Unveiling the Business Relevance of FinOps: The Unit Economics Connection
Myth: FinOps - Just Another IT Function?
In the labyrinth of cloud-driven enterprises, a persistent myth looms—FinOps is perceived as just another IT function, seemingly disconnected from tangible business outcomes. But let's unravel this myth and venture into the intriguing tale of a subscription-based vendor, akin to the likes of Netflix or Spotify.
The Dynamic Blue and Orange Offices
Picture a vibrant office building with two distinct wings—the blue office houses the IT department, and the orange office serves as the thriving sales hub. The blue office receives a challenging mandate from the CFO—bring down cloud costs by 20%. Though the IT team diligently applies operational FinOps practices, the options for further cost-cutting are diminishing, making it hard to present compelling arguments.
Conversely, the orange office buzzes with celebration. The business is soaring, exceeding growth expectations. Sales of subscriptions are skyrocketing, and the sales team attributes their success to the cloud-powered back-end infrastructure.Here lies the disconnect—the blue office focuses on budget management, while the orange office revels in the celebration. But what if there's a way to bridge this gap and connect these two offices? Enter the game-changer—unit economics.
The Power of Unit Economics
Unit economics evaluates the costs and revenues associated with individual units of a service or product. In this case, each unit represents a subscription sold by the sales office. By linking cloud expenses to the sales of extra subscriptions, the blue office can determine the actual cloud cost per subscription.
As subscription sales flourish, the IT team now calculates how the cost per subscription evolves. They might uncover that despite increased cloud consumption, the cost per subscription is decreasing. Armed with this insight, they gain a powerful argument to present to the CFO—cloud costs are well-aligned with business growth, making it a strategic investment rather than an isolated expense.
Transforming FinOps: A Strategic Imperative
Unit economics transform FinOps from just another IT function to a key driver of business relevancy. The IT director can now showcase the direct impact of cloud spending on the company's financial success, revealing how cloud investments fuel the growth that the sales office celebrates.
Conclusion
In conclusion, FinOps is far from just another IT function—it is a strategic imperative that bridges the gap between financial control and business growth. By embracing unit economics, organizations can unleash the true business relevancy of FinOps, showcasing how cloud investments play a pivotal role in driving real business outcomes.