As CMOs Grab IT Budget From CIOs, Cloud CapEx and OpEx Shift
If analysts are correct, and the CMO eventually wrests control of the IT budget from the CIO, then spending on cloud computing will get a lot less predictable and a lot more complicated.
Mon, January 28, 2013
Less Visibility Means Spending Unpredictability
Far more important than the "who's up and who's down" of buying and selling politics will be what affect this new buyer has on IT spending patterns. In other words, the who affects individual deals—"I'm vendor X…who is the decision maker for this purchase?"—while the what affects the makeup of the entire budget. It's here that the new decision-maker and next-generation application profiles really change the nature of IT spending.
Analysis: 6 Ways CIOs Can Make Peace with CMOs
This new CMO cloud world will cause IT spending within a company to be far less predictable for the following reasons:
1. In the old, IT-controlled world, yearly budgets were more or less set in stone by Jan. 1. Beyond the obvious fact that headcount costs were more or less fixed and could be forecasted by that date, most other spending was fixed as well. Because nonmaintenance, nonheadcount spend was primarily capital expenditure for long-lived assets, it had to go through long planning and budgeting exercises before the year it would be spent, often two or more years in advance. It's common for IT organizations to be researching something in one year, putting it into the budget planning the next year and spending the following year.
In the new, CMO-controlled world, much of the spending will be focused on public cloud computing, where no capital investment is required, but where all costs will fall into an OpEx category. The fact that this spending does not require CapEx means that less visibility into budgets will be possible on Jan. 1 of a given year.
2. This unpredictability will be exacerbated by the fact that these CMO-oriented applications, by their very nature, have much higher variability of load and user base. If your application is tied to a movie's release, and the star of the movie experiences a personal scandal that drives enormous interest in the movie, your app may experience 10 times the traffic you expected—and 10 times the cost for your cloud computing.
3. A third factor increasing the unpredictability of IT spending lies at the intersection of the decision-maker profile and cloud computing itself. CMOs frequently are presented with new business opportunities that don't fall neatly into "beginning of the year" launch timeframes. If it's a good opportunity, you want to pursue it right away, not wait for the next budget cycle.
In the past, when you had to budget capital to pursue an opportunity, the process meant the increased spending was quite predictable, as it had to be planned for and slotted into the yearly budget. Today, when cloud computing makes resources available in minutes, there's little to prevent you from starting right away. Even if there's a budget forecast at the beginning of the year, you can expect significant variation as CMOs choose to pursue promising new business opportunities.
In short, the new world moves from predictable CapEx to unpredictable OpEx. You can expect many more midyear budget recalculations as cloud-based application costs move all over the map.