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Learn how to create a Cloud Center of Excellence that will effectively handle the governance and education of your company’s cloud operations.
Establishing a Cloud Center of Excellence (CCOE) is an important milestone in every company’s cloud computing journey. While it is usually not the first milestone — which is focused on delivering value to customers — this milestone is reached as the company grows and scales.
Turning ad-hoc cloud initiatives into a company-wide strategy, the CCOE helps the business to manage the cloud process and adopt best practices.
With a Cloud Center of Excellence in place, organizations can better serve their business interests, make data-based decisions, and set up a comprehensive framework for their cloud operations.
In this article, we’ve outlined the steps you can take to set up your Cloud Center of Excellence, as well as best practices your organization should consider incorporating.
A Cloud Center of Excellence is an internal task force whose responsibility is to manage the many different moving parts of an organization’s cloud infrastructure from a governance and education perspective.
Three key Cloud Center of Excellence responsibilities include overseeing security, operations, and cost management. When those elements are effectively managed, the engineers are enabled to build well-architected systems because they have the guardrails and knowledge they need. Those systems, in turn, feed into security, operations, and cost management.
In many organizations, the CCOE is all about governance — creating rules and regulations that deter bad outcomes and create good ones. We believe that the CCOE needs to be a balance between governance and education. While the governance aspect helps manage risk, the education aspect ensures teams have the knowledge they need to make good engineering and business decisions.
This perspective on the Cloud Center of Excellence is in alignment with the principles of FinOps, below. Making decisions based on business value is of key importance in a CCOE as well as in FinOps:
With education and governance on a spectrum, organizations can determine where their CCOE needs to function. In highly regulated companies, such as medical device manufacturing, for example, the CCOE may focus more heavily on the governance end to control sensitive data.
However, an organization in a more creative industry may want to use its CCOE as an educator instead, where teams have more leeway to make decisions that lead to good outcomes.
Regardless of how much focus the CCOE puts on governance and education, the key is to proactively guide the stakeholders before, during, and after development of new cloud projects.
To ensure a Cloud Center Of Excellence succeeds, it’s imperative to have executive buy-in. The CCOE should live in the technology side of the organization under the Chief Information Officer or Chief Technology Officer. With a seat at the table, the CCOE can guide the relevant stakeholders to make operational decisions based on cloud cost metrics.
Without this kind of executive-level support, the CCOE may not be able to implement important governance policies or provide teams with relevant education around cloud computing.
In addition, executive buy-in helps ensure the cost management aspects of the CCOE are brought to the forefront, and are communicated in terms that relate to the strategies of the business. Executive support is often the key difference between a successful CCOE effort and one that is expensive and unnecessary.
Depending on the organizational maturity of the business, the CCOE may consist of one individual or a cross-functional team. Regardless of how many people are tasked with this role, it should be their primary focus — not a side project.
The CCOE team needs to have strong communication skills and experience going between different stakeholders, including company executives, product owners, engineers, and finance, and ensuring each group has the relevant information for their function.
Similar to the skills needed to be a technical product manager, the CCOE team does not function as a gatekeeper of information, but rather as an enabler.
The team’s goal is to help their stakeholders understand their cloud footprint in a way that’s important to them. For example, some groups need to know how cost grows over time as customers change, while others are more interested in how to best price products based on cloud expenses.
The CCOE team needs to be proficient in translating information exchanges between stakeholders and the engineering team.
For example, if the executive team wants to improve profitability, the CCOE needs to be able to pinpoint the most expensive features and discuss how they can be optimized with the product team. Connecting desired business outcomes with technical activities — connecting the dots, so to speak — is an important role of the CCOE.
With executive buy-in and a CCOE team in place, it’s time to define a charter for how the Cloud Center of Excellence will operate. The charter should include:
In some organizations, there is a tendency to give the Cloud Center of Excellence the burden of maintaining the cloud. We recommend keeping this aspect under the engineering team, so that the CCOE can act as an advisor, not an owner.
If the team is also responsible for maintaining cloud operations, they may not have enough bandwidth to focus on governance, education, and planning — and the business will not be able to make effective use of this asset.
The financial aspect of the Cloud Center of Excellence is what brings real value to the organization. In order to understand how the cloud operations are performing and what they cost the business, organizations need to know much more than just their initial spend.
However, operating the cloud efficiently requires the organization to analyze countless data points related to cost and usage. The CCOE needs historical data to predict trends and align with the growth of the company.
A cloud cost intelligence platform, like CloudZero, helps the CCOE to create a common language by expressing activities in terms of the business they are serving.
For example, the KPIs the engineers are interested in will be different from the KPIs the executives are interested in — but they need to be connected so the organization can make decisions based on data.
The Cloud Center of Excellence needs to tie the strategic goals of the company to their cost of delivering value.
For an airline company, this may be the cost to deliver an airline ticket; for a rideshare company it may be the cost of a ride per customer. Using a business’ key value metrics, the CCOE can help rationalize activities and infrastructure.
Without a cloud cost intelligence platform in place, there is little opportunity for the CCOE to follow best practices because they are essentially flying blind.
They cannot translate engineering decisions into business terms, resulting in frustrated finance, executive, and product teams who have little understanding of their cost environment outside of the total spend.
At CloudZero, we help companies like yours shift the way you think about your cloud infrastructure — so you think of it as an investment rather than an expense.
When organizations don’t know anything other than the cost of their cloud infrastructure, they don’t fully realize its value to the business. This can lead companies down a rabbit hole of rightsizing and waste reduction, resulting in diminishing returns.
However, articulating a company’s cloud investment in a way that shows the value to each business unit helps organizations make better decisions for their customers and themselves.
A Cloud Center of Excellence that doesn’t have access to this kind of data — and the ability to put it into context — has little chance of succeeding. Regardless of how much education or governance they provide and what kind of guardrails they set up, in the end, the cloud will seem like an expense that needs to be curtailed.
However, digging into the value the cloud brings to the business broken down by relevant metrics ensures that all stakeholders — from engineering to executives — can make sound business decisions for the long term.
Erik Peterson is the co-founder and CTO of CloudZero, is a software startup veteran, and has been building and securing cloud software for over a decade. Erik is a frequent speaker on FinOps, cloud economics, DevOps, and security.
CloudZero is the only solution that enables you to allocate 100% of your spend in hours — so you can align everyone around cost dimensions that matter to your business.