Azure : IT Governance in the cloud

Introduction

During the weekend I saw the following tweet passing by …

Apparently, a hosting company (allegedly) got all their data wiped by an ex-admin. Now I can imagine people thinking that this is something that is part of the territory when it boils down to cloud. So I wanted to write a blog post entailing what you do to set up a governance structure in Azure. Here I’m aware that the above tweet is more related to the security aspect of governance, it’s a part of it nevertheless.

 

Governance?!?

Let’s get started on our scope… IT Governance can cover a lot of ground. In essence, the goal is to assure that the investment in IT generates business value and the risks that are associated with IT projects are mitigated. Though I found that CIO.com has a nice definition on it ;

Simply put, it’s putting structure around how organizations align IT strategy with business strategy, ensuring that companies stay on track to achieve their strategies and goals, and implementing good ways to measure IT’s performance. It makes sure that all stakeholders’ interests are taken into account and that processes provide measurable results. An IT governance framework should answer some key questions, such as how the IT department is functioning overall, what key metrics management needs and what return IT is giving back to the business from the investment it’s making.

So let’s take a look at how we can put an enterprise-grade structure around the management of Azure!

 

TL;DR = Azure Enterprise Scaffold

For those who want to skip the post below… When talking about governance in Azure, the best place that summarizes it the following page in our documentation ; “The Azure Enterprise Scaffold“.

Continue reading “Azure : IT Governance in the cloud”

Azure : Billing Automation / Integration via the REST

Introduction
If you are an internal service provider needing to do chargebacks, or get an insight into your spending. Or if you are a cloud service provider in need to bill your customers for their Azure usage… You’ll find your self in need to get the raw usage data of your subscription(s). So today we’ll delve into getting your usage data from Azure via the REST api.

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Environment Setup
For today’s post, we’ll be using “postman“. A very nice tool suggested by a co-worker of mine (Robin) and it’s really user-friendly to work with! What does the tool do? Basically it’ll let you craft REST calls without the need for custom scripts / coding effort. Why do we need it? Because we’re going to need to do authentication with each call, and let’s say… It isn’t that straightforward if you aren’t accustomed with it (like me at this time). 🙂

In order to set up your environment, I would suggest that you go through the following guide. So basically setup your environment …
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Best practices regarding the creation of an “RFP” (aka “Request for Proposal”)

The Overall Process
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  • Study ; The first step… Consider what you want to achieve and what’s life currently like. This might seem as a no-brainer, though you might be surprised how few organisations actually do this.
  • RFI ; So you have a great idea? Fantastic! Now compare this with what is currently seen as industry standards and what are common solutions positioned by vendors. My advice here is not to differ too much from the ongoing standards, unless this is really ground breaking or market differentiating for you. Though, in most cases, you are just looking to keep your business running. In the latter case, keep as close to the standard as possible.
  • RFP/RFQ ; So we know what we want, and what is possible at this point in time by the market. Let’s select our vendors from who we wish a clear-cut proposal. We’ll go more in detail about this phase later on… So don’t worry. 🙂
  • Project ; Once the selection is done and contract negotiations are (near) closed, the project can start. This usually starts with a due diligence by the vendor to check if the assumptions / constraints are still valid.
  • Operations ; A lot of people think that operations stops during this project. The reality is far from it, and that’s actually common sense! We do projects to enhance our operational baseline, but the latter is a moving target. We cannot freeze our business for half a year! So be aware of this…

Study
The first step before any project should be a “study”. Do a requirements analysis, update your views on the operational baseline and define the target flag of what you want to reach. Now you can do a fit-gap analysis and see what needs to be done. If the entire matter is way to big… Slice it into smaller / manageable chunks. In the past, we often saw “big bang”-projects which have shifted towards “Roadmaps”. In a Roadmap, the road towards the end goal is mapped via smaller / more realistic paths (projects). The conjunction of all these projects ensure that you reach your path. Though where it might be possible to enter all these projects into one RFP, in most cases it might be more interesting to spread them as your operational baseline is (with due reason!) a moving target.

RFI
Your job is mostly focussed to serving your internal business processes. It is not wrong to say that you are not an expert in the sector you want to purchase from. This is not something to be ashamed of! Though, be aware that your vendor IS an expert in the matter. During the “RFI” (Request for Information”) you are going to study the relative sector from which you are looking to acquire services/products. Research into the products and do not be shy to invite vendors over to discuss their products. Learn to know their (dis)advantages and how they can serve your business. In the end… always translate certain “features” / “technologies” into basic requirements. For instance ; IT Storage projects revolve around “capacity”, “performance”, “availability” & “integration”. Thin provisioning, snapshotting, deduplication, … all revolve around “capacity”. So do not be fooled by the nice “bling bling” that vendors portray and search for the essence of what you want to achieve. During this round, you will also define your list of requirements and selection criteria! So be sure to look for the elements that should compose these requirements/criteria.

RFP/RFQ

Phases
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  • Start-up ; Invite the vendors to take part and ask them to confirm. After receiving confirmations, send the RFP to all vendors at the same time.
  • Round One ; During the first round, you will allow the vendors some time (typically one to two weeks) to process the RFP. At the end of that period, they will need to have sent all their answers to you. You will process these and provide all vendors with a list of all questions & answers. After which, you will allow them again a given period to adjust their proposal to fit these answers. After the deadline, you will do a “downselect” of the vendors to reach the number of vendors you want in round two.
  • Round Two ; When going through the answers of round one, you will notice that there are fundamental differences between vendors. Now you will adjust your requirements to align all the vendors towards one target. In addition, you will invite the vendors to explain their proposals into more detail. This will give you a more profound insight into the reality of things. At the end of this round, you will once again to a downselect to reach the last contestants (typically two or three).
  • Last Round ; At the beginning of the last round, be sure to provide the remaining vendors with a clear-cut baseline that everyone should meet. Now you do not want any structural differences between the parties anymore where the main focus will be around meeting the target and pricing. Clearly indicate that this should be their “Best And Final Offer” (“BAFO”), which will be presented at CxO level. At the end, choose the party which ranks the highest in relation to your selection criteria.
  • Contract negotiations ; After the selection, contract negotiations will start. In some cases, an “LOI” (“Letter of Intent”) will be signed to create a non-linear relation between the contract negotiations and the project start.
  • Project Start ; The project will start with a due diligence; Here an investigation will be done by the vendor to check if all the assumptions made (and agreed upon) are valid. After which the project will kick-off!

Be aware that these kind of processes can take up to half a year! So be sure to initiate them with ample time left before your deadline. Also be aware that these things will have a delay and in most cases this is caused by yourself! You still have your regular job to do… and you will get questions that you did not consider and need time to analyze.

RFP/RFQ Document Contents
So how should a typical RFP/RFQ document look?

  • Management Summary ; Create a one-pager for executives from the vendors to read through.
  • Context ; Why do you launch this RFP/RFQ? Provide an insight into your way of working/environment. How does this project interact with it?
  • Timing ; Setup a clear timing table. Each phase should have a clear deadline… An RFP/RFQ is a project so be sure to manage it like a project. This is also important for the vendors to allocate resources towards the process of answering the proposal. It is in your best interest to ensure that they can prepare themself properly.
  • Selection Criteria ; Always use (and communicate!) selection criteria. You, and the vendors, should know how you will quote their proposals and make the final selection. Be ware that these will become the core driver for the proposals! If you hand out more than 50% on price, then you will get skimmed down offers.
  • Requirements & Product/Service/Project Definition ; Apart from the selection criteria, also be aware that the vendor will provide you the most slim answer to meet your requirements. So if you didn’t define it, you will not receive it! Do not assume anything… This might again look like a no-brainer, though… 😦
  • Constraints ; Actually, these can also be considered requirements… Yet be sure to state that a vendor should take certain constraints into account. Do you require a certain transition / honeymoon period? Do their employees need to have NATO-clearance, …
  • Pricing Table ; You do not want all vendors to provide their own pricing table… You will not be able to compare apples with oranges. So provide your own pricing table and adjust it according to the feedback from each round. In fact, your RFI phase should have already provided you with ample information to create a pretty stable pricing sheet.

Lingo Explained : Capex vs Opex

When dealing with the financial management of a business, the accountancy terms “Capex” and “Opex” will frequently turn up… Yet what do they mean? Let’s start off with the basic definitions ;

Capex

Capital expenditures are expenditures creating future benefits. A capital expenditure is incurred when a business spends money either to buy fixed assets or to add to the value of an existing asset with a useful life that extends beyond the tax year.

Opex

OpEx (Operational expenditure) refers to expenses incurred in the course of ordinary business, such as sales, general and administrative expenses (and excluding cost of goods sold – or COGS, taxes, depreciation and interest).

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Still a bit fuzzy? How are they treated from an accounting perspective ;

Capex

Cannot be fully deducted in the period when they were incurred. Tangible assets are depreciated and intangible assets are amortized over time.

Opex

Operating expenses are fully deducted in the accounting period during which they were incurred

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Still a bit fuzzy? Let’s do some examples… ;

Capex

  • Buying a laser printer
  • Buying machinery and other equipment, acquiring intellectual property assets like patents

Opex

  • Buying paper and tones for a laser printer
  • Wages, maintenance and repair of machinery, utilities, rent, SG&A expenses

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So which one is preferred?

From an income tax perspectives, businesses typically prefer OpEx to CapEx. For example, rather than buy laptops and computers outright for $800 apiece, a business may prefer to lease it from a vendor for $300 apiece for 3 years. This is because buying equipment is a capital expense. So even though the company pays $800 upfront for the equipment, it can only deduct about $250 as an expense in that year.

On the other hand, the entire amount of $300 paid to the vendor for leasing is operating expense because it was incurred as part of the day-to-day business operations. The company can, therefore, rightfully deduct the cash it spent that year.

The advantage of being able to deduct expenses is that it reduces income tax, which is levied on net income. Another advantage is the time value of money i.e. if your cost of capital is 5% then saving $100 in taxes this year is better than saving $104 in taxes next year.

However, tax may not be the only consideration. If a public company wants to boost its earnings and book value, it may opt to make a capital expense and only deduct a small portion of it as an expense. This will result in a higher value of assets on its balance sheet as well as a higher net income that it can report to investors.

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Yet be wary… Where a CFO might be sensitive towards Capex, the common pitfall is to ignore the TCO of a given investment. Some investments will have a low Capex profile, yet their Opex cost will drive the TCO upwards, where it might have been better to go for the investment with a higher Capex profile…

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So what do you have to keep in mind? Your CFO will be sensitive to,Capex, yet be wary to achieve to most optimal TCO.

Major source for the above ; http://www.diffen.com/difference/Capex_vs_Opex

Lingo Explained : ROI, NPV, IRR

When talking about projects, you often see the following terms popping up ; ROI, NPV & IRR. Yet what do they mean?

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ROI

  • Abbreviation : Return On Investment
  • In Short : The ROI will give you an indication how fast you will have a return on your investment. It’s mostly expressed in a period of years, when calculating with costs related to a year.
  • Wikipedia : http://en.wikipedia.org/wiki/Return_on_investment
  • Formula :

    return on investment = (gain from investment – cost of investment) / cost of investment

  • Video : Youtube

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NPV

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IRR

  • Abbreviation : Internal Rate of Return
  • In Short : The IRR will indicate the “interest” you get from an investement. It’s often used as a metric to see if money shouldn’t be kept with the finance institution instead of within a (risky) investment.
  • Wikipedia : http://en.wikipedia.org/wiki/Internal_rate_of_return
  • Formula :

    Check here…

  • Video : Youtube

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And how does that related to decision making?

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