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Finance and engineering often clash when it comes to topics like ROI, costs, and margin. Use these tips to get everyone on the same page.
Conventional wisdom states that SaaS engineers don’t care about costs. They care about building an optimal product, regardless of the dollar signs associated with it.
As a result, the finance team feels they must corral the engineers’ efforts and constrain them to work within an agreed budget. In fact, the FinOps Foundation’s annual survey consistently ranks “getting engineers to take action on cost optimization” as the number one challenge experienced by FinOps specialists.
At first glance, this statistic seems to support the allegation that engineers simply couldn’t care less about costs. But let’s look a little deeper.
Though this issue did rank as the number one challenge, only 30% of survey respondents chose that option as their top answer. This means 70% of FinOps respondents think something else is their greatest challenge, implying they’ve found a way to work more-or-less harmoniously with engineers on cost decisions.
This is surely welcome news if you’re a finance team member struggling to find common ground with your company’s engineering team. There is a way to bridge that communication gap and get finance and engineering on the same page, and we’re here to help you find it.
You might not see eye to eye on every single cost-related decision going forward, but the following suggestions can help you minimize strife and encourage your engineers to keep ROI in mind as they work.
Is it true that engineers really don’t care about costs? It might seem true to you, but do you actually know the priorities and considerations of your engineering team?
Let’s take a moment to get inside the mind of a typical engineer.
Engineers are usually very intelligent; they have a highly technical skillset; they enjoy finding solutions to complex problems; and they hold efficiency in high regard.
If that sounds familiar, it’s a good thing. As a finance-oriented person, you likely think in much the same way as an engineer. The main difference is that you prioritize things like ROI and margins, while engineers prioritize building powerful software.
With the understanding that you’re both approaching things from a similar perspective — albeit from two different angles — you can start to use that common ground to come up with shared objectives that would make both of you happy.
Another thing finance and engineering have in common is that you both understand complicated terminology that sounds like an alien language to any lay person listening in.
The trouble is, the complicated terminology used in finance is very different from that of engineering.
Things like EBITDA, COGS, and ROI are second nature to you, but you likely would not expect to have an engaging two-way discussion about these topics over the dinner table with your spouse.
Likewise, it’s not going to go well if you expect an engineer to follow along enthusiastically with the details of your proposed budget, even if that budget affects their work.
Similarly, your coworkers in engineering probably don’t go home and discuss CPU utilization or memory consumption, figuring that no one else would likely understand and be able to respond in kind.
So why do they drown you in technical details as an explanation for why they’ve gone over your proposed budget? You’re not even speaking the same language!
But again, there is common ground here. You both work primarily with numbers, your jobs are built on crunching data, and you know how important it is to hit certain goals.
The next time you’re having a discussion about costs, try to bridge that communication gap by focusing on numbers rather than dollar signs. You may be thinking in terms of the financial costs to complete a particular project, while the engineers are thinking in terms of efficiency costs. It seems like a completely different topic, but it isn’t.
Give your engineers a solid number to work with.
For example, tell them exactly how much money is being spent on a particular project, and then put that number into an efficiency context. It can be something as simple as, “Bigger is bad, smaller is good.”
It’s simplistic, but it’s a starting point where you’re both operating on solid ground.
You’ve discussed your budget number with engineering and agreed that smaller is better. Now it’s time to break that single number down into a few more important figures.
As you do so, help the engineering team understand exactly what you want them to optimize. You can keep it extremely simple at first:
And so on. It might seem silly to you, but again, put yourself into the mindset of an engineer.
If you simply ask them to keep their spending under-budget, they will not intuitively know how to do that and will more than likely disregard your budget in favor of building the project optimally from their perspectives.
But if you frame each financial term as an efficiency-related objective, engineers can develop a relationship with those terms and begin to actually enjoy striving for better numbers.
Once your engineers get used to the idea of shifting their perspectives toward more financial goals, you can discuss more complex concepts such as COGS and margin with them.
For example, engineers are often shocked to learn that a typical software margin should be around 80%.
They might take a look at how much it costs to build a particular product and assume it’s okay to spend a bit more if the revenue is higher than their expenses.
However, they may not be taking into account things like product marketing and customer service, which eat into that margin. Providing these details gives your engineers the context they need to understand why you’re asking them to stay within your budget, and by how much.
This works because engineers love achieving objectives. They just aren’t used to chasing financial objectives.
When you remove the dollar sign and make a goal around efficiency, your engineers suddenly have a problem they want to solve. Instead of a budget goal that means practically nothing to them, your engineers can focus on things like maximizing value or decreasing delivery costs.
Conveniently, you might find your goals line up more often than not. If engineers decrease the time and effort it takes to build or support a product, it should lower the product’s associated costs.
Just remember to take future costs into consideration and avoid letting the conversation be derailed by the “sticker shock” of a project’s up-front price.
Often, a more efficient infrastructure costs less over time, even if it costs more to build upfront. A less efficient infrastructure, on the other hand, may look better on paper because of the lower setup costs, but it could wind up saving money in monthly costs.
If your engineering team feels strongly that they can build and deliver a more efficient product in exchange for a bit of wiggle room in the immediate budget, it’s probably worth your consideration.
Remember, engineers don’t want to feel the quarterly wrath of the finance team when they fail to understand and achieve financial objectives. They would much rather be lauded as company heroes who have built an exceptionally fine-tuned and efficient product with robust margins and an excellent customer experience.
If you can frame your objectives in a way that ties directly to their objectives, you might find you both want the same thing after all.
You may follow all of the above advice to the letter and still run into a problem if your engineers have no idea how to track their spending in real-time.
It’s great if you’ve motivated them to strive for a larger profit margin and a higher ROI, but without the ability to see if their spending is actually where it needs to be, engineers are still mostly making blind shots in the dark. When the monthly or quarterly bill comes in, your engineers could be devastated to find that they’re still far over-budget, even after all their hard work.
CloudZero solves that problem by sending real-time spending updates to engineers via Slack messages. They can receive quick feedback on how their actions have contributed toward monthly costs and see clearly whether spending is higher or lower than expected.
Armed with this information, they can make smarter decisions about how to keep costs in an optimal range to hit monthly goals.
Cody Slingerland, a FinOps certified practitioner, is an avid content creator with over 10 years of experience creating content for SaaS and technology companies. Cody collaborates with internal team members and subject matter experts to create expert-written content on the CloudZero blog.
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.