Metric Driven Cost Optimisation (MDCO)

Introduction 

Metric Driven Cost Optimisation (MDCO) is a method for measuring the potential optimisations of technology investments and using goals and targets to trigger a process. It is important to have metrics in place to measure the impact of optimisations, as this helps to make the right trade-offs between technology, business, finance, and governance for the best possible outcomes overall. Without these metrics, it may not be clear whether optimisation efforts have been successful or not, and how they support the business outcomes. 

How to implement MDCO 

There are four key factors that define the practice of MDCO and each are critical for success:  

• Automated measurement - This means that computers, not humans, should be used to measure optimisations;  

• Use of targets - Metrics without targets are not truly metrics, as they do not have a clear goal to aim for; 
• Importance of setting achievable goals - It is important to have a proper understanding of the data to determine realistic outcomes; 
• Data-driven decision making - It is essential to measure the impact of optimisations before taking action, and to let the data drive the decision-making process. 

There is a health risk that is worth noting here, like most aspects of IT operations, metrics and KPIs are a journey. As an organisation matures, it may start with unit metrics that are tactical in nature and focus on cloud costs.  

Over time, it should move towards a set of clearly defined business value metrics, because cloud investments should be about driving business value and making the right trade-offs rather than a technology deployment.  

Measuring Success 

Looking at each one of the building blocks in turn, there are some metrics that can be applied to measure value: 

For accountability and enablement, the metric of Cloud FinOps Enablement as a percentage of the organisation can be used to measure the alignment and adoption of Cloud FinOps within an organisation. This can be measured by the number of business leaders, IT finance colleagues and engineers who have been trained in FinOps, divided by the total number of individuals in those roles within the organisation. As the organisation matures, the percentage of individuals trained in FinOps should increase. 

Measurement and realisation metrics can include Cloud Cost Allocation as a percentage to support both showback and chargeback models, which directly correlate to business value. This is measured as the percentage of total cloud costs allocated to responsible business owners. As the organisation matures, the goal should be to attribute as much cost as possible based on direct consumption measures. 

It is important to understand that the goal of cost optimisation is not just to save money, but to invest cloud spend in a way that maximises business value and makes appropriate trade-offs with governance and financial considerations. This is an iterative and continuous process that involves visualizing and managing cloud consumption in the most cost-effective way. One way to measure the effectiveness of cost optimisation efforts is through the use of the Cost Optimisation Savings % metric, which measures the percentage of savings achieved through cost optimisation efforts. 

For planning and forecasting, the metric of Cloud Spend Accuracy % can be used to measure the accuracy of an organisation's cloud spend forecasts. This is calculated as the percentage of actual cloud spend that falls within the forecasted range. As the organisation matures, the goal should be to increase the accuracy of forecasts. 

Finally, tools and accelerators metrics can be measured by the percentage of Cloud FinOps Automation which can be used to measure the amount of cloud FinOps processes that are automated. As the organisation matures, the goal should be to increase the automation of FinOps processes to improve efficiency and reduce the burden on staff. 

Conclusion

Overall, the adoption of MDCO and the use of appropriate metrics can help organisations to demonstrate and quantify the value of their cloud infrastructure and technology investments. It can also facilitate a meaningful dialogue between IT and business.  This is where the use of FinOps professionals, such as Thebes Cloud management, to augment your teams to train colleagues in your organisation can accelerate these processes and capabilities and get to outcomes that really matter to your Leadership Team.