Latest news with #costoptimization
Forbes
2 days ago
- Business
- Forbes
FinOps Foundation Adds To Balance Sheet To Encompass Cloud+ Costs
Cloud is cheaper, but expensive. Cloud computing has always been positioned as a route for businesses to grasp greater flexibility over their IT services expenditure across compute, analytics, storage as well as related data management tasks and now AI services. The promise of being able to 'spin up or spin down' a cloud service still holds, but convoluted contracts, complex observability challenges and miscellaneous misconfiguration migraines mean organizations often suffer from over-provisioning and under-utilization. As a codified industry practice designed to combat and control cloud costs, FinOps has been defined as, 'An operational framework and cultural practice which maximizes the business value of cloud and technology, enables timely data-driven decision making and creates financial accountability through collaboration between engineering, finance and business teams.' The mission statement here is one designed to empower both software development and business teams to make trade-offs between speed, cost and quality in the decisions they take on their cloud architecture investments. New developments in this space now see the FinOps Foundation extend its definition of core cloud cost considerations to also encompass IT asset management and its associated practice of software asset management. This is a coming together intended to merge and align cost optimization and compliance disciplines in so-called Cloud+ environments. The term is being used to explain FinOps that span not just public cloud expenditure, but also SaaS spending that extends outwards across cloud licensing, datacenter charges and other variable technology costs from big data analytics to AI and large language model costs… and everything in between. According to JR Storment, executive director and founder of the FinOps Foundation, the 2025 expansion of the FinOps Framework sees the scope of FinOps grow from public cloud cost management to a wider purview. He says that Cloud+ is an umbrella label for managing spend across SaaS, software licenses, hybrid infrastructure etc. Storment and team explain the progression by saying that traditionally, ITAM and SAM have focused on aspects of IT and cloud management that include software inventory, license compliance, renewal governance and software discoverability. The rationale for Cloud+ comes from the fact that while practices have historically operated in parallel, they are increasingly converging into unified teams and workflows. The 2025 State of FinOps report suggests that organizations are merging FinOps and ITAM/SAM efforts under shared leadership or cross-functional programs. Analyst house Gartner agrees with this proposition, it thinks that by 2026, the 'majority of enterprises with mature cloud strategies' will unify their FinOps and ITAM capabilities. Businesses will do this for a number of reasons, but primary objectives will include a need to streamline software tooling and avoid duplicate efforts to drive better business outcomes. Key areas where FinOps is thought to need to progress next is an appreciation for the ITAM/SAM intersect, which spans so-called SaaS rationalization. This involves combining FinOps usage and cost telemetry with ITAM 'discoverability' and license controls to optimize SaaS portfolios. This discipline also crosses into cloud license compliance i.e. applying SAM principles to public cloud 'bring your own license' models and usage-based billing scenarios. While it's hard to provide a like-for-like competitive analysis of the FinOps Foundation as a nonprofit project under the Linux Foundation (there is no other Linux, essentially), we can balance a few weights and measures here and provide some external perspectives. Even nonprofits make revenue, some of which goes to pay for glitzy conference venue budgets, some of which covers expenses and hotel bills, some of which goes to pay executive salaries… but (in fairness) most of which goes to advancing the codification, development and exchange of best practices and education. Walk the halls of the most enterprise open source exhibitions and you'll often hear member organizations telling you how much they've shelled out on stand space and travel expenses. There's still no such thing as a free lunch… and if an organization wants to be part of the industry's widest body of standards for a practice like FinOps, then it needs to put the financial-factor into its operations operandus. The global market for FinOps services has been forecast to grow from $13.5 billion in 2024 to $23.3 billion by 2029, so, there is money at stake here, even if it's nonprofit money. In terms of this whole Cloud+ demarcation that the FinOps Foundation is now detailing, can we question whether this is a plus-grade akin to an airline Comfort Plus seat (actually more functional, sometimes with a cocktail) or merely an attempt to peddle plus size clothing (same product, a bit of extra yarn) across the cloud costing cosmos? 'Cloud+ has been generally well-received in the market. The inclusion of SaaS and on-premises private cloud investments is a natural extension of FinOps' scope at large. IDC has long advocated for SaaS to be part of the scope and processes of FinOps teams, as enterprises typically spend as much on SaaS as they do on public cloud providers. The difference is that the cost is spread across multiple SaaS providers and departments. A big public cloud bill typically gets the attention of the CFO, while wider SaaS spending goes under the radar. As AI investments increase in both public cloud and private enterprise-owned datacenters, the need to track return on investment and provide transparency into all cloud spending will be essential,' explained Jevin S. Jensen, research vice president for Intelligent CloudOps Market at technology analyst house IDC. The FinOps Open Cost and Usage Specification (also known as FOCUS), is a standardized framework for cloud billing data and has been adopted by cloud hyperscalers including AWS, Microsoft Azure, Google Cloud and (if skip to fifth place after Alibaba) Oracle Cloud. FOCUS joins the foundation's FinOps Certified Practitioner and FinOps Certified Enterprise program. IDC's Jensen thinks that FOCUS will benefit FinOps tool vendors immediately (he himself has just completed the FOCUS Analyst certification to increase his understanding of the specification) and he envisages FinOps vendors needing to engage in rapid short-term investment to support the standard. Looking for additional measures in this space, it's worth saying that major (and more moderately-sized) vendors have of course produced FinOps-related technologies. But even if we look at services such as Microsoft Azure Cost Management and Microsoft Azure AI Metric Advisor, we have to remind ourselves that Microsoft joined the FinOps Foundation as a member in February 2023. Membership fees for individuals are free and the FinOps Foundation gives away hundreds of thousands of dollars worth of scholarship fees every year to individuals who can not afford to pay for certification exam costs. Enterprise membership is not free and nor should it be, but it's hard to track exactly how much any given organization needs to pay. Applicant organizations are 'invited to inquire' from a number of different web links. If the foundation does currently offer one flat membership for enterprises, this may substantiate the calls on some social streams for a more tiered membership model appropriate to different-sized organizations. In the pursuit of understanding where FinOps goes next, IDC's Jensen reminds us that there is 'more overlap' happening now as this discipline widens to straddle public cloud, private on-premises cloud, AI and SaaS management. He highlights the natural confusion that will still arise in some organizations between FinOps Cloud+ and (traditional) technology business management (widely shortened to TBM) as it has been known to date. Joining Jensen among the most experienced and widely quoted technology analysts currently dedicated to deconstructing the FinOps space is Tracy Woo, principal analyst at Forrester. While she has plenty of positive views detailing the efforts of industry bodies in this space, she also has reason to call out areas where she sees a shortfall in functionalities, breadth and specific tools. 'The FinOps Foundation has built the FinOps movement. It defines industry standards and thought leadership that the rest of the industry follows - point blank. There aren't others that are more aware, more in touch, more knowledgeable about the space than the foundation. For me and for other end users out there, the bringing together of end users to discuss the challenges in their practices is invaluable to analysts like me who study the space… and to end users who are looking for support and best practices to follow,' said Woo. Woo points out that the FinOps Foundation has also done what many thought was impossible i.e. gathering the biggest cloud vendors on one stage, in one room to standardize billing constructs. 'That being said, the foundation could be better in vendor inclusiveness. It has put a lot of effort into making sure end users are extremely well-protected from being 'sold to', while providing more access to consultancies who have something productive to offer,' she added. She says that there continues to be an increasing number of vendors jumping into the FinOps arena and the biggest problem with the market is instability, especially among the smaller players. Forrester's Woo highlights the fact that consolidation is common and points to the fact that product pricing and offering changes have created buyer weariness of working with smaller players. For Woo, there are 'big gaps' right now with tooling capabilities. She says the first point to focus on is AI cost management, because it is still a largely unknown entity. But, she warns, it is a growing concern that will 'hit end users like a freight train' in the next two to three years. 'Business visualization is also key,' explained Woo. 'Most vizualisation in a FinOps tool is found at the engineering layer. For a low to medium-spending organisation, this can work ok. But as cloud spend goes up, the need to justify cost efforts and demonstrate cost avoidance to execs will increase. At this point, the business intelligence and visualization layers aren't there. That being said, I don't think they [the FinOps vendors] should necessarily be the ones reinventing the wheel, but rather they should look to close integration with tools like Quicksight, PowerBI and Tableau.' On the topic of infrastructure automation within the FinOps realm as a whole, Woo says that 'much of this is weak', especially when compared to Terraform, Jenkins, Ansible. 'This is another area where reinventing the wheel isn't necessary. Some deeper infrastructure automation capabilities should exist in FinOps tools, but also deeper integrations with traditional automation players,' she concluded. Perhaps the most important (and obvious) factor when it comes to FinOps is the financial bottom line. Organizations will want to know whether they get more sales leads as a result of being certified and branded with affiliation to an industry body. They will want to know how many more sales conversions they get… aand they will want to be able to accurately quantify the value of any FinOps savings they have helped customers deliver in order for them to underpin and validate their own worth. Not all these variables are necessarily easy to measure at the time of writing, but they will very likely improve given the size of this industry body and the penetration it already wields.
Forbes
6 days ago
- Business
- Forbes
Prioritize Cost Optimization Over Cost Cutting To Achieve Meaningful Results
As pressure to reduce costs increases, CFOs have an opportunity to deepen their cross-functional influence and fortify their advisory role to the CEO and other C-suite leaders. Capitalizing on this opportunity likely calls for some CFOs to forget everything they know about traditional cost cutting while embracing—and instilling throughout the organization—a mindset focused more on sustainable cost optimization. Prioritize cost optimization over cost cutting to achieve meaningful results The stakes of this gambit are exceedingly high. Economic uncertainties related to tariffs, supply chain upheaval, inflation and/or stagflation, and geopolitical conflicts are among numerous issues that have boards and C-suites taking hard looks at their cost structures. At the same time, the risks associated with cost-cutting missteps have never been higher. A blanket across-the-board cut can undermine the organization's execution of strategic initiatives, leading to declining employee morale, engagement and productivity and driving highly skilled, difficult-to-hire talent to competitors. Trimming the budget of a technology modernization initiative can delay the adoption of vital artificial intelligence (AI) applications while subjecting the company to a higher risk of being too slow in pivoting to disruptive markets. Indiscriminate or percentage-based cost cuts can compromise service quality, scale back innovation, hamstring future growth and even impair the organization's long-term viability. Bottom line, in today's fast-moving business climate, old-school cost cutting can, while perhaps achieving a short-term quarterly objective, do more long-term harm than good. Similarly, drastic workforce reductions and other one-off slashing don't work well for very long. There is a better way. Multiple surveys of business leaders find that only 40-60% of traditional, one-time cost-reduction initiatives achieve their initial goals. A Gartner study indicates that just 11% of organizations are able to sustain cost cuts over a three-year stretch. On the other hand, cost optimization initiatives are proving to be increasingly beneficial. For instance, according to the results of Protiviti's most recent Global Finance Trends Survey of CFOs and finance leaders, 60% of publicly held organizations have achieved measurable, meaningful progress in their cost optimization efforts by utilizing cloud-based systems. And that's just one example. We're seeing substantial savings from deploying technology to automate processes. Renegotiating supplier contracts, improving inventory management and implementing energy-efficiency measures (in capital-intensive industries) are examples of other cost optimization tactics. Cost optimization relates to the CFO's responsibility to nurture and preserve the organization's financial health. Think of the approach as a perpetual efficiency play that continually rebalances the right cost structure with an eye on revenue-generation and profitability objectives. Its focus reaches well beyond cost cuts. While cost optimization efforts target the same pain points as traditional, more reactive cost cutting, these pain points are assessed in a more thoughtful and holistic manner: How do these costs influence our pursuit of strategic objectives? How would a potential cost reduction affect our product and service offerings, workforce, customer experience, ability to innovate, and growth prospects? Advanced data analyses and AI tools can help address those questions and refine the search for 'smarter' opportunities for cost savings. Consider this scenario: A traditional cost reduction play might call for a business process to be offshored, end of story. A cost optimization approach might result in that same process—let's say accounts payable (AP)—being offshored, but with some critical differences. A smaller AP team might remain onshore to handle exceptions and manage relationships with high-value suppliers and vendors. That team also might receive training in risk management and the use of AI applications to help them operate more effectively and efficiently. Plus, the upskilling necessary to enable these additional job functions could be funded by a portion of the cost savings realized from moving the bulk of the AP group offshore. As finance leaders create cost optimization playbooks, they should consider how the following actions can benefit their organizations in the near- and long-term. Perhaps the biggest difference between traditional, reactive cost cutting and cost optimization is that the latter should be performed continuously rather than in response to economic and marketplace swings. The point is clear: Optimizing costs is as much a good idea in the cool of the day when times are good as it is in the heat of the moment when times are challenging. When CFOs stop their organizations from vacillating between across-the-board cuts to focus on increasing profitability on the one hand and investment infusions designed to stimulate growth on the other hand, cost optimization stands a better chance of becoming a standard operating procedure. Indeed, it becomes a key pathway to sustaining the organization's agility, resilience and long-term viability.
Yahoo
19-05-2025
- Business
- Yahoo
Spencers Retail Ltd (BOM:542337) Q4 2025 Earnings Call Highlights: Strategic Cost Reductions ...
Release Date: May 16, 2025 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Spencers Retail Ltd (BOM:542337) achieved a significant improvement in EBITDA, increasing from 14 crores in the previous year to 60 crores in FY25. The company successfully reduced operating expenses by 76 crores, primarily due to strategic store closures and cost optimization. The launch of the Jiffy quick delivery service in Kolkata has shown promising growth, with a 58% increase in user growth and a 47% increase in order growth. Spencers Retail Ltd plans to expand its Jiffy service to Lucknow and Banaras, leveraging existing store networks for efficient delivery. Nature's Basket introduced a membership program, Elysium, which has gained traction with 4,300 members, aiming to drive customer loyalty and repeat purchases. Spencers Retail Ltd experienced a 15% drop in top-line revenue due to the closure of stores in North and NCR regions. Nature's Basket faced supply chain issues affecting the availability of imported gourmet products, impacting sales and margins. The company's net debt stands at approximately 860 crores, limiting its ability to take on additional debt for growth or capital expenditures. The financial profitability in FY25 was partly due to other income from store closures, which may not be sustainable in FY26. Spencers Retail Ltd's balance sheet remains leveraged, and the company is exploring options to raise equity, but market conditions are currently not supportive. Warning! GuruFocus has detected 6 Warning Signs with BOM:542337. Q: Can you provide more details on the challenges faced by the newly opened Nature's Basket stores? A: The challenges were primarily due to supply chain disruptions and lower-than-expected footfall. The lack of product availability affected customer retention and footfall, but these issues are being addressed internally. (Respondent: CEO) Q: With a net debt of around 860 crores, how does Spencer's Retail plan to manage its balance sheet, especially with a large portion of long-term debt maturing soon? A: The company is exploring options to raise equity, although market conditions are currently not supportive. The focus is on improving operational efficiency to reduce losses and eventually raise capital. (Respondent: Vice President, Investor Relations) Q: Given that a significant portion of profitability was due to other income from store closures, how confident are you about maintaining profitability in FY26? A: While other income will decrease, operational improvements and cost reductions are expected to help achieve break-even at the EBITDA level in FY26. (Respondent: CEO) Q: Are there any plans to liquidate parts of the business in the near future? A: No, there are no plans to liquidate any part of the business. The focus is on growing the top line across all segments, including Spencer's, Jiffy, and Nature's Basket. (Respondent: CEO) Q: How does Spencer's Retail plan to compete with e-commerce players, given the debt constraints and market share shifts towards quick commerce? A: The strategy is to offer existing customers an online option through Jiffy without significant capital expenditure. The focus is on leveraging existing store networks rather than opening new dark stores. (Respondent: CEO) For the complete transcript of the earnings call, please refer to the full earnings call transcript. This article first appeared on GuruFocus. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
09-05-2025
- Business
- Yahoo
Civitas Resources Inc (CIVI) Q1 2025 Earnings Call Highlights: Strategic Moves and Financial ...
Capital Expenditure Reduction: $150 million reduction compared to 2024. Incremental Free Cash Flow: $100 million annual increase targeted through cost optimization and efficiency plan. Oil Gathering Agreement: Expected to increase free cash flow by approximately $15 million annually. Hedge Position: Nearly 50% hedged on crude oil for the remainder of the year, valued at nearly $200 million. Net Debt Target: Year-end 2025 target of $4.5 billion. Share Buyback: Completed 10b5 repurchase program, buying back nearly 2% of shares outstanding. First Quarter Production: Slightly lower than expectations due to lower capital. Second Quarter Oil Growth Expectation: 5% growth, led by the Permian Basin. Operational Efficiency: 10% faster drilling in the Delaware and 5% increase in throughput in the Midland Basin. Cash Operating Costs: Higher than planned due to operational challenges in the Permian. Warning! GuruFocus has detected 8 Warning Signs with CIVI. Release Date: May 08, 2025 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Civitas Resources Inc (NYSE:CIVI) has implemented a comprehensive cost optimization and efficiency plan aimed at generating an incremental $100 million of annual free cash flow. The company has a robust financial liquidity position, a strong hedge book, and significant capital flexibility to adjust plans as necessary. Civitas Resources Inc (NYSE:CIVI) has identified over $100 million in incremental free cash flow on a run rate basis, with approximately 40% benefiting the second half of 2025. The company has significantly expanded its hedge position, now nearly 50% hedged on crude oil for the remainder of the year, with hedge positions worth nearly $200 million. Civitas Resources Inc (NYSE:CIVI) completed its existing 10b5 repurchase program, buying back nearly 2% of its shares outstanding, and plans to shift more free cash flow to additional share buybacks once the net debt target is achieved. Production in the first quarter was slightly lower than expectations due to lower capital and higher cash operating costs. Operational challenges with contracted water takeaway in the Permian elevated first-quarter costs, although the company plans to pursue cost recovery. The company experienced delays in production due to weather and capital shifts, impacting first-quarter results and pushing some growth to later quarters. Civitas Resources Inc (NYSE:CIVI) faces a challenging macro environment with volatile oil prices, which could impact its ability to meet its debt target if conditions worsen. The upstream market is currently challenging for asset sales, and the company is not willing to sell assets at low prices, which could affect its $300 million asset sale target. Q: Can you provide more color on your comfort level in executing the production and free cash flow ramp for the rest of 2025, which is key to hitting your debt target? A: Chris Doyle, CEO: We have structured our program to better level load capital, with 55% in the first half and 45% in the second half. This setup supports production growth in the second half. Despite being slightly below expectations in Q1 due to weather, we are confident in our ability to deliver guidance unless oil prices drop to sustained mid to low 50s. Q: If oil prices drop to $55 or below, what would Civitas do in response? A: Chris Doyle, CEO: We would first reduce completion-related spending, potentially building some drilled but uncompleted wells (DUCs) in the DJ Basin. If prices remain low, we would also cut drilling expenditures. Our focus would be on maintaining productive capacity while prioritizing high-return investments, particularly in the Delaware Basin. Q: Can you discuss the higher-than-expected operating expenses (OpEx) in Q1 and how you expect them to trend through the year? A: Chris Doyle, CEO: The higher OpEx was due to a contractor in the Permian failing to meet obligations, requiring us to add temporary solutions. We plan to recover these costs contractually. As water volumes peak and decline, we expect OpEx to decrease in the second half, supported by cost optimization initiatives. Q: How do you reconcile your confidence in achieving the $300 million asset sale target with the challenging upstream market? A: Chris Doyle, CEO: We are focusing on non-producing assets like surface acreage and infrastructure, which are less affected by upstream volatility. This strategy gives us confidence in meeting our asset sale target without being forced to accept low prices. Q: What are your priorities in this uncertain macro environment, and how do you plan to achieve your $4.5 billion debt target by year-end? A: Chris Doyle, CEO: Our top priority is achieving the debt target, but we won't sacrifice asset value to do so. We have a strong balance sheet and free cash flow, supported by a robust hedge book. We will not reduce the fixed dividend, as our cash flow is protected down to $40 WTI. For the complete transcript of the earnings call, please refer to the full earnings call transcript. This article first appeared on GuruFocus. Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
