Innovation, but at what cost? Why today’s CFO must build a business case for cloud
Sanjiv Sachdev, Director, Strategic Business Value Consulting, Serviceware, examines why it is up to today’s CFO to build a business case for cloud, and how effective IT financial management and greater cost visibility will be crucial to this.
For many organisations, technology and the rapid adoption of cloud-based infrastructures has proven to make or break over the last year – enabling companies to stay afloat and continue to serve even in the roughest of climates. Rather than a choice, technology became fundamental to overall business strategy during the pandemic. But now, as we settle into a new sense of normality, many organisations will be facing the dreaded ‘bill shock’, as pandemic-driven IT investments become an imminent reality. For those who are yet to invest in the cloud, tightened purse strings have put the CFO in a tight spot. Business leaders are demanding innovation, but at what cost?
Preparing for any form of digital transformation requires strong levels of transparency around prospective investment costs against ultimate ROI. In other words, investment of any kind must be able to prove its value and fast. CFOs are feeling this pressure keenly. A March 2021 report, Create A Business Case For Your Hybrid Cloud Strategy, authored by Bill Martorelli, Principal Analyst at Forrester Research, explains, “Cloud practitioners generally agree that a pure lift-and-shift approach won’t fulfil cloud’s promise to unleash developer productivity in the cause of business agility.” The Forrester report reveals that when it comes to hybrid cloud strategies, this need is intensified amid a host of potential pitfalls and hidden costs that could skew the ultimate success of any journey to the cloud.
To secure the visibility required to make this transition seamlessly and effectively, the impact of a business case is critical. For the CFO, having a readymade like-for-like comparison of all entailed costs – not just the cost of the cloud technology, but also project management, training, change management and process re-engineering – is likely to be the difference between realising cloud’s undoubted benefits, or replacing one set of inefficiencies with another.
At a time where cost inefficiency is simply not an option, CFOs should be doing all they can to plan their journeys before they’ve even begun. The creation of a business case, supported by financial management tools that provide real-time insight and management across a company’s cost data, is a great place to start.
A race to the cloud, but not at any cost
Delving into the criticality of the past year, organisations are understandably eager to offset financial strains with improved flexibility, scalability and business agility – three tenets that cloud adoption promises to facilitate. Offering significant cost savings at a time of uncertainty feels like the holy grail, and it has culminated in a Forrester prediction that the global public cloud infrastructure market will grow a further 35%, to $120 billion. Last year, it was revealed that 22% of a company’s IT budget was being typically spent on cloud-based services, and this is also predicted to rise to as high as 44% by next year.
However, while these challenging times have made the benefits of cloud all the more attractive, they’ve also put the timing and success of that migration under a lot more pressure. According to Gartner analyst Ed Anderson, organisations that lack plans to track and monitor cloud costs overspend by an average of 40%. Therefore, the need for clarity in a volatile and strained economic climate is paramount.The report byForrester’s Martorelli comments, “A cloud strategy must be rooted in an actual business need that’s defensible and justifiable, not simply because it seems like the right thing to do. A strong sense of ‘why’ should precede the decision on ‘how’ and ‘when.’”
To get value from the cloud, you need effective governance, financial transparency and agile budgeting processes. Under a collective banner, this calls for a single source of truth – data-driven evidence of the right investments to make, and when.
Forrester’s research shows that from a use-case perspective, it can trigger insight into the direct costs involved with a migration or hybrid approach between cloud and on-premise. But it can also bring to light those additional, often forgotten, costs related to data centre facility management and human resource. It’s a way to expose and tidy those investment anomalies that will decide the ultimate efficiency of an organisation’s new digital makeup.
From business case to sustainable reality
This is also where financial management tools come in. Armed with more accurate data and comparable insights from suitable and business-specific use cases, the benefits of a cloud strategy can be laid out in clear projections and ROI – stripping away the hidden costs to reveal the true value. And more importantly, the steps and investments needed to reach that ultimate value.
By helping to free up liquidity, these tools enable agility around cloud options; across prospects of building, migrating, modernising, and even replacing models with SaaS alternatives. The inclination to guesstimate, to see cloud as a one-size-fits-all technology, or to assume others’ use cases as your own examples, can all be bypassed.
Yet, like any significant digital transformational effort, a business case for cloud must be backed by sufficient commitment and consensus throughout the company. The report by Forrester’s Martorelli comments, “This initiative not only needs a set owner but also must identify the stakeholders and the potential for supplementing skillsets through training, hiring, or bringing in services partners.”
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Ultimately, you can embrace a much-needed exploration of, and migration to, the cloud with a transparent and holistic picture of how your business case experiment can become a sustainable reality.
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