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Idea Exchange September 2020: Cloud Expense Forecasting and Budgeting

David Lambert
David Lambert in Community Highlight
21st September 2020

This month, over 20 community members met for the Idea Exchange to discuss best practices, tips, and tricks on cloud expense forecasting and budgeting.

Cloud finance forecasting can be a complicated exercise. Costs across different VMs, storage, containerization, and other services aren’t all billed the same way. Add in discounts and things can get messy. Our community got to the bottom of some cloud expense forecasting ideas.

If you’re a member and want to watch the meeting in full, check out the recording.

What’s an Idea Exchange?

Idea Exchanges are a monthly, casual get together where community members vote on a topic to discuss and the group exchanges ideas, stories, and best practices. Members get together with the following principles in mind:

Idea Exchanges are for everyone. If you’re new to FinOps and its practices, sit back, listen and enjoy. Mature in your practices and have a story to share, even better. Ask questions and join in on the conversation during the call (and afterwards in Slack!).

Cloud expense forecasting and budgeting

One thing is certain (even if forecasts aren’t): cloud finance forecasting is a complicated, dynamic matter. Depending on how your business utilizes cloud computing, budgeting can be a simple or greatly complicated task.

One element of forecasting that can shift any algorithmic estimate are the more human and social contexts of cloud costs (e.g. the recent pandemic, lowering operational costs, rising costs from deploying a remote workforce, etc.). This means FinOps practitioners need to layer in context specific to their business by working with leaders and finance teams. Context that can shift the accuracy of forecasts could be seasonality in application utilization, trends in how users operate services, migrations in progress, etc.

Given this dynamic nature of forecasting, the more consistent repetitions and cycles of data-driven cloud finance forecasting your teams can do, the more your teams can refine those numbers (or at least get pretty close).

Having a key relationship with finance helps

Building a strong culture, relationship, and rapport to speak both engineering and financial acumen can guide teams toward a better understanding and outcome for budgeting. This relationship is also a source of context to better shape forecasting. The finance team is the best organization to know of mission critical contexts around business spending that could be addressed with optimizing cloud finance management.

Some community members told stories of how strong relationships with finance teams also helped build better forecasts to accommodate with COVID-19-reated changes. Meeting budgets and forecasts through uncertainty is a lot easier when agreed-upon budgeting data is being shared and discussed.

Should we buy or build a cloud finance forecasting tool?

Sometimes a third-party tool is nice because it’s immediately available and doesn’t need to be built, configured, and tested. However, some teams might also use native tooling, build custom tools, or have the best of both worlds by layering custom tooling on top of vendor tools for single-cloud environments.

Reasons to buy

The group agrees that multi-cloud cost management requires a third-party layer to help uncomplicate the work. Forecasting is much easier and causes less strain on finance teams since the data is processed and forecasts are built using analytics and algorithms within a cloud finance management tool.

If your organization has complicated business units and metrics to measure, and to compare budgets and forecasts against, this is another potential reason to want to use a cloud finance management tool.

Many members emphasized using a third-party tool to help create a business unit cost to use in conjunction with forecasts to help fine-tune and hone in on an accurate cloud budget.

When you buy a third-party tool, there’s also the value of built-in support, knowledge base, documentation, and other helpful resources to make sense of cloud finance budgeting.

Reasons to build

Relying on a third-party tool could bring the need to wait on third-party tool product roadmaps and timelines for your particular organizational use case. If time is of the essence, it might be more useful for internal teams to hack together a solution to start making sense of cloud finance forecasting.

One community member mentioned that some tools might create limitations or requirements that are untenable for long-term use. There’s more complication in getting these tools going than to just do it yourselves (assuming your team has the engineering resources to do so).

Listen in for more details and example methodologies

During the latter part of the call, a few members dug into actual rough equations and formulas of how they generate their cloud budget forecast. Check out these specific examples within the recorded video call.

Next topic: Buying third-party tools versus building your own

After voting on the next topic, the Idea Exchange group voted on discussion buying versus building your own cloud finance management tool. Join the group during the next meeting to join in on the discussion!