Making the financial case for moving to the cloud

Posted by Mike Vizard on Jul 31, 2015 8:00:00 AM

IT budgetAt this point, it’s not a question of if organizations are going to embrace cloud computing but a question of to what degree they'll embrace it and in what form. Increasingly, organizations of all sizes are looking to IT service providers to help them figure that out.

new study from Cloud Cruiser, a provider of IT financial management applications, finds that nearly three quarters (72 percent) of IT organizations rated their ability to track cloud usage and costs as either very or extremely important. The primary reason IT organizations want this ability is to better forecast and compare costs, but they also indicated a desire to either chargeback or at least “showback” usage of cloud services to various lines of business.

Foggy financial visibility into the cloud

Arguably, this lack of financial visibility into the cloud is holding back migrations to the cloud. When it comes to IT financial management, companies generally break down into two factions. There are those that prefer to treat IT as a capital expense because they have the budget to do so. For them, IT becomes part of the tax write-off process. Then there are companies that prefer to pay for IT as needed, which means treating IT as an operational expense.

For example, the vast majority of the usage of public clouds is by smaller companies without much in the way of capital budgets or by enterprise IT organizations that decided to allocate their limited amount of capital budget to acquire, say heavy machinery to manufacture the products that are at the heart of their business.

Historically, most IT organizations have preferred to treat IT as a capital expense. In fact, the Cloud Cruiser survey shows that only six percent of those surveyed relied solely on public clouds. Another 31 percent rely on hybrid clouds, while 23 percent have built a private cloud. More telling is that only 37 percent have more than a quarter of their application workloads running in the cloud. The challenge facing IT services providers that specialize in cloud computing is to increase that number substantially in the months and years ahead.

Identifying the right cloud applications

The good news is that a separate survey conducted by HfS Research on behalf of Accenture finds that 44 percent of senior executives would write off their legacy IT investments if they could find the right solution that immediately gave them greater value. In many of those cases, that means helping them identify cloud applications that provide the capabilities they need. These applications also need to do this in a way that enables their organization to be more agile because they are no longer waiting on internal IT to deliver new functionality once every 18 months or so.

For the most part, the first wave of IT organizations that are pre-disposed to move to the cloud have already done so. What remains is the hard work of convincing remaining customers that the time has come to put their issues aside, whether they prefer to treat IT as a capital expense or have concerns about security and compliance issues. After all, the cloud is generally more secure than their on-premise environment, and they all have better things to do with their capital than spend it on IT.

Photo credit: 401 (K) 2012 on Flickr. Used under CC 2.0 license. 

Get updates in your inbox. Click here to subscribe to our blog!

Topics: Cloud Trends

Which Data Loss Gremlin Is Targeting You
Fixed Price Data Protection
MSP Phishing Quiz
Intronis Local Lunches
MSP Marketing Assessment