CIO Leadership, Cloud

Are CIOs ready to answer the ROI question on Cloud Computing?

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The extensive availability of cloud services have increased CIOs’ presence across the enterprise, whether these services are procured at a corporate level in alignment with the overall IT strategy or by individual business units looking to realize their own objectives. Either way, the responsibility of ensuring that there are mechanisms in place to answer the ROI question on cloud computing squarely lies with the CIO – for all such services consumed across the enterprise. Such mechanisms better position CIOs to address questions on cloud ROI likely to be posed by the CFO, CEO or for that matter, shareholders who drive the IT conversation today.

I recently read a post by Chris Harding, Forum Director for SOA and Semantic Interoperability at The Open Group. In his guest post titled Counting the cost of cloud on Dana Gardner's Briefings Direct blog, Harding characterizes a typical conversation that would have happened in the traditional environments when demand exceeds capacity and contrasts it with a similar conversation in the cloud computing environment today. I like Gardner’s summary that hits the point home - IT costs were always a worry, but only an occasional one. Cloud computing has changed that. We need to track the cost of cloud and the returns realized on a continuous basis in order to be effective cloud consumers realizing business value for our shareholders.

CFOs have a well-defined role to play from a corporate financials perspective as I outline in my post on 5 steps CFOs can take to compute the cost of cloud.  However, Harding’s article punctuates the critical need for CIOs to have continuous interaction with the CFOs for effective execution of these steps across the enterprise:

  • Establish a viable relationship between the CFO and the CIO
  • Define current cost structure
  • Extend cost structure to cloud computing
  • Create agile cost computation models
  • Facilitate transformation to the cloud

Chris references an Open Group "State of the Industry" cloud survey last year where only 35% of the respondents had measuring mechanisms in place for tracking the return from cloud computing usage. He says that The Open Group is planning on repeating this survey this year. I look forward to the results.

But, in the meantime, let me do a little survey of my own. How is your enterprise doing? Are you in the 35% who said last year that they have a measuring mechanism in place? If so, congratulations! You are better positioned than others to meet your shareholders' expectations!

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Discussion
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pcalento
Paul Calento 256 Points | Wed, 08/22/2012 - 21:12

Key to demystifying cloud ROI is starting with the costs and KPIs for traditional IT. This could be the measurment mechanism that  65% of folks say they don't have currently.

Do traditional metrics apply? If so, compare the numbers, especially when additional services are added to an in-operation cloud.

But key to getting a handle on this is an assessment of all of the cloud computing building blocks in place: i.e. private cloud, public cloud and even traditional IT. We're in the era of converged cloud ... and some of it has Shadow IT origins. We need to know what we have.

--Paul Calento

(note: I work on projects sponsored by EnterpriseCIOForum.com and HP)

enadhan
E.G. Nadhan 229 Points | Thu, 08/23/2012 - 00:56

Great points, Paul.  Needing to know what we have in the world of Shadow IT.  Which is why we integrating the business of IT is absolutely essential.  http://bit.ly/MkSD1q

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enadhan
E.G. Nadhan 229 Points | Tue, 08/07/2012 - 22:03

Thank you for your comments, Pearl.  I think the linked blog you liked is the one titled "Individual Business Units looking to realize their own objectives" where I highlight the top 5 reasons why it is so easy to build application silos.  Click here: http://bit.ly/OocZDQ

I agree with your observation on this being a good opportunity for business to pay more attention to architectural/technological debt.  If cloud is a business decision, business better ask the right questions about ROI -- and the CIOs better be ready to answer them.  Are they?  Hence my post.

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pearl
Pearl Zhu 89 Points | Tue, 08/07/2012 - 15:39

It's a thought provoking blog to brainstorm IT budgeting and IT finance management, as Cloud now provides the fresh angle to transform CapEx to Opex, it's also good opportunity for business to pay more attention to architectural/technological debt, manage shadow IT smoothly, I like one of the linked blog pointed out: business division should have enterprise mindset, be more collaborative with resource sharing. thanks.