 Hi, I'm Peter Burris, welcome to another Cube Conversation from our beautiful studios here in Palo Alto, California. As we do with every Cube Conversation, we come up with a great topic and we find someone who really understands it so they can talk about it, we capture them for you so you can learn something about some of the new trends and changes in the industry. And we're doing that today too. The topic that we're talking about is, how do you do a better job of mapping the costs that are being generated by the cloud? Are that information's coming out of cloud suppliers related to what you're using with the actual business activities that generate the differential capabilities that customers are looking for? That's a tough, tough challenge and to understand that better, we're talking with JR Stormant who's a co-founder of Cloudability. JR, welcome to the Cube. Thanks Peter, good to be here. So let's talk about first, who are you? Yeah, so I am co-founder of Cloudability and Cloudability is focused around improving the unit economics of cloud spend. So our customers tend to be those who are spending large amounts in AWS or Azure or GCP and we take their billing data, their utilization data, various metadata about their business and do machine learning and data science on top of it to help them get better visibility into sort of where that spend is going, how they're using it but more importantly to give them some controls around how they want to optimize. And optimize doesn't necessarily mean to save money in a cloud world because most companies who are moving into cloud very heavily are doing that for the innovation, for the speed, so they can deliver better data faster. But it's really about fine tuning the conversation that okay, here we want to save money, here we want to move faster, here we want to focus on quality and really providing a way for the various groups that aren't normally talking, the finance teams with the engineering teams with the procurement teams, all these groups to come together and be able to take executive input to say okay, how do we want to operate and how do we want to improve those unit economics as we go? Well, I want to start with just a quick comment on this notion of unit economics because when people historically hear the notion of unit economics, they think of increasing scale so the average cost per unit goes down. But I think you're talking about more than that, right? Are you really also talking about a mapping of what spend is generating to the business activities that actually generate value and ensuring that you get the differential or the optimized unit economics and unit costs? Yeah, no, so the mapping is actually really interestingly challenging in cloud. It's hard enough in traditional IT. If you look at somebody like AWS, they have 200,000 SKUs, different products you can buy and they now bill at a second level resolution. So what this means is you've got all these engineers out there using cloud in a very good way to move quickly, innovate, deliver more features and they kind of have an unlimited credit card that they can go spend on as quickly as they need and they never see the statements, they never see the bills. And the other side, you've got finance teams and government teams who've sort of lost control of traditionally the power of the PO that they have to actually rein that in and they're struggling just to understand what is the spend and then to the mapping question, how do I allocate these hundreds of millions of charges that I have this month into cost centers and business units and getting that sorted in a world where engineers are focused on moving fast. They're not tagging things based on cost center typically. So once you get that sort of mapping aspect sorted to the next point you brought is in bringing the business value. So how do we start to relate that back? There's a concept, a lot of IT has been a cost center and now it's actual driver of value in a world where businesses are increasingly delivering their value through software. So we need to start tying the spending, mapping it to the business and then tying that to the value delivered. Great example of this, I was sitting last week with one of the largest cloud spenders in the world and they're up in nine figures with their primary vendor. And in the conversation with the executives we realized that nobody was looking at both sides of that equation. You had the finance people who were saying, hey, we're tracking the cost and we're figuring out what's happening there. And then you have the revenue generators looking at the money coming in, you have the cloud people with that but there wasn't this centralized view to say, all right, we want to have a conversation about what value are we getting out of the spend? And the question that always comes up with that is are we spending the right amount? I don't know. Let me build on that because IT is historically, and this is one of the things that we've been doing over the last few years. IT has historically done things at a project level. Yes. All right, so we had waterfall development. We tried to change that with agile. We had, you know, buy the hardware upfront and then deploy the application on the cloud changes that. So this project orientation has led to a set of decisions about finance at the moment that the business decides to do it. We've changed the practices that we use at a development level. We've changed the practices that we use at an asset level. Is it now time to change the practices that we use at a finance level? Is that really kind of what's going on here? It is. The project analogy is good because what we're seeing is they're shifting from a project basis to a product basis and products that deliver value. Increasingly, if you think about the changes happened with DevOps in the scene and cloud, companies are delivering more of their value through software and they're not just using IT for internal projects, right? It's actually the driver of business. It's how we interact with airlines and banks and all these things. So that's the shift to say, okay, now we've gotten good at DevOps moving fast and we've gotten good at deploying and building better data stores. Now we need to bring in this new discipline. And the discipline is what the market is calling FinOps, which essentially is combining- Financial. Financial operations. Got it. But you essentially combine it to DevOps. Applied to a technology world. Applied specifically to a cloud world. And it only can really happen in cloud. It can't happen in data centers because data centers have fixed spending, right? You have to wait to get resources. Once you make the investment, it's at some cost. There's months of lead time. Cloud introduced the removal of constraints, which means you can get whatever you want as quickly as you want. And DevOps minutes all automated. So instead of your collection of 60 servers, you've got thousands that are coming up and down all the time. So what you now have to do is bring in all these groups. Engineers have to think about cost as a new efficiency metric. They have to think about the impact of their business that this code, this cloud formation template they just wrote is going to have. And the finance teams have to shift from this mode of I'm going to report retroactively at a quarterly granularity 60 days after it happened and block investment to be, I'm going to partner with these teams, report in a real time fashion, give them the visibility and help forecast and actually bring them together to make better business decisions about the cloud spend. So cloud has allowed development to alter practically. I mean, agile has been around for a long time before the cloud predates the cloud, but it became practical and almost demanded as a consequence of what you could do with cloud. So cloud changed development through agile. It changed infrastructure management through DevOps where now you're deploying software infrastructure as code and what you're saying is the third leg of that stool, cloud is now changing how you do financial management of technology, financial management of IT. And we're calling that FinOps. Yeah, and you can't really have FinOps without cloud or without DevOps. And if you have the two together, you ultimately need this new set of, it's a new operating model. The reason this has come to a head of late is, if you look at going to the Amazon re-invent conferences a few years back, it was like, well, how much is cloud going to be a thing? And okay, cloud is not going to be a thing. When's it going to happen? Now it's about the how and how do we do this better? Cloud is hitting sort of material spin levels now at big organizations. I mean, you always see the cloud projections of where it's going. I think it's now 360 billion in the next few years. And we're seeing CFOs at public companies look to say, okay, it's not my biggest line item yet, but it's the most variable and fastest growing COGS expense. So it's actually starting to affect our margins. We need a new set of processes to actually manage this. So one of the things that's coming to market is this new group called the Phenops Foundation, which is the nonprofit trade association that initially has a few dozen of some of the largest cloud spinners of the world. There's the Spotify, the Atlassians, the nationwide, it's Autodesks. And they've all come together as a set of best practice practitioners to start to codify this into something that can be scaled out in organizations. So that group is going to be putting on a user conference around this area. There's a new O'Reilly book that's coming out at the end of the year that's going to be sort of the the treaties and all this stuff pulled together because what we found in, you know, me as in cloudability in the last eight years, we bring in technology and platform to show the recommendations of visibility and how to do this, but the real challenge companies run into is they don't have the internal expertise. Their finance teams understand what they need to, the engineers don't. And so, you know, they came to us last year saying, can you help figure out the processes? Can you educate us? And that's really where, you know, this Phenops Foundation has grown out of of bringing together those people to define those processes. So the impact of cloud on each of these different groups, on the development group, on the infrastructure team, and now on the finance team. The developer groups, some of them resisted it, but generally speaking, it's gone okay. And eventually, tooling from a variety of different players came along that made it easy to enact best practices and software development through an agile mechanism. In the last few years, after significant battles within infrastructure teams about whether or not they were going to use software as code, we've seen new products, new tooling that has facilitated the adoption of those practices. What kind of tooling are we going to see introduced that facilitates Phenops, so that finance teams, procurement teams, move from a project orientation to a strategic management of the resource orientation? I mean, I think the first is on the engineering side is seeing cost become a first class citizen of an efficiency metric that they need to look at. So in their build processes, baked in the CICD, looking to see, am I properly sizing my compute request for the workload that it needs? There's some research that just came out showing that I think it's like 80% of the market is not using the best discounting options that cloud providers offer. You hear these horror stories, cloud's too expensive, we so overspend, that's not actually a problem with the cloud providers, that's a problem with the enterprises that are not using the tools offered, the discounts, the reservists, the infrequent access. Caviar mentor. Exactly, so I think at the end of the day, it's the first step in this is getting those checks in place to say, are we using the things that help drive the right cost for our needs? And on the other side of that, the finance team's really changing the way that they are interacting with their technology teams, becoming partners, becoming advocates in this, versus a passive, you know, retroactive reporter down the line. And this enables these sort of micro-optimization discussions that can happen where, data center world, we bought it at some cost, it's sitting there, cloud world, we can make decisions today that impact the business tomorrow. So let me make sure I got this. So I have a client who, who I was having a conversation with him, they told me that their Amazon, their AWS bill is 87 gigabytes, not monthly, not 87 pages, that's 87 gigabytes. So we get, we bring this 87 gigabytes in and it's a story about what I consume out of Amazon. It's not a story what my business utilizes to achieve its objectives. So we're now entering into a world where we're trying to introduce those financial, that financial visibility into how that spend can be mapped to what the business does. So the finance group can look at a common notion of truth and the IT group can look at a common notion of truth, the application owners can look at a common notion of truth and that's what is FinOps is providing. If I got that right. Absolutely, and the 87 gigabyte example is the exact reason why it is FinOps and not just cloud financial management. You can't have a person with a spreadsheet looking at that and trying to make decisions about it, right? It has to be automated, it's IT finances code, it's got to be baked into the processes. We've seen organizations that have hundreds of millions of individual charges hitting them in a consumption based manner. The other thing that's come in with the FinOps as a core tenant is we're now seeing a decentralization of accountability for that spend. So if you look at the big cloud spenders out there who may be spending tens or hundreds of millions a year, some of them have thousands of cloud environments. Gone is the day of we have a centralized group getting to say we're going to turn this off, turn this off. We want to give each of those teams the ability to see just their portion of that bill in the right mapped way as you said and to be able to take actions on the back of that. So that's changed and you run it, you maintain it, you understand what's shut down. What has sort of come back to the old centralized model is this notion, and this is where procurement's job has shifted too largely, of we do still want to centralize the rate reduction. So engineers, you go use less, right? Essentially, finance team, procurement work together with the cloud vendors to get the best possible rates through reserved instances, committed use discounts, volume discounts, grocery rates, whatever it is. And they become sort of strategic sourcing to say you're going to use whatever you're going to use and you're going to watch that to make sure you're using the right amount with target specials, we're going to make sure we get the best rate for it. And that's sort of the two sides of the coin. Well, very importantly, procurement has always been organized on episodic purchases, with a whole point just to bring the price point down. And now we're talking about a continuous services where you are literally basing your business on capabilities provided by a third party. And that is a very, very, very different relation. It's just in time purchasing. And it's a new supply chain management process where you have so many SKU options and you are making these purchases in sometimes thousands a day and that impacts everything down the road. Excellent. JR Storm and core founder of Cloudability talking about FinOps and Cloudability's role in helping businesses map their cloud spend to their business activities for better, more optimal views of how they get what they need out of their cloud expenditures. JR, thanks very much for being on the queue. Thanks Peter. And once again, I'm Peter Burris and thanks for listening to this CUBE conversation. Until next time.