Why Is So Difficult to Get Budget for Cloud
Our management do not support Cloud. Have you heard these? I heard a lot.
Many customers, I work with, complain that they do want to migrate to the Cloud, they understand all benefits, see new opportunities but Management (or Finance) do not support Cloud at all. They say that the CFO is like a goalkeeper that parries all ideas of moving budgets toward Cloud.
At first, I did not understand what the problem was, why Cloud budget was more complicated for CIO internally than any other IT-related budget.
In fact, Cloud gives much more budget transparency for Management and Finance. If you are a retail chain with 10 stores, and use a specific Cloud service for them, then when you open 10 more stores you will need to almost double this Cloud service to pay. It is easy and clear. If you have 100 employees and pay for Mail Cloud service, then when you hire 100 more you will buy twice more Mail services for them. Simple math. The services-based infrastructure is much more predictable in terms of costs than on premise, and Finance should love it as it allows tracking the link between IT-costs and organization’s results. It is almost impossible to link investment in a new datacenter with a certain new store, but to distribute costs of Cloud services between stores is simple. However, in reality, CIOs have a problem with promoting and supporting budget for Cloud.
I found an answer in my own case. I work in the Cloud division of a large IT-organization. Every year I go through a budgeting process. We are growing more than 100% YoY and I have to budget significantly more of hardware and more of Internet traffic. It is simple: if my plan is 100% growth in Sales, I have to double hardware and buy twice more traffic for it. But all these 3 year, I have had no questions about hardware and had always questions from the Finance department about Internet. I was working with 3 different CFOs at that time and had issues with budgeting of Internet costs every time.
Why does it happen? Why was I not asked to explain why I needed new hardware, but I had to prove that I needed more traffic? Why finance is always more suspicious to OPEX especially when they grow fast?
Talking with Finance to explain my budget requests helped me to look at Cloud from their point of view. The worksheet with my budget (standard form from Finance) contains in rows types of costs: hardware, personnel, internet, etc. and in columns data from the previous year and a request for the next one. It is hard to understand from it why personnel is growing by 20%, when Internet by 100%. It is also hard to see the relationship between a number of resources we are going to sell and numbers of additional specialists in Support Line and the Internet traffic. From this form they see the list of unrelated costs, but not a service.
Management and Finance will always try to optimize budget requests (they believe that they are paid for it). They very seldom have a chance to understand each part of the business deeply, but they use their experience, common sense and specific technics to identify which lines in the request to cut. And they start from items that are least clear for them. For a financial controller, it is much easier to understand the line with hardware than the line with OPEX for some services.
What will happen, if I decrease the request for hardware by 30%? They will be able to sell by 30% less. What will happen, if I decrease internet by 30%? They will watch YouTube less.
Buying hardware is much more understandable than most of outsourcing services.
It happens in my organization and the same thing happens in many other companies when IT-budget requests are being approved.
Willing to attach IT-costs to organization’s business activities, in practice, Finance cannot do it in the classical model of building IT. And in most cases Finance just tracks down dynamics of changing for each type of costs such as staff or Internet. With IT-infrastructure based on Cloud-service CFO gets a chance to see the direct relationship between IT-costs and business. But to achieve it, CFO needs to change old worksheets in which IT-budget is being analyzed and see Cloud services through figures.
It likes to buy a car thinking not in terms of its specification, speed, fuel consumption, etc. but in terms of mass of steel, rubber and plastic. A lot of figures, but few meanings.