by Vanessa Alvarez

How to Set Cloud Expectations For Your CFO

Jun 09, 2010
Data Center

Has your CFO asked why your internal IT organization is not as cost efficient as Amazon's cloud service?

Enterprises today are challenged with gaining and maintaining a competitive advantage, while at the same time reducing overall costs, especially IT costs.  Technologies such as virtualization and tools allow for automation of processes, capacity planning and resource management, amongst other things, that allow for more efficiencies than we have seen in the past. These tools in turn, make IT resource capacity much more available, flexible and powerful. 

Enterprises will face real organizational changes as their IT environments and data centers become much more fluid and on-demand. A trend that has been highlighted in recent research is that of the CFO participating much more in the IT decision making process, or even, in some cases, the CIO reporting to the CFO, where that was traditionally not the case.  (See our recent article, CFOs to CIOs: You Work For Me Now, for more on this trend.)

The fact is, as the advantages of cloud computing become more pervasive and real, C-level executives are putting their strategies in place for their own data center’s phased transformation, whether it be using resources internal within their corporate firewalls, or a combination of public resources such as Amazon Web Services (AWS) and internal resources.

One challenge for CIOs has been to overcome the CEO/CFO’s question of why the company’s own IT resources are not as cost effective as those of AWS, for example.  There is a misguided expectation that an internal IT resource should be just as inexpensive as public cloud services. 

While the cost of infrastructure is certainly coming down, there is still the fact that internal resources are still “owned” by the enterprise.  The organization is still absorbing that capital expenditure.  Obviously, with AWS and like services, this is not the case, and therefore, AWS will always be less expensive to some extent. 

Other factors to consider are those of features and functionality required for an organization’s data center needs.  Are those needs for higher performance, tighter security levels, more manageability, or intensive bandwidth such that it makes economical sense to keep on premise? In such cases, it might actually be more expensive to utilize public cloud services.  Equally comparing the value propositions can be like comparing apples to oranges.  

That’s not to say that there won’t come a time when some features and functionality won’t be cloud service provider table stakes. In fact, some should be standardized across different vendor solutions, in order to be able to create innovation and differentiate options.  Although we have begun to see some of that standardization, there is still much more to be done in this area.   The industry will need to come to terms with what should and shouldn’t be standard. 

For now, it’s best to look at all the cloud models for what they are and offer, comparing only the features themselves, not based on cost.  Basing your decision on cost alone without taking into account all of the features and functionality will only set the wrong expectations for the CFO and CEO.  It’s necessary to highlight all the advantages and disadvantages of both in-house and cloud options.

Vanessa Alvarez is an Industry Analyst with Frost & Sullivan focusing on monitoring and analyzing emerging trends, technologies and market dynamics in the area of enterprise infrastructure in North America. Follow her on Twitter @VanessaAlvarez1.