How Capital One’s financially savvy CIO saved the company millions in server costs

When Capital One started migrating more of its computing tasks to AWS in 2015, the company’s Chief Information Officer, Rob Alexander, issued a mandate to his team: get your applications up and running on Amazon’s computers as quickly as possible. Capital One’s private data center leases were expiring. If the team missed the deadline, the company could be on the hook for a lengthy and expensive new contract.

Once the migration was complete, Alexander issued a new directive: get those applications running as efficiently as possible. According to a former Capital One employee, that included fine-tuning the company’s cloud server configurations, and shutting down application-testing servers at night and on weekends.

In other words: Alexander’s leadership as his team transitioned into the cloud shows that he had a clear view of what was at stake for Capital One in the move, both technically and financially.

IT is the first line of defense when it comes to managing cloud spend. According to the Cloudability survey, 80% of IT respondents said they are notified of potential overspend before it takes place, while 68% of finance respondents said they are alerted only after it’s too late.

It’s worth noting here how quickly cloud costs like these can add up if you don’t monitor them carefully. Take the nights and weekends example: according to an estimate by ParkMyCloud, about 44% of cloud spend is on non-production resources like the ones Alexander directed his team to shut down. Most non-production resources are only used during the workweek, leaving 128 hours — fully 76% of the week — when these resources are not actively in use. For our median SMB cloud spend of $120K, that translates into:

in unnecessary cloud spending if those non-production cloud resources are left running during non-work hours.

For a company like Capital One, which spent over $250 million on AWS services in 2018, the math looks like this:

in wasted cloud spend if non-production cloud resources are left running.

Despite IT’s crucial role in heading off potential cloud waste, effective communication between IT and finance remains rare. Only 28% of professionals say IT and finance leaders within their organization communicate about cloud spending in a formal reporting capacity.

Part of the problem is that there are conflicting priorities between the two departments. A recent Forrester study sponsored by SAP Concur found that 61% of firms believe IT is focused more on usability and employee experience and less on spending reductions, while 64% of companies say that finance is focused more on reducing spending and less on usability and employee experience.

This can be solved, at least in part, by improved communication between an organization’s tech and finance leader. Regular touch points can help ensure alignment on strategy and promote understanding of each team’s perspective. The more the organization is growing—and the faster the situation on the ground changes—the more frequent those touch points should be. Centralizing financial conversations in a single location where stakeholders across departments can see and participate in them, such as a dedicated Slack channel, can also help facilitate the flow of information between teams.

The days when IT and finance could plug away in their individual silos are gone. As cloud computing continues to shift to the center of business operations, organizations that master finance-to-IT communication will have a distinct advantage.

How an unforeseen traffic spike cost Pinterest $20 million

Another prominent organization that encountered unexpected cloud costs is the popular social media site Pinterest. The company spent approximately $190 million on AWS services in 2018—$20 million more than they had originally budgeted.

One culprit in the overspend was an unforeseen spike in traffic around the holiday season. As users visited Pinterest to get decoration inspiration, look up festive recipes, and plan their holiday shopping, the surge in traffic led to a spike in Pinterest’s cloud utilization. The company had paid in advance for their AWS services for the year, which meant that when the extra traffic hit, they had to buy additional capacity at a significantly higher price.

The most painful part of Pinterest’s story is that the unexpected charges could have been avoided if the company had anticipated the holiday spike in traffic. This highlights the importance of planning usage in advance and setting limits and restrictions appropriately.

All of the major cloud providers, including Microsoft Azure, AWS, and Google, provide tools aimed at helping customers manage cloud costs. The exact suite of features varies from provider to provider, but they typically include tools like a pricing calculator, billing APIs, and automated notifications of spending anomalies and overspending risks.

And while paying for cloud computing capacity upfront was ultimately Pinterest’s undoing, that doesn’t mean upfront purchases are a bad idea. Cloud service providers usually offer heavily discounted pricing if customers pay for computing capacity in advance. It’s a valuable cost-saving measure, as long as companies accurately project their needs.



A breakdown of cloud cost centers by category (Source: Rightscale)

It is recommended to plan cloud capacity requirements at least two quarters to one full year in advance, keeping the following in mind:

Ensure full understanding of the provider’s pricing model. Account for all cloud computing services, including data, storage, and networking costs as well as computing infrastructure. Incorporate foreseeable fluctuations in cost into planning.

How streamlining ownership helped Intuit control cloud spend

Intuit is another Fortune 500 company that has seen its cloud bills skyrocket in recent years. The financial services organization saw its AWS bill rise 93% to around $145 million in 2018, in large part due to a decision to migrate TurboTax and other Intuit products to the cloud.

As Intuit’s cloud investment has grown, the company has taken measures to ensure that investment is being spent responsibly. According to VP of Product Infrastructure Sembian Krishnamurthy, the company became more stringent about who has access to AWS and required AWS accounts to be tied to individual employees and departments to make tracking easier.

As corporate purchasing in general is becoming more decentralized, cloud spending decisions are increasingly being made at the point of the end-user: the individual programmers using the space in question. While this model has some benefits— team members are able to get the server capacity they need, when they need it—it can create a “too many cooks in the kitchen” effect, with dozens or even hundreds of individuals making decisions about cloud service purchases across the organization.

By adopting tools that track every cloud purchase to the individual who made it, companies can maintain tight control on their cloud spending. Whether that be customized workflows that ladder up to a smaller number of key decision makers, or virtual cards that make it easy to trace each transaction, having visibility into cloud spend can help organizations stay within budget.

Effective cloud cost management is all about finding the balance between empowerment and visibility, flexibility and control. With the right tools and practices in place, CFOs can strike that balance for their organizations.

Head in the cloud, feet on the ground

The job of a CFO is not simply to reduce costs; it’s to ensure costs are being managed effectively and resources are being channeled to yield company growth. As IT spending continues to shift, cloud costs will play an increasingly central role in the process.

By centralizing purchase approvals, planning usage strategically, and improving communication between stakeholders about resource allocation, CFOs can steer their organization clear of the kind of over-spending catastrophe that hit Adobe, while still facilitating innovation that will move the company forward.