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Is Cloud the Answer for the CIOs and CFOs?

HardwareNews
by Andrew McCreath
, 03 Mar 2010News

There continues to be much hype around cloud computing.  It's been increasing over the last 18 months and is likely to continue growing for the foreseeable future. A number of key factors are contributing to this, including (but not limited to):

  • Increased levels of cloud service maturity particularly in the software as a service (SaaS) market.
  • Huge investment from vendors and service providers.
  • A growing number of deployment models including public, private and virtual private clouds.
  • An ever increasing range of service offerings, such as SaaS, infrastructure as a service (IaaS) and platform as a service.

Hype is one thing, but why are CIOs and CFOs starting to take cloud computing so seriously? Regardless of the cloud solution chosen, they all have one thing in common; a move away from a capital intensive model to an operating expense (opex) based model.

No CIO or CFO wants to be tarnished with the fact they invested huge sums of capital into a project that offers poor ROI. This cost-focussed attitude is helping opex-based cloud computing gain more traction at the executive level.

Many CIOs are at a ‘crossroads’: should they spend millions of pounds on building new data centres and buying all new assets in order to refresh or grow their existing infrastructure? Or, should they consider a cloud model, which may see them only paying a penny a day for a server with no capital outlay.  

If you chose the former, it's likely the CFO will ask what was the value of the recent, expensive refresh. Also, in the mid-market in particular, it may no longer be a case of  ‘what will your data centre look like and cost to run’ but more a case of ‘will you own a data centre at all’?

Cloud computing changes the dynamics of buying IT infrastructure. In the past CIOs would request budget based on a series of technical requirements and the CFO would often have to trust the judgement of the CIO.

On top of that, vendors rarely got in front of the CFO and when they did, they talked technology. With cloud computing the conversation is a very different one; it talks about price per compute unit (Gb or Mb), availability and rapid provisioning - a language the CFO understands.

Vendors and service providers are now able to target the CFO directly with promises of computing at a significantly reduced cost, a factor that is driving CIOs to seriously consider researching and investing in cloud computing.

In the past, organisations have had to adopt ‘build just in case’ models for their infrastructures. This is particularly the case in the retail sector, where a significant increase in customers and transactions during short periods throughout the year, such as Christmas, cause huge peaks in demand on the infrastructure.

With the development of cloud computing and in particular IaaS, the concept of ‘pay for what you use’ with the ability to burst during peak periods becomes a reality.

Now, organisations can build applications that support millions of transactions, however, the underlying infrastructure only need handle thousands of transactions until that surge occurs.  When it does occur, the infrastructure will become available. This model presents a very compelling proposition to both the CIO and CFO.

Even if an organisation doesn’t need to build a new data centre, the cost of developing and operating a custom enterprise application is still very high. They generally require a significant amount of time, developers, software licenses, infrastructure, maintenance and support.

On top of the expenditure, businesses still aren’t guaranteed to end up with an application that fulfils the requirements. CIOs are starting to embrace SaaS offerings, such as Salesforce, where the limitations in functionality (if any) are outweighed by the costs being shared across many customers and wrapped up into a simple lower cost ‘pay per user’ model.

In summary, the hype around cloud seems to be justified. The industry is already seeing cloud computing reducing the cost of providing IT services back to the business from both a capital and operational perspective.

It is also about right-sizing the infrastructure for the services being delivered, eliminating unnecessary expenditure. Both are tasks high on the agenda of most CIOs but ones they have struggled to deliver on in recent years.

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