What do travel, marketing budgets, and the cloud have in common? A lot.
I’ve spent years in different SaaS industries. They all have the same problem.
In my time at Adthena, the leader for marketing ad intelligence, the setup is very similar to that of cloud computing:
- A few of the major players are the same (Google and Microsoft among others)
- They offer native tools
- Waste is rampant
- The advertisers only have incentive to give just enough insights on cost savings, but let’s be honest, they have a business to grow
So many marketers are asked by finance, ‘what can be done to improve ROAS (return on advertising spend) or to cut the marketing budget.’ So, they do. I won’t go into the details, but there are easier ways to show 5-10% cuts in the marketing budget. Or improve ROAS at the expense of organic traffic. Lipstick on a pig.
The 5-10% Illusion: Short-Term Savings vs. Long-Term Efficiency
The industry problem? Leaders are not giving a specific enough directive and cannot track the progress with the right data, so they applaud a 5-10% savings. But was the opportunity 30%?
Let’s take the travel industry for instance. What is the ROI on an internal meeting being in person? What is the ROI on an exec traveling business class instead of economy?
These are challenging things to model. So, when asked to cut travel costs, a Travel Manager must limit the number of business-class flights. Or pull back on internal meetings in person. 5-10% saved. Some frustration by travelers, but job well done. Right?
I would say wrong. Why aren’t the actual budget holders or P&Ls being held responsible?
Asking the Right Questions: Establishing a True Baseline
What is the problem in both scenarios? The baseline.
- What should our marketing baseline be?
- What should our travel spend baseline be?
- How do we maintain them?
These are similar questions that I don’t see asked enough. There is a similar issue in the cloud.
“How much can we save?” is usually the question that is asked.
This is too short sided for any industry. The question I would rather see asked is: “What should our baseline of cloud spend actually be and how do we maintain that?”
I rarely see this asked. Instead, companies “save” 5-10% and then move on. Only to see their spend balloon back up.
FinOps: A Culture Shift Towards Sustainable Optimization
What is the alternative? For the cloud, it is proper FinOps.
Inform on the current environment. Optimize low-hanging fruit. Allocate the cloud costs. Then budget. Next, show back the spend to budget holders. And then, eventually, charge back the spend to budget holders. Hold them accountable. Build a proper governance framework.
FinOps is a culture shift from “how can I save?” to “how can I give finance, engineers, leadership, procurement, and product all the information to help them cultivate an efficient, yet innovative environment?”
This simply cannot happen if the trend of annual projects to optimize the cloud continues without any culture shift in place to ensure the baseline is maintained.
Meghan Trainor got it right. It’s all about that base(line) and whether we maintain it.
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ABOUT THE AUTHOR
David Forman has been in cloud and AI since 2016.
He lives in Austin, Texas with his wife and 2 kids. In his spare time, you can catch him on the golf course or trying a new restaurant in Austin.