Understand financial considerations

A digital transformation goes hand-in-hand with a financial transformation. When you're making the shift to the cloud, there are financial considerations around how the cloud will impact your financial position, accounting KPIs, and processes that Chief Financial Officers (CFO) and finance teams need to understand. Your organization's motivations and business outcomes will help determine how you look at your financials.

This guidance will help you learn how to use the cloud to make your IT cost structure more flexible and help you build a business case to migrate to the cloud.

How does cloud pricing work?

The cloud uses a pay-for-what-you-consume model versus the up-front server infrastructure and software licensing costs that you would typically pay on-premises in your data center. The cloud allows you to take advantage of a variable cost model instead of a fixed cost model.

CAPEX to OPEX

One benefit of moving to the cloud is that it shifts how you pay for capacity, from CAPEX to OPEX. Your overall budget allocation moves from a CAPEX investment to OPEX pricing models that can fluctuate based on capacity or utilization of the cloud environment. Your organization will realize meaningful improvements in financial statements, with improved cash flow timing and a reduced need to acquire assets that result in a fixed cost structure.

Reduced data center footprint

A reduced data center footprint is another benefit of a shift to the cloud. On-premises data centers are frequently overbuilt for peaks, resulting in excess capacity and excess spend. In the cloud, you can spin up resources quickly with the flexibility of scalability, where you can scale up and down as needed. Azure operates in many different geographic regions, giving you flexibility to choose where to build your applications. Amortized facilities or co-lo or hosting agreements that you have in place are no longer required.

Increased productivity and service delivery

How can the cloud help your team be more productive? It's critical to consider how DevOps and the cloud can improve and drive efficiency in your organization. The cloud can help unlock better DevOps processes, resulting in faster time to market, increased revenue, increased employee productivity, and the ability to deploy products more quickly.

Sustainability

Migrating to the cloud can reduce your carbon footprint, and your organization immediately benefits from a sustainability perspective. Cloud providers continuously invest in new green technologies at a dynamic scale that an organization can benefit from and decreases its environmental impact.

You can use cost as a carbon proxy. The ability to track your carbon footprint across your cloud environments can sometimes be a challenge. You don't always get much visibility of the underlying infrastructure you deploy, and you can have third parties controlling some of your deployments. At some level, all your compute's embodied carbon and electricity costs are factored into the cost of all your services.

Given this, optimizing the OPEX spend can be a way of optimizing carbon efficiency.

Next steps

The financial considerations guidance above, and subsequent guidance in the Strategy methodology help you build a business case to migrate to the cloud. Before building your business case, review common finance terms that can help.

Glossary of common finance terms