Category: TCO

As technology evolves, tech execs adapt how they manage and operate the technology infrastructure. One recent development is Technology FinOps, which helps optimize spending on tech resources. This blog post explains what Technology FinOps is, its benefits, and how to implement it in your organization.

What is Technology FinOps?

Technology FinOps (Cloud FinOps) enhances cost management by promoting collaboration and alignment between technology and finance teams. It combines financial accountability, operational excellence, and governance to optimize technology spending.

Organizations striving to optimize technology investments must minimize wastefulness, especially in the era of cloud computing. Technology costs fluctuate, adding to the challenge of effective management.

What are the benefits of Technology FinOps?

First, implementing Technology FinOps has multiple benefits for organizations. It enhances spending visibility, enabling better expense tracking and identifying cost-saving opportunities without compromising quality.

Secondly, it creates a culture of accountability and transparency in technology spending, which promotes better decision-making and fosters collaboration between technology teams and finance.

Thirdly, implementing Technology FinOps enables organizations to optimize their technology usage, so they can operate efficiently and minimize waste. Finally, Technology FinOps provides an opportunity for technology leaders to demonstrate the value of their work to stakeholders effectively.

How can you implement Technology FinOps in your organization?

Implementing Technology FinOps is a multi-faceted process that requires collaboration between technology and finance teams. Here are some steps that you can take to get started:

1. Establish a cross-functional team that includes representatives from technology, finance, and procurement departments.
   
   
2. Define and document technology spending policies and procedures.
   
   
3. Set up cost tracking and reporting tools to monitor technology expenditure and identify areas of waste.
   
   
4. Conduct regular reviews of technology spending and adjust your budget or strategy accordingly.
   
   
5. Foster a culture of continuous improvement by providing training to your technology and finance teams.

Technology FinOps is vital as technology evolves. Implementing this approach optimizes spending, enhances collaboration, and fosters an efficient, accountable culture. Start small, integrate gradually into company culture, and ensure long-term adoption and success.

As technology advances, businesses prioritize their tech infrastructure. Tech execs must justify costs as organizations aim to streamline processes and boost efficiency. However, assessing investment prices can be challenging. Besides hardware and software expenses, other factors come into play. That’s where TCO comes in. But what goes into calculating TCO?

1. Hardware and Software Costs – The most obvious cost to consider when purchasing technology components is determining the required hardware and software for implementation. The costs of both hardware and software will impact the total cost of ownership (TCO). Additionally, factoring in the maintenance costs of hardware and software is crucial for ensuring reliability and security.
   
   
2. Personnel – Another crucial TCO factor is personnel. You require staff to implement, integrate, maintain, and troubleshoot the technologies your organization adopts. Consider not only their salaries but also benefits, insurance, bonuses, and overtime as part of the TCO calculation.
   
   
3. Training and Education – Your employees need proper education and knowledge of technology implementation to effectively use the system. The cost of training and educational resources should be considered in the overall total cost of ownership (TCO). While some vendors provide training, the cost may be prohibitive. Alternatively, internal education can be time-consuming and costly.
   
   
4. Data Today Equals TCO Tomorrow – The data collected today significantly impacts future TCO. Expenses for data backup, cybersecurity, and regulatory compliance must be included in TCO calculations. These factors ensure the ongoing safety and reliability of your data.
   
   
5. Equipment Upgrades and Replacements – Technology always needs updates and replacements. Network infrastructure, servers, storage, and other hardware or software should be factored into your TCO. The cost of replacing outdated upgrades may exceed implementing new technology. Keep track of when upgrades are needed to calculate TCO accurately.

Estimating TCO requires precise budget planning. Technology executives must consider all items, factoring in technology complexity. Understanding TCO is crucial to avoid excessive costs. By following the guidelines in this blog, you can accurately determine TCO and make informed decisions.

Tech debt hinders innovation in organizations. As a tech executive, eliminating debt while transitioning to new technology is crucial.

Here some examples of areas to focus on for an immediate impact: 

1. Fix simple bugs like error messages displayed when a user submits a form, broken page layouts in browsers, or invalid data being displayed.
   
   
2. Eliminate hard coded references, like IP addresses, as the limit the flexibility of the application.
   
   
3. Address UX issues such as issues like inconsistent navigation, unreadable small font, and inconsistent use of UI elements across pages may confuse users.
   
   
4. Migrate to the latest supported release of vendor solutions.  Backdated software can introduce bugs or add cost due to vendor maintenance fees. 
   
   
5. Fix inconsistent naming/ code structure which can cause lengthy troubleshooting time – like searching for a class by name that’s inconsistent in the codebase.
   
   
6. Improve automated test coverage to increase maintainability, which ensures that logic covered by tests can be modified without resulting in bugs.
   
   
7. Change the structure of the code to make it more testable. This can usually be done in small, incremental changes, each of which renders a little bit more code subject to test coverage.
   
   
8. Minor refactors – For instance, when a well-factored class grows to 800 lines, it can be beneficial to split it into multiple classes. Another example is making minor code changes to leverage a new library release that includes useful bug fixes or features.
   
   
9. Deprecate obsolete code – Old documentation no longer necessary. New code may differ from the old, potentially causing bugs.

Eliminating tech debt can be one of those “low hanging fruits” that technology executives are looking for to reduce IT costs.

In prior posts we’ve been talking about technology strategy. Tech execs must possess a robust strategic approach to steer technology direction and secure agreement on projects and budgets within their organization. Addressing technical debt is crucial in every IT strategy. As part of our strategic building process, we include the following step:

5. Analyze Current IT Environment: A large piece of the strategy build effort occurs in this step.  Here analysis of the current environment (current state, or status quo) is documented and reviewed in order to do reflections and backward looking. 

During the current state assessment, watch out for technical debt. It’s crucial for CIOs to prioritize reducing tech debt, whether staying on the current platform or migrating to a new one.

Technical debt often stems from decisions made to expedite application deployment. It can manifest as deviations from project specifications, reliance on outdated technologies, or even shortcuts in the supporting infrastructure. Let’s explore a few instances where technical debt tends to arise:

Unpredicted expense

As pressure mounts for teams to deliver quickly, especially for applications on a lengthy development roadmap, evolving business needs may necessitate accelerated release schedules. This pressure can tempt teams to resort to shortcuts, such as hardcoding IP addresses, limiting logic flexibility and hindering future application transition to the cloud.

Evolving technology

During the system’s initial release, the technology choices were appropriate. However, the aging infrastructure requires maintenance over time. As applications become older, changes become more likely. Upgrading the operating system or supporting software may be costly but necessary for effective system operation.

Misunderstandings

Incomplete business requirements result in rework. Improperly documented and misunderstood application support processes cause user frustration and costly errors. Effective communication with experienced professionals prevents technical debt. A resource management plan provides valuable, low-cost support for applications.

Managing technical debt is a delicate balance between cost and quality to meet business deadlines. If left unchecked, it hampers speed and agility in addressing business needs, gradually accumulating as the application ages.

See the next post for idea on how to eliminate Technical Debt.

Click here to see a post on Total Cost of Ownership (TCO).