Cloud computing promises both greater IT agility and reduced costs. No one disputes the agility issue – compared to traditional resource deployment that can drag on for weeks or months, cloud computing offers the enormous improvement of a timetable measured in minutes (or so it seems). On the subject of cost, however, there is far less consensus. CFO’s debate how to measure cloud computing costs, which in turn impacts how to assess its cost-effectiveness.
The CFO View of the Clouds
Since we’re talking CFO’s here, let’s talk bottom line. Agility is primarily an IT-focused topic. Pricing is the province and domain of the CFO. How CFOs evaluate cloud pricing, and subsequent cost-effectiveness, will have a large impact on adoption – in some cases regardless of IT’s opinion (sorry IT guys!).
Today, CFOs have a love/hate relationship with cloud computing. With time, their stance will inevitably shift toward a preference for cloud computing and away from on-premises installations, but in the meantime…
Why CFOs Hate the Cloud
The hate part of the equation can be summed up in one word: unpredictability. The by-the-drink pricing methods of the Cloud can mean cost fluctuations from month to month that tend to drive CFO’s to, well, drink. By nature, CFO’s are adamantly uncomfortable with unpredictability. The good news is: there are ways to reduce the unpredictability of cloud computing costs and, in time, greater predictability will rule the Cloudy day – so take heart CFO’s.
Why CFOs Love the Cloud
The Cloud offers CFO’s – and the companies they work for – a shift away from capital expenditures (CapEx is typically anethema for CFO’s), scalability that removes much of the all-or-nothing uncertainties of expensive IT roll-outs, and flexibility that similarly removes much of the concern over economic uncertainty.
Bernard Golden has explained this Love-Hate relationship in greater detail in a recent PC Advisor article. Read more.
So How ‘Bout a Bottom Line?
Uncertainty and its attendant risk are the unhappy bedfellows of the CFO. Reducing the inherent uncertainty of variable costs in cloud computing will come – both through new costing methods and simply by the predictive nature of knowing a thing better. As cloud computing matures and CFO’s work with it in increasing degrees, predictability is likely. As Golden says in the PC Advisor article, “CFO’s will develop comfort with the new financial model of on-demand payment and will also develop techniques to reduce the payment variability associated with that framework.”