Continuing my survey of the cloud computing surveys, I’ve been staring at the results from the June 2009 CIO Magazine cloud computing survey, wondering what I’m missing. The responses that have me scratching my head are related to cloud computing drivers, budget spend and budget reductions. Snapshots of the three questions follow.
[Click on pictures to enlarge].
As you can see, the first question shows reduce hardware and staffing costs as the primary drivers of cloud computing. The second question attempts to quantify this savings (% budget reduction) over time. Take note of the Average (Mean) line. The expected reductions are 5.6%, 7.6% and 9.3% over 1, 3 and 5 years respectively. As a former Senior IT leader with budget responsibility, I recognize that 5.6-9.3% budget savings aren’t easy to come by, and certainly add up as savings, or provide an alternative source for strategic investments.
So, all good. Until you review the Average (Mean) line of the projected spend question. That line shows on-demand service expenditure as 5.6%, 8.0% and 10.2% of budget over 1, 3 and 5 years respectively. Comparing the spend against savings, you’ll see the spend is equal to, or greater than, the projected savings.
Ok. Initial years IT spend outpacing projected savings isn’t exactly a newsflash. IT is a long-term investment, and return isn’t immediate. Certainly, if respondents are building on-premise cloud computing environments, you would expect a longer time period to savings, with a more sustainable savings stream.
However, this survey focused on “on-demand services”, as in ‘from away’:
“The way most CIOs define cloud computing today is as a Software-as-a-Service-like arrangement where your company does not own the software, hardware or any specific equipment run by the provider. Access to the cloud vendor’s systems takes place over the Internet in some secured way and for that access, customers pay a subscription fee that rises or falls with the level of use. Cloud computing offerings are often referred to as “on-demand services”, “cloud services”, “Software-as-a-Service (SaaS)”, etc.”
Translation: a subscription (rental) economic model. If that’s the case, then this survey shows that on average, organizations are paying more in rent than they expect to recoup as savings. Obviously, no CIO is consciously making that call, spend $1.00 to save 90 cents, indefinitely. Something is missing, and I don’t think it’s me.
Rather, there are business value benefits the survey didn’t consider, such as shortening time to value, increased focus on core capabilities, extending a value chain, or even the creation of short-term business innovation spaces.
So, this is a long-winded way of saying, do benchmark analysis, but then do your own math. In doing that math, don’t limit your sights to the IT side of the equation.
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