How Cloud Computing Changes Enterprise IT Economics

The rapid rise of cloud computing means corporate IT may no longer be the cheapest purveyor of application hosting, infrastructure, storage and other services. The sooner IT leaders come to terms with this, the better.

By Bernard Golden
Thu, May 09, 2013

CIO — After a recent speaking engagement, in which I focused on creating a hybrid cloud computing strategy, an attendee approached me with a question. "How," he asked, "can I show that our storage is less expensive than AWS?"

When I asked him to elaborate, he outlined this challenge. His group installed a significant amount of storage a year ago, based on an estimate that the installation would support the growth of the company for the next five years.

Now, less than a year later, the new storage is nearly full. He explained that business users want to offer new capabilities to customers; one example is providing customers the capability to view their invoices for the past year online. Unfortunately, these new capabilities consume far more storage than planned for in the upgrade.

This isn't unusual. The increased expectations of business users—based on watching what competitors are delivering online, not to mention the amazing revolution in applications commonly referred to as the consumerization of IT—are consuming far more computing and storage resources than anticipated. This makes the traditionally challenging area of capacity management even more difficult.

Traditional IT Department No Longer Tenable

Put bluntly, the traditional assumptions of IT—stable workloads and predictable growth—are no longer tenable, having been undone by increased business process expectations and the accelerating rush to digital applications as the primary method of customer interaction.

These trends dislocate established IT economics and present IT groups with a financial challenge—one that threatens to topple their position as monopoly supplier of computing to the larger enterprise.

You can see this by examining the dynamics of this situation.

First, the fact that a "five-year storage purchase" is nearly exhausted after a year calls into question the basic competency of IT. IT can respond by saying that business users have increased demand beyond what was foreseeable, but that won't really hold water. In any case, nobody cares about the why; they just know that what was billed as a five-year solution became a 10-month solution.

Forrester: How to Achieve Cloud Economics for Operations and Services

Second, users will be frustrated that they need to secure sufficient resources to address their business requirements. Even if they're willing to pay the attributed cost, they may find that IT cannot deliver resources to address their needs.

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