Cloudability

If you are a customer of Apptio, you may have heard us talk about something called Cost Optimization Index Number, or COIN. But what is COIN, and how can we use it in a way that will be of value to our organization?

In FinOps we strive to bring ever increasing levels of context to cloud spend. We also strive to engage, and empathize with our users in meaningful ways. 

To achieve these things, we may allocate spend to the appropriate parts of the organization, we can use Unit Economics to measure the cost of producing each increment of business value (see previous blog on Unit Economics), and we can utilize gamification to engage our users in interesting ways.

In the case of COIN, we are applying additional context to a business entity's spend by looking at… 

…the sum of optimization opportunities as a percentage of total spend. 

The optimization opportunities are an aggregate sum of right sizing and terminate recommendations across all relevant services and are referenced as the “Optimization-Opportunities” throughout this blog.

The simple math for COIN as follows:

( "$Optimization-Opportunities" / "$Total-Amortized-Spend" ) = COIN

For example, our Total Amortized Spend for a month is $1,000 and our Optimization-Opportunity is $250:

( $250 / $1000 ) = .25

In other words, our optimization opportunity is 25% of our Total Amortized spend. 

At this point, let’s say we have built our COIN KPI and we have set a target of 20%. I.e. no more than 20% of your total spend can be “waste,” or more diplomatically stated, “opportunity.” 

As we pilot the KPI and view results over a few months and we find some things that are somewhat problematic. 

• Issue 1 - BU1 has a score that is well within our compliance target of 20%, but since this is an extremely high spending account, this is a savings opportunity that we do not want to ignore.
• Issue 2 - Similarly, BU12 and BU14 have exceeded our target. However, the savings amounts of $315 and $152, are not large enough to expect any kind of priority.

    

Clearly, we need to wrap some parameters or standards around this metric to make it useful. In fact, any KPI we look to utilize operationally will require some qualifying parameters to be useful.  

    

To further illustrate this point,  consider a quote from British statistician George Box, who said, “All models are wrong, but some are useful.” 

    

In this case, we need to make the metric useful. 

     

Enter our Standards. COIN Standard 1 (below) shows our initial target.

     

• COIN Standard 1 – Each BU must maintain a COIN score of 20% or less to be compliant
• COIN Standard 2 – Each BU must maintain a total Optimization-Opportunity of less than $5k to be compliant – regardless of COIN score. (Treats Issue 1 above)
• COIN Standard 3 – COIN Standards 1 and 2 do not apply where Total Amortized spend is less than $1,000 (Treats Issue 2 above)

    

The next issue we notice is that when our FinOps team asks dev teams to analyze and act on their savings opportunities, some of the teams indicate that they can do some of the optimizations, but other optimizations will not be feasible due to technical or business factors. 

    

We trust that these are sound reasons, and we understand that since these are no longer “opportunities,” leaving the totals for the declined Optimization-Opportunities will skew our COIN score.

 

Therefore, another standard is required to treat this:

    

• COIN Standard 4 – Any optimization opportunities which have been declined must be removed from the Optimization-Opportunity total in our COIN report. 

    

There may be several ways to remove these declined optimizations from our totals, but one example would be to tag the resource with an appropriate key/value and then simply use this tag to filter our COIN report excluding the declined opportunities. 

    

In summary, by collecting all our optimization opportunities and expressing them as a percentage of the total spend, AND by properly operationalizing the metric, this helps us to… 

    

• Engage our users in meaningful ways
• Set cost efficiency expectations throughout our organization
• Empathize with our user’s unique technical and business challenges
• Trend results over time showing increased cost efficiency or room for improvement

    

If you need help with COIN or any FinOps KPIs, your Apptio team is extremely able and happy to assist!