit can reduce costs of several resource types (not just virtual machines) over one-to-three years.
A method of associating resources with workloads/projects/billing codes must be created. The typical method that is discussed is to use tagging – which, despite all the talk of Azure Policy – requires a human to apply values to the tags which may be deployed automatically. I prefer a different approach, using one subscription per workload and using that natural billing boundary to do the work for me.
The tool for managing cost is perfectly named: Azure Cost Management. Cost Management is not perfect – I seriously dislike how some features do not work with CSP offers – but the core features are essential. You can select any scope (tag, subscription, or resource group) and get an analysis of costs for that scope in many different dimensions, including a prediction for the final cost at the end of the billing period. A feature that I think is essential for each workload is a budget. You can use cost analysis to determine what the spend of a workload will be, and then create alerts that will trigger based on current spending and forecasted spending. Those alerts should be sent to the folks that own the workload and pay the bill – enabling them to crack some fingers should the agreed budget be broken.
Once the decision to go to The Cloud is made, there is a rush to get things moving. Afterward, there’s a panic when the bills start to come in. Sticker shock is not a necessity. Take the time to put cost management into the process. Bring the finance people and the workload owners into the process and educate them. Learn how resources are billed for and make careful resource and SKU selections. Use Azure Cost Management to track costs and generate alerts when budgets will be exceeded. You can take control, but control must be created.