Value of Establishing a Baseline for Metrics

As organizations continue to leverage cloud investments to drive their business growth and top line revenue, business, finance, and technology executives need to become increasingly connected in their efforts to deliver strong business outcomes.  More than ever before, executives need to quantify the value of their investments in business and technology capabilities.  As such, business and IT leaders need a set of value metrics that cover both operational and strategic outcomes, as well as risks and opportunities.  Nevertheless, operational IT metrics are often disconnected from business outcomes, and executives need to establish the connection between technology and business outcomes to facilitate a meaningful dialogue between IT and business leaders.

Like many aspects of IT operations, metrics and KPIs are commonly a journey.  Organizations typically start this journey with unit metrics focusing on cloud costs and eventually progress toward a set of clearly defined business value metrics.

As we define the set of metrics across the five key building blocks of Cloud FinOps, which include Accountability & Enablement, Measurement & Realization, Cost Optimization, Planning & Forecasting, and Tools & Accelerators, we ensure that these metrics are easily measurable and commonly attainable across the organizations that are on the journey of digital transformation. 

Accountability and Enablement Metric

The Accountability and Enablement pillar is foundational to building a culture of cost and value awareness and charts the course for both the process and cultural transformation journey in cloud FinOps.  The primary goal is to help drive financial accountability and accelerate business value realization by streamlining IT financial processes and enabling frictionless cloud governance.  Enablement empowers IT, finance, and business teams with training to better understand cloud resources and strategies to efficiently deploy and manage them.  Driving accountability and enablement starts with a charter and core governance policies, and then guides the transformation of processes that link finance, IT, and business owners. 

We recommend adopting Cloud Enablement % as the standard metric for the accountability and enablement pillar, measured by the # of business leaders trained and certified / total # of business leaders in the organization.

This is an important metric as many organizations fail to adopt Cloud FinOps because of lack of awareness and training. This cloud enablement metric will help business leaders better understand the value of cloud and how it can be an enabler to drive sustainable business outcomes. 

The cloud enablement metric can easily be implemented through a set goal based on the number of identified business leaders across the organization. With that said, it is important to utilize the Pareto principle of 80/20 rule here and identifying the key business leaders who are extensively consuming services on the cloud should be the primary focus. Google Cloud recently published a new Cloud Digital Leader certification that is aimed for business leaders and executives. By obtaining the Cloud Digital Leader certification, it ensures the individual is well-versed in basic cloud concepts and can demonstrate a broad application of cloud computing knowledge in a variety of applications and how Google Cloud services can help achieve desired business goals. In addition, the FinOps Foundation also provides training and certification to practitioners in a large variety of cloud, finance and technology roles to validate their FinOps knowledge and enhance their professional credibility.

Ultimately, we see that a target goal of over 70% of business leaders achieving the Cloud Digital Leader certification can significantly drive alignment and adoption of Cloud FinOps across the organization and leverage cloud technologies as an enabler to create sustainable business outcomes.

Measurement and Realization Metric 

Foundational to any good process is accurate data and effective metrics, which starts with the notion of cloud costs visibility and traceability. This is driven by proper resource hierarchy and project structure standards and supported by a labeling and tagging data architecture behind your organization’s use of cloud resources.  While many common tags include IT-driven designators such as application, environment, and project, it is important to design a direct connection to your P&L into your labeling and tagging architecture, by including cost centers or the chart of accounts as tags.  Furthermore, automation of tagging ensures that all taggable resources are deployed with consistent and accurate labels and feed FinOps metrics with reliable data.

Establishing consistent and detailed tagging is essential to attributing cloud resources not only to specific products and projects, but also to detailed cost centers aligned with lines of business and associated P&Ls.  In order to establish a full chargeback of typical cloud services, customers will need to attribute costs associated with 3 types of cloud resources.  The first and most straightforward will be attributing taggable resources (compute instances, databases, and storage buckets) that are aligned to a specific P&L, such as where a given application is solely consumed by one line of business.  

The second situation is where taggable resources are shared across multiple lines of business.  Many customers will resort to using traditional P&L allocation models, such as using business revenue or headcount of the associated business units to divy up the costs.  In order to more accurately allocate shared application costs, leading-edge customers use elements in their cloud microservices architecture, such as API calls, to specifically measure the relative consumption of shared applications.  

The third type of cloud resources are those that cannot be tagged.  Common examples include support, networking costs, and third party Marketplace costs.  Here, traditional P&L allocation models as described above (using headcount or revenue) are commonly used.  Some customers will use the relative distribution of their taggable resource allocations to appropriate non-taggable costs to their business units, while some types of costs, such as networking, are allocated based on API calls.

To measure the effectiveness of the Measurement & Realization pillar of cloud FinOps across these three types of cloud resources, we recommend adopting Cloud Allocation % as the lead metric.  This metric is measured as the percentage of total cloud costs (taggable resources consumed by individual business units, taggable resources shared across multiple business units, and non-taggable resources) allocated to responsible business owners.

This metric can be used to support both Showback (cloud costs held in a central IT P&L but reported to business units) and Chargeback models (cloud costs fully charged to business unit P&Ls), and reflects the underlying effectiveness and accuracy of resource tagging and cost attribution to business units.  Cloud Allocation % can be implemented in two ways.  The basic implementation would qualify costs apportioned by any P&L metric (either by consumption or by traditional P&L allocation such as by revenue or headcount).  The more advanced implementation of this metric would only qualify those resources (both specific and shared) that use either tagging or API calls to measure consumption and attribute associated costs to business units.

Customers evolving from a Crawl to a Walk stage of implementation will seek to allocate 70% or more of their total cloud costs, while those moving to a Run state will achieve 90% or greater cost attribution based on direct consumption measures.

Cost Optimization Metric

Cloud cost optimization is not just about cutting costs—it’s about knowing where to spend your money to maximize the business value. It is an iterative and continuous process that provides a consistent methodology to visualize and manage cloud consumption in a most cost effective way.  Success in cost optimization can result not only in significant reductions of cloud spend, but sometimes also in improved application performance to manage higher traffic (user requests per seconds or transaction processed) within the same cost envelope. 

It is important for an organization to automate reports generated by ingesting billing usage and cost data as well as recommendations generated for optimizations. These optimizations reflect the potential savings (also known as unrealized savings) which allows the team to prioritize implementations to realize the cost savings. 

Typically potential savings contains adoption of:

• Pricing optimizations like Committed Use Discounts (resource-based and spend-based), BigQuery reservations, etc.
• Resource optimizations of wasteful resources (including aged snapshots, idle instances, and over-sized databases) that don’t provide any business value.

Capturing this metric is important as it allows the organization to keep a pulse on inefficiencies that exist in the organization and allows businesses to focus on achieving cost savings thereby capturing true value of running their workloads in the cloud.

The cost optimization metric can be implemented by integrating Recommendation Hub in your FinOps workflows. Recommendations Hub is part of Active Assist that contains a portfolio of intelligent tools and capabilities to help you optimize your workloads with minimal effort. It surfaces a summary of all recommendations across your projects along with potential cost savings ($) so you can prioritize your cost optimization effort. We have seen customers realize savings by taking action on recommendations generated by idle VM recommender, Committed Use Discount recommender, VM machine type recommender and many more.

Ultimately we see customers achieving realized savings of over 90% on total cloud service optimizable. We have seen customers reinvest these savings into creating differentiated products and offerings and improving their customer experience, thus accelerating business value realization from the cloud.

Planning and Forecasting Metric

Financial planning is a foundational capability within finance organizations that will directly influence each company’s capabilities of cloud computing forecast accuracy. Financial planning focuses on accurately forecasting financial metrics that are set on an annual basis to guide the company’s financial objectives. The annual plans are measured on a quarterly basis and adjusted based on performance throughout the year; the forecast performance is monitored on a monthly basis to help influence operational results.

Planning and forecasting cloud computing costs is typically the responsibility of the team responsible for cloud operations. Operational forecast planning is based on consumption workload plans, historical trajectory, seasonality and leading indicators. Transformational projects also create material risks to forecast accuracy. 

Establishing accurate financial forecasting in the cloud spend requires rethinking traditional approaches to asset depreciation run-outs and trend-based forecasting of maintenance and licensing costs. Using workload-specific forecasting models that leverage a combination of trend-based models for steady-state workloads, driver-based models for scaling applications, as well as monthly variance analysis can greatly improve the accuracy of dynamic cloud needs.

Capturing and measuring forecast accuracy enables companies to understand if they do what they plan. Companies get what they measure and so by measuring and discussing variances to forecast accuracy it enables better control of cloud spend allocations. 

Cloud computing forecast accuracy should be included as a topic that Finance and Cloud operations teams discuss at least monthly. The cloud operations team should monitor forecast trajectory during the month and evaluate adjustments when they identify unexpected shifts.

An effective forecast accuracy is one that avoids surprises to company executives and investors. Cloud computing often has more variability and seasonality than depreciation of capex from on prem environments. Coordinating project and sprint agile management can help avoid surprises. If a development change creates an unexpected jump in spending then change management processes should be reviewed to avoid future surprises.

Tools and Accelerators Metric

Employing proper tools and accelerators are important to fully benefiting from FinOps practices. In earlier stages, companies may have limited their ability to report detailed analysis of cloud spend. As practices mature and improve, labeling and tagging of resources proves valuable to understanding costs for specific projects/teams and for building unit cost metrics. 

These capabilities can become even more powerful through automated monitoring of resources that offers insights on spend, value, compliance and recommendations.  

Therefore the recommended measure of Tools & Accelerators maturity is to evaluate the # of automated recommendations that have been implemented as a % of total list of automated recommendations generated that results in cost savings

This is an important metric because as the organization onboards newer workloads to the Cloud environment, lack of robust actionable recommendations and monitoring can lead to increased cloud waste. This has been a key component prohibiting organizations from realizing the total value of their cloud investment.

Customers starting on their tool maturity journey can leverage Google’s out of the box recommendations Hub to get started. The Recommendation Hub is a place in the Google Cloud Console where you can view, prioritize, and apply these recommendations.  Some examples include VM right sizing recommendations, BQ slot optimizations, Committed use Discount etc, Idle resource recommendations. This can further be integrated into any existing enterprise tooling using the recommendations API. As organizations mature, they can leverage Cloud Monitoring to create advanced recommendations based on custom business logic.

Ultimately, we see that a target goal of over 50% of automated recommendations implemented as the tooling for surfacing recommendations matures and this will ensure that the organization can minimize and eliminate cloud waste to maximize value from cloud investment. 

Bringing this together with a Cloud FinOps Dashboard

As technology and business goals continue to evolve over time, it is essential to establish a process where the Cloud FinOps metrics are continuously reviewed whenever the goals change. Furthermore, it is important to note that not all organizations need to achieve the “Run” state of the identified metrics target. The metrics are means to achieve the business outcomes based on the organization’s priorities. By collaborating with cross-functional teams to quantify and measure the impact of the Cloud FinOps metrics, executive leaders can quickly obtain buy-in, highlight common-shared goals, and move fast. 

At Google Cloud, we have developed solutions to help our customers build a Cloud FinOps Dashboard to capture these metrics to drive a culture of change and equip the transformation and business leaders with the tools to share and track the results of the key metrics. Successful adoption of the Cloud FinOps metrics enable organizations to focus on the business outcomes and the dashboard provides a meaningful feedback loop to report on the impact and drive visibility across the organization.

So, where are you now in your FinOps journey, and how do you move beyond the challenges ahead? Google can help you start the conversation and accelerate your path to maximizing business value with the cloud. 

No matter where you are on the cloud transformation journey, through an interactive session with Google, we can bring executives across the organization together to work toward a shared vision and a plan to accelerate and realize business value in the cloud. If you are interested in more information, please contact us.

^{Special thanks to Daniel Pettibone, Amitai Rottem, Bruce Warner, Jon Naseath, and Nihar Jhawar for co-authoring and contributing to this blog post and the members of the FinOps Foundation including J.R. Storment, Vas Markanastasakis, Anders Hagman, John McLoughlin, Mike Bradbury, and Rich Hoyer for providing their domain expertise and continuous support to this important cloud FinOps topic.}

From electrifying transportation to shifting the grid to renewable energy, environmental sustainability is one of the greatest challenges of our generation. A critical but often forgotten goal is the development of sustainable agricultural practices, especially given increasing water shortages and soil degradation around the world.

Lucent Bio was born to solve some of these threats to humanity’s ability to feed itself. It delivers crop nutrition solutions that accelerate the transition to sustainable agriculture. Lucent Bio developed novel technology for bioactive crop nutrition products, including its flagship product—Soileos®—which boosts nutrient density in crops, regenerates soil, avoids polluting agro-ecosystems, and enables the circular economy. Soileos is a plant-based product that is made by upcycling food processing co-products such as lentil and pea hulls into bioactive nutrients that then create the next harvest.

As a start-up, Lucent Bio has used Google Workspace since day one to drive collaboration, streamline operations, and scale. As an organization, it is also closely aligned with Google’s sustainability goals. Google is carbon-neutral for its operations and has made a public commitment with detailed plans to run on carbon-free energy by 2030, meaning clean power every hour of every day.

Google Workspace has been an invaluable resource to fuel collaboration between the engineers at the Lucent Bio pilot plant, the scientists at the research lab and greenhouse, and on-field agronomists as they conduct trials on Soileos across North America. Without the use of Google Workspace during the COVID 19 pandemic, Lucent Bio would not have been able to achieve their current scale.

“In just 18 months, Lucent Bio has been able to scale manufacturing from 1 kg to 1,000 kg of product per day. This year, we’re poised to take the next big step to 20,000 kg per day. During this scale-up process, we went through several iterations of improvements, resulting in a completely zero-waste manufacturing process—a hugely difficult but impressive achievement in line with our mission to accelerate the transformation of agriculture to sustainability. Every step of the way, Google Workspace has been an essential part of our innovation and growth strategy.”
Michael Riedijk, CEO Lucent Bio

Google Workspace runs on the cleanest cloud in the industry. It helps teams of all sizes, and across all industries, connect, create, and collaborate from anywhere. Workspace recently launched AI-generated summaries in Spaces, which help distributed teams stay focused while quickly catching up on chat messages they might have missed. Innovations like these keep the scientists at Lucent Bio collaborating as they build a more sustainable future for agriculture.

You can find more about Google’s commitment to sustainability here, including our goal to become not just carbon-neutral, but carbon-free by 2030, efforts to combat deforestation, and how we’re supporting clean energy.

FM Logistic provides its international customers with complete logistics solutions that cover everything from warehousing and handling, to transport and distribution, co-packing and co-manufacturing, and supply chain optimization. Operating in 14 countries including France, Russia, Poland, India, Vietnam, Brazil, and China, FM Logistic supports its clients by offering specialized services across a number of markets including consumer goods, retail, cosmetics, and health.

“We are in the process of transforming all our tools and integrating new solutions to be able to work faster and more efficiently. Two main IT priorities are mobility and openness, in terms of working from anywhere and being able to interact with other information systems.”

– Communication Manager, FM Logistic

As a business that has existed since 1967 and in 2018 achieved a turnover of €1.178 billion with 9.5% annual growth, FM Logistic is always looking to help secure the company’s position within an evolving sector. To better serve its customers, FM Logistic decided to launch an innovation project in 2017 to transform the internal digital tools of the company and replace its intranet, email, and productivity software. The company looked for an integrated solution that would enable more collaborative ways of working and bring its international operations closer together. The company found that implementing G Suite and LumApps social intranet was the perfect combination.

“We are in the process of transforming all our tools and integrating new solutions to be able to work faster and more efficiently,” says the Communication Manager at FM Logistic. “Two main IT priorities are mobility and openness, in terms of working from anywhere and being able to interact with other information systems.”

A global transformation

For large international companies with global operations, implementing a single integrated solution to enable collaboration across regions while respecting regional variations can be a real challenge.

“We have 26,000 employees spread across a broad geography, with a variation in cultures and technological maturity. There was an aspiration to work in collaboration, but the necessary tools were not in place,” says FM Logistic’s Communication Manager. FM Logistic looked for a solution to enable new, more collaborative work practices, which were flexible in terms of usage and that, most importantly, would work as part of an integrated solution.

To do that, FM Logistic worked with Google Partner Devoteam G Cloud to implement G Suite alongside the LumApps intranet portal. It took six months to complete the migration of 7,000 accounts, with employees accessing the Business or Basic G Suite edition according to their needs. “Before, with our physical infrastructure we found ourselves buying additional hard drives as we ran out of storage,” says the Technical Project Manager at FM Logistic. “That’s no longer a problem, and we can tailor access depending on whether or not employees need unlimited storage .”

“It’s a real advantage to be able to access your account from any device and work from anywhere. Hangouts Meet has been really transformational in that respect: it has reduced the need for travel significantly, even in the few months we’ve been using it so far.”

– Communication Manager, FM Logistic

“We followed Google’s G Suite migration advice and had early adopter ambassadors in every country. By the time we got around to the final country, very little input was needed as they were ready to go!” says the Technical Project Manager. “Many of them were already familiar with the product, so it was very intuitive. Our feedback surveys gave a satisfaction rating of almost 4.5 out of 5 in relation to the transition. We also had significant executive support, with two members of the executive committee on the steering board. That really helped the project to move quickly.”

As a result, employees were quick to understand the benefits of the new system. “It’s a real advantage to be able to access your account from any device and work from anywhere. That was clear from the start,” says the Communication Manager. “Hangouts Meet has been really transformational in that respect: it has reduced the need for travel significantly, even in the few months we’ve been using it so far.”

LumApps: a fully-integrated enterprise hub

One of FM Logistic’s main reasons for choosing G Suite was the seamless integration with LumApps’ intranet portal. LumApps adds value to G Suite, thereby boosting and sustaining employee adoption. FM Logistic chose LumApps to create a hub for its enterprise, where everything is centralized from internal communications to business apps.

“We didn’t want a patchwork of solutions, we needed a platform that worked as an integral whole,” says the Technical Project Manager. “With LumApps, employees access the intranet using their Google authentication and can access all their G Suite tools through the intranet. Moreover, LumApps is Google native, so the integration is seamless and we know that it will evolve to accommodate any changes that might take place.”

“The main advantages we see are communication and knowledge sharing,” says the Communication Manager. “With LumApps, all 26,000 of our employees are now able to access the portal in their own language and access local news.”

For the next step, FM Logistic is considering integrating social communities so that employees can express themselves and be more engaged in the corporate culture.

Supporting digital maturity

Thanks to Drive, employees can now work from wherever they are, and are able to work more efficiently and more collaboratively. “From an administrative point of view, users can benefit from automatic updates, so there is less pressure on the IT department,” says the Technical Project Manager. “And we’re seeing many innovative uses of the tools to work in more efficient ways: many services have gone paperless with Forms, so less time is wasted; commercial agents are using Drive to work together on tenders simultaneously; and with Sheets, tasks are automatically sent from the team manager’s file to employee’s Calendar.”

“G Suite and LumApps are the first step of our digital transformation, in terms of collaboration and moving into the cloud. We have real confidence in our partners LumApps and Google, and we’re investing in those relationships for the long-term benefit of the company.”

– Communication Manager, FM Logistic

Now, FM Logistic wants to further support its employees in exploring all the tools G Suite has to offer. “We are embarking on a second phase to give our employees the skills they need for advanced uses of Docs, Sheets, and Forms,” says the Communication Manager. “It’s a learning curve, but it’s key to our goal of transforming our everyday processes.”

“G Suite and LumApps are the first step of our digital transformation, in terms of collaboration and moving into the cloud. We have real confidence in our partners LumApps and Google, and we’re investing in those relationships for the long-term benefit of the company.”