Chris Pick (Europe) - Are Enterprises Ignoring the Elephant in the Cloud?

Although there are clear financial benefits to cloud computing, Chris Pick, chief marketing officer at Apptio, raises the question as to why no one is talking about how to ensure the benefits are delivered.


There's no question that cloud computing is a disruptive force in IT. A recent survey of 100 enterprise CIOs by the Worldwide Executive Council, says that agility and economics are the two primary benefits companies aim to achieve when moving IT operations to the cloud. This sentiment is echoed far and wide, although proving the ROI and cost benefits of the cloud is not as clear-cut. In fact, James Staten, vice president at Forrester has written, "Everywhere you look there's hype about how cloud computing can save you money. Unfortunately, these claims paint a very generic picture of cost savings that simply isn't true."  

Cloud solutions provide "just in time" IT resources, enabling businesses to improve agility in deploying new services and scaling existing services. The cloud not only provides a framework for significantly reducing Total Cost of Ownership (TCO) for IT services, but it delivers a fundamental change in the financial model for IT. Now that most enterprises are beginning to implement cloud computing in various forms - whether public, private, or hybrid - it's apparent that the economics of the cloud should become an even greater focus for today's IT organizations.  This is a result of three major shifts:


1. In the cloud, services are charged based on consumption. This forces IT to reduce the cost per consumption and holds the business user accountable for their use of IT services.

2. In public or hosted cloud scenarios, IT moves from a CapEx expenditure to an OpEx expenditure, giving the CIO much greater flexibility in controlling their IT spend.

3. Cloud computing sets a market price for IT services. This forces corporate IT to ‘meet or beat' the cloud offering. In the old world, the price was whatever it cost IT to build and deliver a service.

Enter the elephant. If we're all in agreement with the financial benefits that the cloud provides, why is no one talking about how to ensure that those benefits are delivered? There is plenty of discussion on how to deliver agility, yet there's been little mention of how to maximize the financial benefits.

This "elephant" was quickly identified by the CIO of a leading online travel Website. She figured outsourcing email to an external service provider would not only provide greater flexibility, but would also be more economical in the long run. However, once she began to account for the fully loaded costs of moving to the cloud (i.e., the many customizations they would need to make, especially as it concerned security protocols), she realized it was actually more expensive than what she could deliver internally. Once she was able to articulate these costs as a whole number, the decision to bring email back in house was easy. As many companies have learned, the list price for the cloud is seldom its final price.

This is a perfect example of the flip side to the cloud equation which demonstrates why IT decision makers need a new set of financially-oriented IT metrics that will enable them to make a true apples to apples comparison between internal services and the cloud. With the increasing adoption of cloud services, it is becoming even more important to benchmark internal and third party costs at a granular level in order to rationalize cloud investments.

As a result of the changes cloud computing brings to the IT landscape, there must be a greater emphasis on the new economics of cloud. CIOs and IT leaders must rethink the way they manage this new paradigm in computing and make smart decisions about how to leverage the cloud. It's time for enterprises to stop ignoring the elephant in the cloud and focus on ensuring the economic benefits of the cloud are delivered.

By Chris Pick, chief marketing officer for Apptio, a leading provider of on-demand Technology Business Management (TBM) solutions. For further information visit Apptio