Finance and IT executives continue to look for major steps to reduce the costs and overhead of technology and computing required for business to operate. The economic outlook and reality of what organizations will have to do for further reduction of costs requires more than shaving off costs through consolidating applications or databases. All of these efforts are important but still will not have the significant impact that many would like to see in the reduction of the keeping the lights on (KTLO) technology budgets managed by IT. This is further complicated with IT organizations that have little financial savvy and do not do a great job in IT financial management let alone using TCO effectively. These issues have driven many in finance and CIO’s to engage deeper into examining IT spending effectiveness more closely.
One of the technology and computing strategies being examined much more closely is the underlying computing power and IT infrastructure of organizations. For many organizations they spend 60 to 80 percent of their IT budget on maintaining existing infrastructure and the percentage is rising not declining. This raises the question on whether organizations should be in the business of spending so much of their management cycles and budget doing this in the first place. Maybe more of it should be outsourced completely which has been done by many organizations. But now the strategy of using cloud computing must be examined to help reduce management cycles and significant costs of data centers and business technology completely. Our firm, Ventana Research pointed out at the beginning of the year the importance of Cloud Computing as a significant business technology priority. The use of cloud computing has expanded to what is called ‘private’ cloud where the computing power of the server and storage is managed by a third party organization but the ability to load and operate software is still an IT responsibility. This provides an alternative to completely engaging into IT outsourcing and instead looking to eliminate the infrastructure management which provides little to no competitive business advantage or value. The private cloud approach can provide business and IT organizations the comfort in having tighter control from a security perspective of their systems still within the confines of their management. Using private clouds clearly is beginning to grow and recently IBM announced their IBM Blue Cloud Initiative to advance their technologies to support virtual grids of computing in their IBM Cloud Computing efforts.
IT also has an opportunity to use other computing clouds managed by software vendors and some with their partners to support their organizations. This is still required and already significantly embraced by business today where IT should be more engaged in understanding the ramifications of these choices being made in many cases without them. Business has been adopting software applications that operate in cloud computing environments including CRM, business process management to performance management across HR and finance. Richard Snow on our team discussed the efforts by to leverage their platform for more than CRM and I reviewed Vitria and their business process management software that operates within the cloud recently. As well finance and operations have begun to take their planning and financial performance management needs of the corporation into the cloud through providers like Adaptive Planning and Host Analytics who Robert Kugel on our team recently reviewed their latest releases. All of this as business finds fewer resources in IT and lack of responsiveness to their specific needs as the focus on managing the existing IT portfolio leaves little budget or time to help business. Also human resources (HR) has been procuring for many years new applications for talent management or workforce performance management providers in a more haphazard ‘one-off’ approach creating workforce information anarchy though most of the BI SaaS struggle to survive. All of these cloud computing and use of software in a software as a service (SaaS) examples have been driven by business with mostly little IT involvement which is good and bad. The bad side is as well that IT has not been very engaged into how to support the efficient data integration needs across cloud computing environments. This is required to address the business pressure for IT to help better deliver better analytics and business intelligence. All of which is not easy when you have data operating across many cloud computing environments outside of the internal IT premises.
Using cloud computing strategies and finding methods to be more strategic with IT budgets has many paths of which each have a multitude of ramifications to existing operations. IT needs to fully engage into what is called IT Performance Management and document their strategies and scenarios to determine the best alignment for business in an effective manner. Just as business uses strategy and planning software to determine their alternatives with documented metrics and goals, IT should do the same. This is essential as the range of cloud computing strategies from private to public clouds leveraging software rental or subscription models like SaaS and business process and IT outsourcing options each should be analyzed for their ability to meet business needs of technology computing. A critical outcome of these activities is to find the best option to reduce capital and operating budgets of IT that is not primarily focused on business value that Ventana Research believe is a critical business and IT strategy.