You see, depending on your perspective, the fact that cloud computing means that technology is democratized and available to all is either the best thing ever, or the worst thing ever. For business units it’s great – it gives them the ability to acquire technology without going through the often long and torturous process with IT. For IT and CFOs, however, technology democratization is painful – it means they lose control and visibility over what people are using and what costs are being incurred by the company. That can result in some big surprises at the end of the month, quarter or financial year.

It was awesome then to talk with Tyler Sloat, CEO of subscription and billing vendor Zuora, and Mat Ellis, CEO of cloud spend management company Cloudability (disclosure, I’m an investor in Cloudability) to get their perspectives on this cloud cost conundrum.

We started off by setting a little bit of context: I detailed exactly why I believe the cloud is a revolution rather than an evolutionary step for technology, and why the democratization that cloud produces is both a positive and a problematic thing for organizations. We talked about the balance that organizations strive to find between control (for IT, the CFO and the C-suite generally) and agility.

Some questions we talked about included:

• Why is cloud cost so complex?
• What is the CFO perspective on how you think about this problem?

Finally, we talked about specific ideas for solving the problem – Mat Ellis set out a four-step cycle of continuous improvement when it comes to managing cloud cost issues:

1. Tell finance to categorize cloud expenditure in a special place to keep an eye on it.
2. Obtain a cloud cost management solution to avoid any surprises.
3. Review costs. Ask questions (Can we do more with less?). Optimize.
4. Hold people accountable for their spending.

It was an interesting discussion that revolved around an important, but often ignored, issue. You can check out the replay below.

Anyway – it’s exciting to have seen Cloudability’s thinking move from pure cost reporting to being a true cloud analytics platform covering not only cost but also usage. In doing so Cloudability is signaling its intention to really enable a process of continuous improvement for cloud practitioners.

So – what does this analytics platform look like? Essentially the company has re-thought its original platform and created a new engine that enables customers to flex the offering in order to understand the trend emanating from the meta data inside their cloud infrastructure. Alongside a daily email that marries actual cost with usage data, the new system offers over a dozen configurable reports on usage, cost, capacity or lets companies build totally custom views of their infrastructure using over 30 metrics and dimensions.

The key thing here is that Cloudability is pulling actual invoice, billing and usage data – not estimated data. The idea being that with better source data, Cloudability will be able to offer up far more accurate insights into an organization’s usage patterns. The platform also includes an API designed to allow enterprise customers to integrate Cloudability with their existing internal monitoring systems.

An exciting day for the company (and, I guess, for its early advocates). I’m looking forward to sharing a beer with the team in Broomfield this week. Congrats guys!

The drive with CloudU has been to put in place a broad education program so business and tech leaders and staff have the ability to understand the terminology, differentiate marketing spin from real substance and, bottom line, to ask their vendor the right sort of questions.

Some barriers to adoption, however, are technical and can’t simply be solved through education. Cloud computing services can be acquired by business units on a credit card, which can introduce a lack of visibility both within business units and across business units. This is one of the problems that Cloudability is trying to solve (disclosure, I’m an early investor in the company).

The thesis is that it’s hard enough to know exactly what you’re spending on the cloud at any point in time, let alone budget for the future. In order to provide some help with this issue, I’m moderating a webinar in a couple of weeks that brings together people who spend their working day thinking about this problem. We’ve got Mat Ellis, CEO and co-founder of Cloudability, and Tyler Sloat, CFO at cloud subscription and billing vendor Zuora.

It’s another in a series of educational webinars that we’re bringing the cloud community to extend on from the CloudU syllabus – in this webinar we’ll show you how to see what you’re spending and how to communicate that to the rest of the company in a way that keeps finance happy. We’ll talk about:

• Tracking your cloud costs throughout the month
• Catching spikes in cloud costs before they happen
• Taking full control of your company’s cloud usage
• Structuring your budget to account for variable cloud costs

As a bonus, everyone who registers for and attends this webinar will receive a free Cloudability account to track and budget for their own cloud costs. Feel free to register here.

It’s fair to say that much attention is being given to accurately providing organizations with a more clear picture of their cloud expenditure. Companies like Cloudability (but, as always, see my disclosure) are doing a great job of tying together all the disparate spend within an organization and reporting on it so IT departments can get an accurate sense of how much is being spent, and where. But recently I’ve begun to think about the next natural progression of this – the need to tie these spend insights, to some kind of financial revenue figure.

The problem we have is that within an organization there are two sides of the house – IT and finance, that are largely disconnected. Tools like Cloudability are well integrated with other IT systems – be they management, actually IT products or monitoring functions. But they tend to be wholly disconnected form the financial systems of record – the ERP and core accounting tools. True finance eventually gets the IT bills, but generally in a converged view that doesn’t give them the ability to derive any real cause and effect insights from them.

So. What does my ideal system look like?

I’d love to see a situation where IT cost tools are integrated with financial tools, but in a granular way. I note that Cloudability recently introduced what they’re calling their “tribes” feature – functionality that allows different spend to be aggregated to a particular project or business unit. I’d like to see this sort of functionality tied to reporting codes within the ERP.

What I envisage is a day where IT and finance can sit down and readily see the actual costs incurred during any particular project, but also see the revenue that the project generated. This will then deliver a completely accurate ROI measurement that can be analyzed alongside the non-financial metrics.

It seems to me that we are in a very early stage of the cloud when an organization can make broad brush comments about cloud unlocking the potential to try new things, get formerly impossible projects off the ground or focus on core business. These are all accurate and highly beneficial outcomes of using the cloud, and ones which I articulate often. But as the cloud matures, and comes into the orbit of more traditional, empirically-driven organizations, we need to find much more accurate and finite measure of the benefits that cloud brings. In striving to either focus on TCO, or articulate some ephemeral agility benefits, we do little to encourage the creation of these more concrete metrics.

It’s exciting times at Cloudability HQ as the team announces an awesome $8.7M Series A round led by the awesome crew from Foundry Group. I first came across Cloudability during their launch last year at Structure – I was instantly excited and that led me to accept an invitation to come on board as an adviser, and then take part in their initial angel round. Fast forward 12 months and here’s an awesome validation of what Mat and team have built – $8.7M in funding from some great names like Foundry, 500 Startups, Trinity. Also the untold part of this is the number of small initial investors who are taking part in this subsequent round (myself included).

Building a startup is all about executing cleanly – I’ve continuously been impressed by just how well the team have built out their product, chosen and executed the right partnerships and hired some super smart people to help them on their way. While there are no sure things in this world, least of all in tech, this is one deal that I feel pretty comfortable about.

Full release copied below – congrats to everyone on the team!

Cloudability, the only way to easily manage and monitor all of your cloud costs in one place, today announced that it has closed a Series A investment round of $8.7 million, led by the Foundry Group. Other participants in the round include 500 Startups, Trinity Ventures and Wieden + Kennedy. Additionally, Cloudability has announced that Jason Mendelson, Managing Director for Foundry Group, and Jason Seats, Managing Director of TechStars Cloud and the founder of Slicehost, have joined its Board of Directors.

Cloudability is rapidly expanding its overall operations in response to an increasing demand for scalable cloud cost management. The Series A round will help further expand its engineering and marketing teams, build out new, advanced features and accelerate platform development and additional cloud-service integrations. Cloudability is making cloud computing and hybrid IT models cost-effective and manageable for all companies – from SMBs to large, enterprise organizations.

 

“Cloud and hybrid IT models can offer companies of all sizes tremendous value and cost savings when used correctly,” said Mat Ellis, Founder and CEO of Cloudability. “However, costs can easily get out of control if not managed wisely. Many companies use multiple cloud vendors and accounts, developers turn on and off instances outside of management’s knowledge, reserved instances are not always used for maximum ROI, and much more – Cloudability simplifies cost management and monitoring for the full spectrum of cloud computing.”

 

“Organizations use a variety of difference cloud vendors for their operations, and Cloudability is the only cost manager on the market to integrate with nearly all of them,” said Jason Mendelson at Foundry Group. “Cost and ROI are still a major barrier for companies and their IT departments, but Cloudability makes it possible to make the most out of the cloud. Its executive team, technology and overall usability have set them a part as a true leader for the advancement of cloud computing.”

According to a recent survey, 53% of respondents believe that cloud computing is more cost effective than in house infrastructure, and creates a less complex IT workflow, which shows sentiment for cloud computing gaining positive traction. Cloudability provides the tools necessary to get the most value out of cloud computing and streamlines the management of cloud usage and costs for improved IT workflow within any organization.

Since its launch in 2011, Cloudability has grown to over 15 employees and tracks over $123 million in cloud spend for over 3000 customers, in over 80 countries around the world. It has continued to expand its breadth of cloud integrations, and now enables customers to track all of their accounts, be it IaaS, PaaS and/or SaaS, from over 90 cloud vendors. Cloudability is free to use.

A while ago I took part in a role playing exercise run by BMC software. It was an event that had its genesis, at least in part, in a discussion I had with the analyst relations team at BMC about the realities of commentating on the cloud landscape. And the fact that adoption is so often much more than a feature comparison exercise but one of a political struggle that really is a minefield for the uninitiated.

BMC was telling me about real world cloud planning workshops they run with customers. I expressed an interest in this services aspect of their portfolio and suggested that it would be a great idea to give analysts a taste of what was involved. All that came together nicely in a workshop attended by a handful of industry analysts.

Over on ReadWriteWeb Scott Fulton has a run down of the exercise but suffice it to say that a small selection of industry analysts got together with BMC staffers to create a hypothetical situation where a large pharmaceutical company was planning a cloud migration – or more correctly had business units already using the cloud and wanted to gain visibility into all the systems in use across the organization. As Fulton rightly points out;

This is the situation more and more businesses are facing: not moving their assets out of the data center and into a public or hybrid cloud, but rather gathering up those assets that have already been moved, and bringing them back under the firewall and back into compliance.

While the session itself was a chance for BMC to talk about the consulting services it offers to businesses and to touch on the functional attributes of its own Cloud Lifecycle Manager product, the session was far more important, in my view, as an aid for those of us who spend more time analyzing and less time within enterprises to understand the different tensions that exist within an organization.

These were well demonstrated by the two teams in this particular role play – on one side was the IT department, while on the other was the R&D team. While over simplifying the tensions, the workshop did point out the range of drivers. On the side of IT it’s all about security, control and transparency. On the side of the business, however, it’s simply years of frustration at slow and cumbersome IT procurement processes – they simply want to get stuff done.

It’s probably fair to say that we’re still in the Wild West of cloud adoption – direct business unit acquisition of cloud services (rogue IT anyone?) is going strong and IT tends to have a very aggressive and heavy handed approach towards averting the risks. But this situation – anarchy on one side and big brother tendencies on the other — cannot continue much longer. We need to find ways to find a common middle ground where business units gain the agility and flexibility they need, while IT maintains sufficient control to guarantee compliance with regulations and policies.

This is where a whole new range of startups are coming in – from those working on the visibility of cloud spend (disclosure – I’m an investor and adviser to Cloudability, a vendor in this space), to those working on facilitating the creation and management of cloud services (an area that enStratus is setting the world on fire). The big areas for growth going forward are in the companies that provide a spanning layer across multiple heterogeneous products – at whatever level of the stack.

It was interesting a few weeks ago to take part in a private cloud summit in the financial industry. At that event I spent a lot of time talking with investment funds, bankers and the like. The regular question I got was around what are the big potential areas of win in the cloud, and what products or services will really drive general cloud adoption. As I said there, we’re entering a phase where cohesiveness is valuable – any company that has an answer, or even part of an answer, to the tension between IT and business is a good candidate for investment.

It’s an interesting space – the BMC workshop gave me a real degree of clarity around the issues we’re facing.

Disclosure – Some parts of what ControlMyCloud does relate to cloud spend management and are in competition with Cloudability,  company that I’m an adviser of and investor in. This review was made at arms length and ControlMyCloud offers significant areas of functionality unrelated to spend management.

ControlMyCloud.com is a series of template control applications, delivered via a secure web interface, currently able to manage and control the cloud operations of a user’s Amazon EC2 environment (and with plans to include other vendors in the future).

The idea of ControlMyCloud.com, is that customers can manage the cost of public cloud services and match those services to required performance metrics, without having to constantly monitor and manually adjust their IaaS solutions. It’s a real world solution to the ineffective tool that an SLA can be – many of have long argued against the SLA as an effective performance tool for the cloud – solutions like ControlMyCloud give organizations the visibility and the control over the things that SLAs are meant to deal with.

ControlMyCloud works via the notion of the “watchman” essentially a combined monitoring/management tool that take pre-defined policies and sets KPI thresholds within a constantly monitored SLA framework. The service then adjust cloud resources up or down to maintain the optimum mix of service and resource use (ie cost).

I’ve long thought that an integrated monitoring and management platform is a good approach for companies seeking to ensure high performance from their cloud providers. Of course with its existing support for only AWS, ControlMyCloud still lacks the multi vendor functionality that would make their offering even more valuable, I’m looking forward to seeing what they do once other infrastructure vendors are dropped into the mix.

Since then I’ve spent some time talking with Mat Ellis and JR Storment, two of the three founders of Cloudability. I spent time giving them my opinion on here they were going right and, more importantly, where they were going wrong. After a few conversations Mat and JR asked me if I’d be prepared to it on their advisory board as they look to build and market their product. I really enjoy advisory work – I don’t do it for the money (actually it’s very rare to do an advisory gig that actually paid) rather it’s fun to have a small hand in what could potentially end up s a very successful business.

As with all my relationships, I have detailed my role on my disclosures page, and in keeping with my policy with regards disclosure, I will continue to disclose and companies I have a current relationship with if and when I write about them.

For now however, I’m just looking forward to helping Cloudability execute upon its vision.

Cloudability serves up a dashboard that quickly and clearly identifies where organizations are spending money and in doing so they aim to save businesses money as they identify expenditure that is no longer justified – those orphan apps that keep ticking over on someone’s credit card every month.

Cloudability is very new – they launched only a matter of a few weeks ago – and at this stage they’re unsure about where they will take their product, be it enterprise or SMB. They’ve identified a couple of opportunities;

• Giving enterprise CFOs visibility over organizational spend and hence the ability to gain oversight as to business unit expenditure on cloud solutions
• An SMB play that monetizes via highly targeted offers (“given you industry type and use pattern, this other cloud service would save you x dollars per month”)

As I said, I was really impressed with what Cloudability is doing – they absolutely answer a pain point for cloud users. I do think they need to think long and hard about the direction they go in – I don’t really buy the enterprise play, I see them ending up butting heads with some pretty comprehensive spend management solutions from the likes of SAP and Oracle to make that viable. Secondly the logistics around integrating with all the services an enterprise might need and creating controls over all the different expenditure paths would be problematic. Part of my concerns around the enterprise play, beyond the fact that Cloudability competes with some solutions form some very big names in the industry, is he fact that Cloudability doesn’t close the loop on monitoring – I’ve reviewed a bunch of cloud monitoring products and have often commented that without the management part of the piece, it is less of a product than a feature. I put this to JR Storment from Cloudability – his answer was that by covering the entire SaaS world and offering insights into monetization across all cloud services, they offer a breadth that is valuable for customers and that deepening the offering would impact upon this ability. He also mentioned that Cloudability’s strategy focuses more on managing the messaging and notifications from discrete cloud services – all billing messages will be delivered up through the Cloudability – providing a one-stop discovery offering.

Where I totally see the potential for Cloudability however is as an SMB play. Mint.com has proven the value of a solution that delivers real value at zero cost to end users – by giving users highly contextual offers, they’ve managed to monetize their service, while providing a solution at no cost to SMBs, a sector that is loathe to actually spend money on this sort of solution. Storment identified this as a real possible area of development for Cloudability – he gave the example of offering customer who use (for example) Amazon servers the ability to tie in  monitoring service like NewRelic or Pingdom to assess the availability of those services.

Storment reports that he’s had some great feedback from enterprise CFOs who like he fact that Cloudability can give them the ability to gain visibility over “rogue IT” spending. While this may indeed be an attractive proposition for enterprise financial types – I struggle to see how they an avoid just having business units acquire cloud services outside of the Cloudability dashboard – thus rendering this opportunity somewhat moot.

Below is the video in full – excuse the poor sound quality – it was a noisy day at the Structure conference!