Is FinOps Hijacking Your ITAM Program?

FinOps is a valuable new tool for finance, IT, and ITAM. FinOps came into being for a simple business reason: Cloud Service Providers (CSP) charge for their technology-as-a-service. ITAM has always wanted to know the total cost of ownership (TCO) for services provided by the organization's IT team; however, IT could not deliver for various reasons. This is evident by the very few organizations that implemented chargebacks. So, it should be obvious that FinOps plays a vital role in the ITAM Program, but how important and at what cost?

The hype meter was pinned when FinOps first became mainstream, promising to deliver the missing link businesses desired from their IT departments. However, FinOps is just one piece of the return on investment (ROI) that ITAM provides. So, let's take a realistic view of the limitations of FinOps.

Value

FinOps claims to deliver value through a better understanding of the cost of cloud services. While it is true that knowing the cost of cloud services is a variable in the value calculation, cost isn't the only variable. That's because FinOps measures cost in hard dollars and

Value <>  the sum of all hard dollars saved

The calculation of value is much more complicated, including not only hard dollars but soft dollars as well. Let's look at one real-world example:

Executive: What is the chance that I will be audited for software?

ITAM: Well, we can provide some industry statistics, and there is a good chance we can be audited.

Executive: What is the chance we will fail the audit?

ITAM: We don't know until we assess our environment.

Executive: What is the cost of a failed audit?

ITAM: That depends on how far out of compliance we are.

Executive: If you can't show me the cost of a software non-compliance event, how can I justify implementing ITAM?

ITAM: << queue the sound of crickets >>

ITAM creates value by saving hard dollars and soft dollars. More on this later.

Quality

According to the FinOps profession, implementing FinOps allows you to make "trade-offs between speed, cost, and quality." I really thought this line of thinking had gone extinct in the 1990s. But here we are, assuming that quality can be traded! Engineering has learned that quality is a pay me now or pay me later proposition. You can trade off features, never quality.

Vendors

FinOps has been a gift to vendors who provide services and tools to the IT industry. Why? Because FinOps neatly packages up one of the requirements for managing technology – cloud spend. This gift allowed vendors to use an industry message clearly stating its value. And organizations need help implementing FinOps. This is not to fault vendors for taking advantage of an opportunity. And both vendors and organizations benefit from FinOps, so it appears to be a win-win. However, and you knew there was a "however" coming, the vendor's eagerness and success have fueled the hype, like the fear, uncertainty, and doubt of the software audit that the vendors in Europe used to sell SAM. With FinOps, only a slice of the ITAM solution is sold, and it could damage other FinOps initiatives.

Finance

Finance has not always been a friend of ITAM. In fact, of all departments, finance has probably been the most significant roadblock to ITAM's adoption. Let's look closer at areas within finance that have complicated ITAM's mission.

Procurement

Too many ITAM Programs are not permitted to be involved in purchasing and contract negotiations. Terms and conditions are critical to managing IT assets and vendors. There are ITAM Programs that are not allowed access to invoices, or ITAM's invoice retention requirements are not accepted. In many procurement departments, the focus is on getting the best price, and purchasers are rewarded based on price.

Price

The asset's price is often the only focus instead of the value. This goes back to the value equation described earlier, where the value of IT assets includes the vendor's willingness to provide soft dollar savings in the contract. Another example is the assumption that two IT assets appear similar but significantly differ from the end-user's perspective —for example, the difference between Word and a desktop publishing application.

IT Asset Cost

There are instances where a finance policy dictates if an asset should be managed based on an arbitrary cost. For example, one finance policy stated only assets over $700 could be managed. The ITAM Program was forced to bundle monitors with the desktop to push the value above the $700 threshold. Think of all the assets this policy would prevent from being managed!

Cost Avoidance

One of the more prevalent practices that hurts ITAM is the lack of acceptance finance shows for cost avoidance efforts and results. Here's a real-world example suffered by one ITAM team.

The ITAM team saved 14 million dollars over 18 months by redeploying IT assets. When finance was told of these savings, they were exuberant, well, at least until they found out how, and then finance's response was, "Oh, that's cost avoidance, we don't care about that, we assume you are doing it."

This scenario has been played across the world. Cost avoidance, both soft and hard dollars, is one of the greatest values ITAM brings to an organization. The effort of maintaining an accurate inventory and redeploying assets goes well beyond finance and delivers significant value to the entire organization. Ironically, cost avoidance is a high priority for FinOps by avoiding using only the cloud services needed!

What Should ITAM Do?

First, the IT Asset Manager should learn about FinOps and incorporate it into your Cloud Asset Management strategy. Second, determine if your organization has adopted FinOps. If your organization has already implemented FinOps, then engage with the FinOps team. This path may be more challenging if the FinOps team has not engaged ITAM. In either case, ITAM must work with FinOps and establish the ITAM Program as the central program that engages all parties with a vested interest in IT assets.

Resetting Expectations

FinOps brings great value to ITAM and should be embraced. However, FinOps should not be treated differently than if finance started using a new depreciation method or tax table – it's just data that helps ITAM create a more accurate TCO calculation. Also, remember that FinOps' primary focus is on cloud cost with less regard to capital costs that come with implementing cloud services. The cost of cloud services is just one piece of the TCO of cloud.

FinOps' intention is good. The proponents of FinOps emphasize the need for collaboration between finance and IT. However, the question that needs to be asked is – will finance change its approach to managing dollars? Perhaps more importantly, should finance change, and what will it take to change?

ITAM is a program that centralizes the efforts around IT assets to deliver information that can be used by finance, IT, IT security, legal, HR, business unit owners, and executive management to help achieve the organization's business goals while meeting corporate governance requirements.