Is Cloud Computing a way out to strangle-hold on IT Budgets?

If you were to ask any CIO today to list out his / her priorities, the list could look something like this -

• been customer-centric and enhance customer experience
• a few experiments with mobility
• business process automation
• ensuring business continuity
• business intelligence applications
• IT Security

If one looks at the list above, it is very clear that CIOs are primarily looking at their so-called "traditional", "core" functions of  - automation, business continuity from the IT perspective and IT security as their priority. 

Today, majority of the IT functions continue to be performed in-house. The other reason for the list seems to be skewed towards the "traditional", "core" functions of the the IT department is because IT budgets are likely to remain consistent and no major budget increase is anticipated. This thought is further supported by the fact that overall there is a strangle-hold on any new investments made by the businesses due to the current uncertainties about policy and the regulatory environment and rising costs. So, it is all about "keeping the lights on". There is no money for the CIOs to "play" with newer technologies.

So what is the way out?

The "traditional", "core" functions are already optimized by the CIOs, but still are on the list up here. So, what is that a CIO could be thinking in here? Well... perhaps - look at new and emerging technologies which help reduce the total cost of ownership (TCO) and improving the turnaround time (TAT). Well... there is cloud computing that the CIO can tap into.

But how... 

Well... as a CIO with stagnated budgets, one could look at moving the data centre infrastructure on the cloud and availing of infrastructure as a service (IaaS) from one of the cloud service providers. What the possible IaaS will do is - help replace the data centre infrastructure, it can help create that much needed disaster recovery (DR) site strategy to ensure business continuity using at a much cheaper cost than otherwise. The IaaS will allow, the CIO, an ability to be quickly provision servers and all necessary infrastructure for different projects and applications. IaaS could be a good model for hosting web services based applications and applications that require a quick increase in infrastructure availability. The IaaS facilitates further cost savings in terms of amount of power consumed and in terms of time and efforts for server provisioning. 

courtesy: cioresearchcenter.com

Also, a CIO could consider the platform as a service (PaaS) as a great model wherein the management of the infrastructure becomes the job of the cloud service provider and could free the in-house IT team to focus of building solutions that can help transform the business, focus on customer-centric business solutions and enhance the overall customer experience. This will help the CIO bring in a business focus to the IT function and an opportunity to work along with the CEO / COO and other senior management team on the "real" and "burning" business concerns and issues.

Another alternative and most commonly used model for cloud computing initiatives is - software as a service (SaaS). The CIO could deploy his / her business critical applications on the cloud or use off-shelf business applications. Whilst doing so, it is important to take a cautious approach and the CIO would have to consider aspects such as performance experiences and do a detailed cost analysis with comparative sheets for the future plans. This is a model wherein the CIO can save not only on infrastructure but also software application licenses and move to a "pay-per-use" model. So, in this manner, a  CIO could provide the business with much needed solutions on a OPEX model and save the business big money in CAPEX and lower the turnaround time (TAT) considerable.

However... there is no "one size fits all" in here. So what model do I use for my business? How do I figure it out?

As a CIO, it is important that I understand my infrastructure and business application footprint and then adapt and use the various models and options available. This will allows the CIO to effectively shift and reduce the up-front CAPEX expenses in the IT Budget and spread the costs over a longer period using a OPEX model and still be able to satisfy and meet the business needs of solutions from IT. Some business benefits of cloud computing initiatives that CIOs can use to convince  the CEO / COO and the other senior management team could be -

• Shifts fixed to variable cost model (CFOs would love this)
• "pay-per-use", "scale-up when needed", 'try before use" models possible (CFOs would love this too)
• Provides flexible cost-effective computing to support growth (COOs and CFOs love this)
• Enables faster "go-to market" strategy (the CMO and Sales folks will love it)
• Support experimentation
• Drives new potential businesses
• Can enable user-defined experiences

Of course... the CIO will need to detail out the "real" business cost savings and monetize the benefits before putting it to the CEO / COO and the other senior management team.

Great... but what about IT Security on the Cloud? Is it not something the CIO should be worried about? What happens to my data on a "public" cloud because a cloud service provider has so many customers and may also have customers who are in similar line of business as mine. One needs to understand that the cloud computing infrastructure is not fundamentally insecure, it needs to be managed and accessed in a secure way. There are ways - data encryption techniques, designing and defining mitigating controls, cloud authentication and authorization solutions that one can use to ensure that the data on the cloud infrastructure is secure and safe. Most critical is to - protect the API keys.

So.... is there merit for a CIO to look at cloud computing in these times of strangled-held IT budgets? With all its worth, I strongly believe that it is an option that the CIO should look at and if planned and executed well it has considerable business benefits and also impacts the way the business is done - it facilitates the customer involvement in what kind of a product the customer will like to see and use. Also, yes... it is very much doable with the support to the CEO / COO and the other senior management team. It is important that the CEO / COO and the senior management team understand that it can be done and invite the CIO to the "strategy table" and share the business issues and concerns with the CIO. They need to give the CIO opportunity to find a solution to the business issues and concerns, give the CIO an opportunity to innovate and experiment (of course within the defined IT budget) and to optimize and cost savings for the business. 

"Business Anemia" - a wake up call

One of the favorite topic of discussion in the business world today is - the state of the business environment at length - the global and the Indian economies? Everybody has their own perspective about it, everybody has opinions / suggestions on what needs to be done to set it right.

In short, we all try to find a scapegoat and what we do about it in most cases - nothing really, nothing different and life goes on.

But, personally, I have a different perspective on this. I believe it is, in fact, a wake-up call. This is an opportunity - opportunity for CEOs / COOs  to think differently. It is opportunity for the CEOs / COOs to rope in their CIOs and work and partner with them to bring in the much needed efficiency and the effectiveness in business processes, to automate business processes, to deploy solutions that are customer-centric. It is an opportunity to look at each and every function very closely and jointly work with their CIOs to identify the problem areas, work on them, put in technology solutions to improve and overcome the problem areas and iron them out permanently forever. 

The CEOs / COOs need to understand that their CIOs with their business acumen and understanding of the business processes as a result of all the technology interventions - ERP and CRM solutions, are the most apt and best suited for bringing about this change. The CEOs / COOs need to realize that a CIO can take a complete fresh look and new perspective at areas of operations wherein the CIO can actually drive down or even drive out the cost and deliver better service to the "real" customer. The CEOs / COOs need to realise that their CIO is the best partner to work with ironing out inefficient and ineffective business processes and hence prepare the business for the next wave of improved business sentiments resulting in better business performance, to transform the business to grow to greater heights in the future.

Furthermore, the CEOs / COOs need to understand and respect that with all theirs and every other business function and all the employees depends on technology thus the IT function has today become the "bloodline" the business. If you cut down on this "bloodline" or decide to reduce the "blood" that runs through the veins and arteries of your business, it will lead to a "business anemia". By reducing the "blood", the CEOs and COOs are in fact killing their own businesses. The CEOs / COOs need to understand that if the businesses dies, they die with it too. In these times of desperation, the most common mistake most CEOs / COOs make is - pump in more money in sales and marketing, into increase production capacity without really ironing out inefficient and ineffective business processes.  

Well... it can be argued that pumping money into a marketing campaigns, announcing sales incentives, bidding for more business, building larger capacities will bring in "instant", "quick"   returns and "makeshift" changes. True... but just pause in here for a second... how long can the business sustain it all with inefficient and ineffective business processes and people?  "Instant", "quick" returns and "makeshift" changes do not last long if the core problems are not resloved. The CEOs / COOs need to realize that they have to treat the disease to the core, they need to eradicate the disease, prevent it from reoccurrence because everytime it reoccurs, the disease drains away vital energy, resources and money from their businesses. Attack the root-cause of inefficient and ineffective business processes, of people through use of technology, transform the business because in the long-run that is perhaps the ONLY solution to all problems, the ONLY solution for sustenance of the business.

It can be argued that - technology is not the solution to all business problems. Very true... and that is not what I am even trying to prompt. All I am saying is - by the virtue that the CIO understands the business processes because of the numerous technology interventions in the business such as - ERP and CRM projects, because of the documentation of the "as-on" business processes and is also an senior management executive, the CEOs / COOs can seek and partner with the CIO to set the things right at least as far as the business processes are concerned. Furthermore, it is a believed that technology intervention do bring in efficiency  in the business. So, I would like to urge the CEOs / COOs to give the CIO a chance, bring him / her into the mainstream of business (if not already) decisions, partner with the CIO and transform the business to ensure long-term sustainability for your business.   

There is a very famous hearsay or story, I am not too sure, on this and it goes like this - an major Indian automotive company was struggling and that particular year did not make large profits, but the top man of the company decided to invest most of the profits of that year in improving the business processes and bringing in efficiency and effectiveness by streamling business processes and bringing about a transformation through technology and today that automotive company is a major and leading business conglomerate. It was the foresight of this business leader who attacked the root cause, invested in technology to bring about the transformation of the business for long term sustenance rather than investing in efforts that gave "quick", "instant" returns and "makeshift" changes.