People hate budgets. They hate budgeting. A common attitude is that budgets are only useful for being rolled up to hit people over the head with when things don’t go as planned. They’re only created when Finance demands them. Minimal effort is put into their creation “because too many unknowns”, and once created, they’re completely ignored until the cycle is repeated next year.
I love budgets. I propose we see budgets as a useful tool. View them as a map charted for our upcoming journey. Use them to communicate where we’re headed. Consult them to make sure we’re on the right track. As plans or circumstances change, use the budget to support decision making and re-alignment.
This article makes a case for the value of a cloud infrastructure budget and why they are essential for cost management.
Life of a Budget
Finance Teams like to understand where the money is going. They prefer to know this proactively rather than reactively. Others need to see this as well; there are multiple interested parties to a budget. Understanding their needs and their perspective is essential in creating a useful budget.
Cloud infrastructure may be one of the organization’s most significant expenses. Budgeting this expense will bring others into your corner. Instead of cost conversations being contentious - with company leadership unclear about what value they get from that expense - you will have them as allies who help when problems arise. They will defend the expense, and they will understand the value it brings. They will have a clearer understanding of the cost drivers for cloud expenses, and a high level of confidence in your management of those expenses.
Budgets are a primary method for synchronizing your efforts with the financial management of the organization. Budgets communicate a company’s financial priorities, commitments, and constraints. Budgets, and not technology, are the common language of all executives and boards.
Put aside all the technical complexity of cloud infrastructure, and the question that remains is, for X cost I get Y benefit. It is another line-item of expense to manage with the goal of improving the company’s profitability.
Budgets Increase Value
The word ‘budget’ may invoke a visceral reaction like other of life’s less desirable activities - such as filing your personal taxes or finally creating a will. Creating your first budget can be painful. As your cost management practices improve, budgeting will become a natural part of your management practices.
The information you pull together and the decisions that get made when making a budget will enable other cost reduction efforts. You may make commitments to resources you will need long-term, allowing you to get even more value out of your cloud expense.
Once you create the budget, with it you begin your journey. You have the budget as a guide that provides feedback to you to let you know if you are off the path. Knowing this can help you prioritize work, or manage expectations, to either get back on-track or to revise your trip as necessary.
Expectations and Prioritization
For companies who have opportunities to invest in growth, freedom from a restrictive cloud budget can enable teams to keep the gas pedal firmly planted in pursuing growth-enabling development. Creating a budget allows you to align on one of the following expectations for that expense:
- Invest efforts into optimization and cost reduction
- Prioritize company growth and development at increased expense
- Balance growth and expenses by maintaining costs as level (Both of the above)
Understanding and managing this leadership expectation is critical, and the budget creation process can facilitate this alignment.
Your Role in the Budget
A budget should be created - even if no one is asking for one. If one already exists, make it useful. Make sure it considers the necessary elements to serve as a helpful guide and communication tool. We will discuss these critical elements in a future article.
It is impossible to anticipate everything that will happen in a year. New opportunities for revenue or R&D will surface. Unexpected expenses will hit. Mistakes will be made. Expectations around performance, availability, or security may change, leading to costly changes and added expenses. While these may come as a surprise, a budget allows you to handle these in stride. When these unexpected events occur, you will be in a great spot to manage them; to communicate their impact on your plans, and to take action to adjust.
I’ve made a case for the creation of a cloud infrastructure budget and discussed the value it brings to the organization and to your role in managing that expense. In a future article, we will review the inputs and considerations for a cloud infrastructure budget to make sure it is useful in the ways described in this article.