Invoicing and chargeback is one the most important capabilities in the FinOps Framework. What if it is not possible to chargeback cost but you want to raise awareness? Achieving cost consciousness within teams can already be quite difficult if you use chargeback, but even more daunting when chargeback mechanisms are not possible to directly attribute costs to individual departments or projects. When chargeback isn’t an option, focusing on showback should be your next option.

Also, drawing inspiration from the principles of behavioral economics, particularly the work of Richard Thaler and Sunstein on nudges (Thaler and Sunstein, 2008) organizations can adopt subtle yet powerful strategies to promote cost awareness and accountability among their teams. By leveraging nudges and implementing effective communication and education initiatives, businesses can foster a culture where every team member is aware of their impact on cloud costs and motivated to make informed decisions.

Nudging Towards Financial Awareness

Thaler and Sunstein introduce in their book “Nudge,” (2008) the concept of nudges – small, non-coercive interventions that influence behaviour without restricting freedom of choice. In the context of cloud cost management, nudges can play a pivotal role in guiding individuals towards more cost-conscious decisions, even in the absence of direct chargeback mechanisms.

Consider the example of showback, where organizations share cost data with teams without directly attributing costs to them. While showback lacks the immediate accountability of chargeback, it serves as a powerful nudge towards financial awareness by making individuals aware of the financial implications of their actions. By presenting cost data in a clear and accessible manner, organizations nudge teams towards more mindful resource usage and foster a sense of ownership over cloud costs.

Leading by example; importance of leadership

Leadership plays a pivotal role in setting the tone for cost consciousness within an organization. By addressing the importance of financial responsibility and embodying the principles of cost optimization, leaders can in still a sense of accountability throughout the organization. By leading by example and demonstrating a commitment to prudent cost management, leaders nudge employees towards aligning their actions with the organization’s financial objectives.

For instance, leaders can highlight success stories of cost optimization initiatives and recognize individuals or teams who contribute to cost-saving efforts. By celebrating these achievements, leaders reinforce the importance of cost consciousness and create a positive feedback loop that encourages continued participation.

Nudging Towards Awareness: Showback vs. Chargeback

In scenarios where direct chargeback of cloud costs is not feasible, organizations can implement showback mechanisms to provide visibility into usage and spending. Showback is attributing the costs to the team, the team doesn’t own or manage a budget for cloud costs when there’s no chargeback. Therefore, showback could serve as a powerful nudge towards awareness by making individuals aware of the financial impact of their actions.

Thaler and Sunstein (2008) highlight the importance of designing choice architectures that subtly influence decision-making. Showback aligns with Thalers and Sunstein concept of choice architecture by presenting cost information in a manner that prompts individuals to consider the financial consequences of their actions without imposing strict mandates. As written in the book, “Nudges are not mandates; they are small changes in the context that can lead to predictable changes in behavior.”

Consider a development team that regularly spins up large instances for testing purposes. Through showback, team members gain visibility into the associated costs, prompting them to reconsider their resource allocation decisions. By presenting cost data in a clear and accessible manner, organizations can nudge teams towards more cost-conscious behaviors without resorting to punitive measures. But what if the Teams don’t look at the cost at all, how could you influence them with a nudge to look into their cost optimizations? An incentive to nudge the engineers could be giving back some savings of the optimization as innovations funds or gamification, and/or etc.

Path of least resistance

By leveraging Thaler’s and Sunsteins (2008) insights on information architecture, organizations can design intuitive interfaces, dashboards, and architecture. In terms of architecture, it could be beneficial to apply the path of least resistance within your architectural choice. Therefore, make the desired choices the default option, for example;

• Power scheduling is automatically on or should be filled in before it’s possible to turn on a machine.
• Deploying costly VM instances or services requires an approval process
• Automatic alerts on costs
• Restricting the use to only a subset of VMs.
• Choosing the appropriate VM for your workload: General Purpose, Compute Optimised, Memory Optimised.
• Use of licenses such as AHUB is default choice.
• Deploying Databases in a Cluster instead of single DBs per workload.

It is still possible to choose the less desired settings, which could be more appropriate for your workload/cloud environment. However, the less desired option forces you to take extra actions instead of the desired (optimizing) choice. A powerful example of the path of least resistance is being a donor in the Netherlands. First, if you wanted to be a donor you had to sign up yourself through an application. Maybe you were interested or didn’t care if you are a donor or not, but taking actions was to much of an effort. Therefore, you weren’t signed up as a donor. While now-a-days you are automatically a donor and have to make the effort to unsubscribe as a donor. Therefore, a whole group who didn’t care or were partially interested, are now a donor without any effort. Everything is still voluntary, but now you have to make an effort for the less desired outcome instead of for the desired outcome. It should work the same within your cloud environment, people should still have the choice to choose but your default option should be the desired choice.

Communication Strategies: Making Cost Data Accessible and Actionable

Effective communication is key to fostering a culture of cost consciousness. Organizations should invest in user-friendly dashboards and reporting tools that provide real-time insights into cloud spending. By presenting cost data in a comprehensible format, organizations empower teams to make informed decisions about resource usage.

Moreover, regular communication about cost-saving initiatives and best practices reinforces the importance of cost optimization across the organization. From monthly newsletters highlighting successful cost-saving efforts to interactive workshops on FinOps principles, continuous education initiatives keep cost consciousness top of mind for employees at all levels. It is like the power of repetition, don’t address it once but promote pro-actively and continuously.

Ongoing Education: Empowering Teams with Financial Literacy

In addition to providing access to cost data, organizations should prioritize ongoing education to enhance employees' financial literacy. By equipping teams with a foundational understanding of cloud economics and FinOps principles, organizations empower individuals to proactively identify opportunities for cost optimization.

Training programs tailored to different roles and skill levels, supplemented by resources such as case studies and online courses, enable employees to deepen their understanding of cost management strategies. By investing in the professional development of their workforce, organizations lay the groundwork for a culture where cost consciousness becomes ingrained in everyday decision-making processes.

Conclusion: Building a Future of Financial Operations

In conclusion, showback could be an attribute to stimulate employees to optimize their cloud environment. A nudge can be used to enhance the use of showback reporting, because a report is nothing until people start taking action based on the reporting. Thus, it is important to move people in the right direction with a nudge.

Also, nudging could help to prevent the need of optimizations afterwards. Nudges won’t take away your freedom within the cloud, but steer you in a desirable direction with the option to choose for another option that takes a bit more effort.

Invoicing and chargeback is one the most important capabilities in the FinOps Framework. What if it is not possible to chargeback cost but you want to raise awareness? Achieving cost consciousness within teams can already be quite difficult if you use chargeback, but even more daunting when chargeback mechanisms are not possible to directly attribute costs to individual departments or projects. When chargeback isn’t an option, focusing on showback should be your next option.

Also, drawing inspiration from the principles of behavioral economics, particularly the work of Richard Thaler and Sunstein on nudges (Thaler and Sunstein, 2008) organizations can adopt subtle yet powerful strategies to promote cost awareness and accountability among their teams. By leveraging nudges and implementing effective communication and education initiatives, businesses can foster a culture where every team member is aware of their impact on cloud costs and motivated to make informed decisions.

Reference: Thaler, R. H., & Sunstein, C. R. (2008). Nudge: Improving decisions about health, wealth, and happiness. Yale University Press.