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Author: Perry, CFO  
Perry, CFO
   Last updated: August 3, 2017

This post, originally published 31 MAR 16, has some updated details.

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In a world where ‘the Cloud’ is being widely accepted as a vital part of the infrastructure of an organisation, it is important to consider the role it can play within a business. I have collated what I consider to be the 7 key issues which every CFO needs to understand to efficiently allocate resources towards Cloud Computing.

Want the information quick? See the SlideShare below:

1. Where does Cloud Computing fit into our business structure?

One key element in approaching the new world of cloud computing is to recognize the IT department’s role in this new vista. Enabling the most appropriate form of computing to be adopted on behalf of the larger company, with selection, infrastructure and application management, along with cost-effectiveness, is typically the domain of IT. Computing is the objective and infrastructure is the mechanism that supports the objective.

In the past, the only way to fulfil that objective was to own and operate infrastructure, however today owning and operating the infrastructure is no longer a prerequisite to obtain computing services.

Savvy IT organizations will recognize the real question: What's the most cost-effective vehicle to obtain computing resources in the long term, no matter where they reside? The answer will dictate the ownership and management of the infrastructure.

2. How does a company utilise its current resources?

The three main types of cloud solutions are; public, private and hybrid. Public solutions are software applications that can be used by multiple customers, so companies can utilise the same service platform. Private cloud solutions grant a committed backend platform for one customer. The hybrid solution could combine public and private, while taking into account current physical hardware.

"When considering implementing a private or hybrid cloud model, current assets can be used to reduce equipment expenses."

Companies can recycle current servers and hardware and combine it with the private or hybrid cloud infrastructure, which can help decrease equipment costs and provide physical access control to certain hardware. As the existing hardware comes to the end of its useful life, a more cloud based infrastructure can be adopted.

3. How does IT respond to the change in supply?

Fundamental to making effective change to the IT infrastructure in an organisation is the bedrock assumption that IT is the monopoly supplier of infrastructure to users. That assumption, of course, is no longer accurate, thanks to the rise of various public cloud providers. Today, users can avoid the entire resource-rationing contest and go direct to a provider with effectively unlimited resources, purchasing on an elastic basis.

IT is now confronting a world in which its long-established role as sole supplier is no longer plausible or even appropriate. Faced with this new world of increasing demand and alternative sources of supply, how should IT respond?

Unfortunately, all too many echo the approach of an assumption that IT must be less expensive than other options and in an existence justification approach, undertake a time consuming search for a tool to "prove" the assumption. The real question to ask is "How can I understand my cost versus a cloud provider?" Rather, the question often asked is "How can I show that our current storage is less expensive than AWS or Microsoft?"

It is also generally true that most IT departments don’t really understand their true, fully loaded costs. It is vital to ascertain the total costs of a cloud solution and then compare to the existing department costs and the costs of other alternatives.

A reflexive insistence on retaining the position of monopoly infrastructure supplier, and a refusal to look to outside suppliers to provide sufficient extra capacity, can consign IT to an ongoing power struggle with users and often costs the organisation in the long term.

4. Are you considering compliance?

Your company should seriously consider compliance regulations [such as PCI and HIPAA] when planning a migration to the cloud. Many of these regulations are concerned with data security; therefore, not obeying compliance regulations can result in fines or other consequences for your company.

It is not just a case of hoping that you will be ok, you have to acknowledge that the longer you don’t adopt new technology, the more susceptible you are to risk.

5. Is a single IT vendor the most cost-efficient strategy?

The world of cloud-computing offers a variety of sellers providing solutions for IT infrastructure. Sometimes, using multiple sellers can help tackle all the business’ demands for infrastructure, but this can become more expensive than relying on a single vendor.

Using a variety of sellers would also certainly be more time-consuming and complicated in terms of organising the support services they could provide. So, whilst using a single vendor might restrict or limit flexibility, it is ultimately cheaper and ensures accountability.

6. How to still make money during downtime

Cloud computing reduces maintenance support from your in-house department provided that it is dependable; if it isn’t this can work out more expensive. Downtime can have a massive impact on revenue, as well as resulting in negative customer impressions, so you should consider what disaster recovery plans you can implement.

It is generally much more efficient and robust to have a disaster recovery programme based on a cloud solution, and by utilising the power of the cloud, businesses will more often than not be just as productive when unforeseen issues, such as power outages, occur.

7. What is the cost of migrating?

If your business has custom applications in place to meet your particular needs, then you need to consider the cost of transferring these applications to the cloud. Generally a proof of concept phase as well as ample user acceptance testing will need to be factored into any migration in order to ensure that the move is as seamless as possible. While this will add to the initial cost of migration, it will certainly save money in the long term as the process of migrating will have as little an effect on the day to day running of the business.

The process of migrating data and email is very simple, but the migration of legacy applications requires careful planning to ensure that the functionality is not only maintained but enhanced.

 

Conclusion

It is clear that there are many advantages, both financial and operational to adopting a cloud strategy, however achieving the most efficient solution for your business requires input from both the IT team and the wider organisation. The role of the IT department is changing and unless they can embrace this change, they face the risk of becoming a business blocker rather than an innovator.

I hope that this blog has been useful, however if you have any suggestions for me to include in future blogs, they would be very welcome.

Topics: CFO, Finance, Cloud

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