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The Elephant in the Cloud

The Elephant in the Cloud

A Contributed Article By Chris Pick, chief marketing officer at Apptio

Agility and economics.  According to a recent survey of 100 enterprise CIOs conducted by the Worldwide Executive Council, these are the two primary benefits that companies hope to realize when it comes to the cloud. Says James Staten, vice president at Forrester, "that's because
the promise of instant access to a technology service at a fraction of the cost of traditional IT deployments means faster time-to-market and higher productivity for the business."

So now that most enterprises are seriously evaluating the cloud, the focus has shifted.  According to another recent survey report from Accenture, "Right now, most attention is focused on how cloud computing can reduce IT costs and help companies meet pressing but often short-term computing needs."

Cloud solutions - whether public, private, or even hybrid - provide "just in time" IT resources, greatly improving IT agility in deploying new services and scaling existing services. On the economic front, not only does the cloud provide a framework for greatly reduced Total Cost of Ownership (TCO) for IT services, but also turns the whole "IT finance model" completely on its head with three radical differences:

  1. 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 evolves from a CapEx expenditure to an OpEx expenditure, giving the CIO much greater flexibility in controlling their IT spend. 
  3. Cloud sets a market price for IT services and forces corporate IT to meet or beat it, compared to yesteryear, where the price was whatever it cost IT to build it. This is a fundamental and drastic change
    in the financial model for IT.  

Enter the pachyderm.  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 actually delivered? There is no shortage of discussion on how to deliver agility, yet with all the digital ink that's been spilled on how to build out private clouds, there's been little mention of how to maximize the financial benefits.

With all the chatter about the cloud, what is causing the sudden silence? Are we all working under the "build it and they will come" assumption? That sounds like wishful thinking to me. The ocean runs red with IT projects that followed this assumption and failed to meet cost and ROI targets. I, for one, believe there needs to be much more discussion on the new economics of cloud and why we need to rethink the way corporate IT departments manage and maximize their economic benefit. It's time for enterprises transitioning to the cloud to embrace the elephant in the cloud.


About the Author

Chris Pick is chief marketing officer for Apptio, a leading provider of on-demand Technology Business Management (TBM) solutions.

Published Thursday, March 24, 2011 5:30 AM by David Marshall
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