Cloud computing is something that everybody in the office seems to have an idea about nowadays. The salespeople think the cloud should be delivering new prospects to them and reducing the amount of data entry they must do. The business units are pushing for the creation of cloud services, whether or not they have a clear idea of what those services should be. The finance department has heard the cloud is a way of getting IT to reduce infrastructure costs by a third.
To borrow from Mark Twain’s famous remark about the weather, everybody talks about the cloud, but nobody knows anything about it.
At a time when companies’ use of clouds is just getting started, the chief information officer’s judgment and store of knowledge are invaluable assets. These are especially important when the CIO sets out to educate that most important stakeholder of all, the chief executive officer.
First Requirement: Master the Facts
One place where you can begin this all-important dialogue is by demonstrating a balanced, clear-minded understanding of the business case for cloud computing. That includes a realistic view of the savings from clouds. Moving to the cloud always means automatic savings. In fact, one study of those who adopt software-as-a-service found that only about half get a positive return on their investment; a quarter end up spending more than they expect.*
A discussion like this with the CEO has the advantage of signaling that you are attuned to business issues and of demonstrating a predisposition to facts over hype.
Indeed, if the CIO is to be the IT person who leads the cloud charge at a company, this is really the first requirement: Knowing the facts.
Knowing the facts means developing a dossier about what some leading companies are doing with the cloud. The activities of competitors and business partners should be included as part of that intelligence.
Knowing the facts also means the CIO must have a sense of whether his company is among those that can reap the vaunted cost benefits of the cloud. In many cases you will already know the answer to this. In cases where the answer is not clear, a detailed ROI analysis–pinpointing how the company is going to get cost savings and where it has the best chance of achieving them–can remove any lingering uncertainty.
The ROI analysis should differentiate between various kinds of clouds. Infrastructure clouds, for instance, price on the basis of server, storage and network time, very different from the per-user model of cloud-delivered software.
The ROI analysis should also be comprehensive. For example, it should compare the costs of cloud computing to traditional outsourcing, in addition to internal systems. It should look at the ongoing costs of a cloud application, as opposed to just looking at start-up costs or stopping the analysis at the putative break-even point. The analysis should make what-if calculations, specifically with respect to the impact on costs if actual usage falls below (or exceeds) the contracted amount.
Nor should you limit your analyses to the cost advantages of cloud computing. While cost is clearly the benefit driving most companies (70% of respondents to a survey by Accenture characterized lower up-front IT costs and IT maintenance costs as "very important" or "important" motivations for considering the cloud), they are seeking other benefits as well. Among them: Improved communication and collaboration between individuals (cited by 67% of respondents), new ways to engage with customers (64%), faster rollout of new or improved products and services (also 64%), and the institution of uniform processes in different regions (62%). **
The key — and here we come back to the idea of not getting caught up in the hype — is knowing which of these benefits are actually the most important to the business strategy, and would therefore be most important to the CEO. For example, faster time to market will trump cost savings if that’s essential to beating the competition. There may be big differences in how the cloud will play out in one industry versus another, even big differences between companies in the same industry.
For instance, maybe the technology organization that one CIO oversees is more of an early adopter than that of his biggest rival, and has a better track record of innovating to serve business needs. If this is true, it may be that this CIO can get an advantage by implementing cloud services more quickly. Other signs that a company may be ready for the cloud include a high number of virtualized servers, a bias toward centralizing the IT function, and experience in outsourcing IT infrastructure.
These are all data points that can be shared with the chief executive. If anyone will understand that readiness is all, it is the CEO.