Cloud computing: Will the financial geeks give it a boost?

Cloud computing: Will the financial geeks give it a boost?

Summary: The advantages of cloud computing are commonly known: You don't need upfront infrastructure investment; scaling up is relatively easy; and the service provider is likely to be more efficient than your company.But your friendly neighborhood chief financial officer may not get those arguments.

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TOPICS: Cloud
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The advantages of cloud computing are commonly known: You don't need upfront infrastructure investment; scaling up is relatively easy; and the service provider is likely to be more efficient than your company.

But your friendly neighborhood chief financial officer may not get those arguments. Luckily a recent Forrester Research report provides a translation tool to get cloud computing projects done.

Forrester analyst Ted Schadler notes that companies still have to get stuff done in a downturn. And that stuff may increasingly be collaboration applications, email overhauls and Web conferencing (companies are squeezing travel budgets hard).

Also see: Microsoft’s Azure cloud platform: A guide for the perplexed

The cloud--whether it's Amazon.com's, Cisco's, Google's, IBM's, HP's or someone else's--could be used for many of these projects. The hard part is pitching your CFO. Here are a few tips to get that cloud computing project approved via Forrester:

It's all about the cash flow. The cloud--and software as a service for that matter (Forrester is using a wide definition)--has pay-as-you-go economics. Your CFO loves those economics. Why? He doesn't have to put infrastructure on the balance sheet.

Schadler notes:

The ability to pay as you go from a service provider rather than spending upfront feels natural to a CFO — there’s nothing new about buying services. What’s new is that cloud computing offers a delivery and financing alternative to one of the bastions of corporate capital expenditures: IT.

In a crappy economy it's a safe bet the CFO will get over the relative novelty of cloud services. Forrester adds that if a CFO can see better cash flow, lower risk and visibility she'll become a cloud computing convert in no time.

Speed kills. Schadler adds that one financial services company moved its employee portal to a cloud service provider in 60 days. Another firm is still taking 18 months to do the same thing. You'll be more focused. The CFO is likely to want to farm out some projects on the cloud so the technology department can focus on things like customer service.

Now cloud computing isn't a bed of cash flow for everyone. Service level agreements, increasing monthly costs and data ownership are all potential trouble spots that will need to be resolved.

But overall, these technology benefits:

cloud11.png

Can translate to these financial benefits:

cloud21.png

The big question is whether a weak economy will push CFOs over the edge to jump into cloud computing. The switch won't happen overnight, but the longer the economy drags the better it looks for cloud computing.

Topic: Cloud

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7 comments
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  • The Cloud isn't ready yet...

    Hopefully a CFO would realize that small up front costs do not always mean small back end costs.
    Most third party cloud vendors create EULA that clearly give them the right to take your companies IP. Normal outsourcing is usually done be contracts between two vendors and has a great deal of contract law to back it up.However you don't really see this type of behavior with current cloud vendors. The cloud vendors offer one or more services usually at some tiered payment plan. Then hand over a draconian EULA they don't expect you to read and everyone is happy. The problems start to creep in when you realize you can't just hand stuff over to the could. You need to keep the stuff you don't want public on private company owned servers. Huh?
    So as a company I now have to maintain my own IT structure to protect my assets and pay a cloud vendor for some vague service that may or may not help me.Where am I saving money???

    1. If I am a software company that wants to use the cloud to sell my services, I can't use the cloud because if it is a good enough idea I have already given permission to the cloud to steal it via the EULA

    2. If I am a different type of company, I still need to maintain my own IT department to handle all of the proprietary data I don't want out in the cloud. So if I have spent money already on IT, why do I need the cloud???

    Again, data ownership in the cloud is not mature at this time.
    For Example: Google is not going to resist a search order to seize your companies data by the U.S. Government. Google will actually fall over itself trying to help the U.S. Government seize your data.

    Another Example: Google is strapped for cash and needs to raise money. They decide to sell their data storage division to another company. The new company has a more open policy towards data security and your companies rivals hack the storage and secure the winning bid. You lose, sorry, thanks for playing.

    Once you turn anything over to the cloud it is now public domain. You don't have direct control over security so you have no say in who gets to crack your data. A safe assumption would be "Anyone who wants to take a look."

    Cloud computing will eventually become a niche tech that caters to a few clearly defined project types. Any type of open source project where everything will be made public anyway would fit in the cloud.
    Another market would be application warehousing and distribution at the vendor level. The actual cloud vendors would buy all the rights to an application or service and offer it to end users. Basically the original development company makes their money from selling to the cloud and the development company turns over the source to the cloud vendor so they don't care about how open the cloud is.The problem is the developers lose out on recurring revenue streams from licensing fees.
    mr1972
    • You're tagging everyone with the failures of a few

      You're absolutely correct that folks need to read their EULAs and I've seen some do pretty much exactly what you describe. However, not all companies in the cloud space are so autocratic. At 3tera, we wrestled with these issues, and in some cases made engineering changes to our AppLogic cloud platform so we wouldn't have to cover our backsides with legal loopholes.

      So, please keep posting, but when you see a EULA like that call the vendor out by name so they know people aren't happy.

      Bert Armijo
      3tera, Inc.
      barmijo
      • Looked for 3tera EULA...

        Bert,

        I looked for your companies EULA online and couldn't find it. I didn't sign up for a product so may be it is hidden in the purchasing process.
        This doesn't give me a lot of confidence.

        What are 3tera's legal obligations regarding government subpoena's? Google pretty much cooperates with any world government no matter if their clients are hurt or not. Is 3tera different in this area? If so how?

        I am actually not a cloud computing hater. But I don't see some of the basic tenets of business security addressed by the market yet.

        Since I couldn't get a look at anything regarding the EULA or company/client policy I still don't know if 3tera would be a good platform for most applications.

        If you have a link to some information I would be more than willing to take a look at it.

        Thanks.
        mr1972
  • "Another money-saving idea..."

    "... which is not in widespread use and which will involve disrupting everything we're doing now and negotiating many new contracts.

    Tell me where to sign.

    And please return to my office at 2:00 to discuss the expense reductions which will be happening within this company."
    Anton Philidor
  • Windows Virga

    Anyone considering the long-term feasibility of cloud computing should take a look right now (1:23 PM ET Friday) at http://www.internetpulse.net/ and see what the peering dispute between Cogent and Sprint is doing to the connectivity on which the cloud would depend. The Wall Street Journal site, the Internet Storm Center site, and surely many others, are essentially off the air.

    Dependable cloud computing may require regulators to march in and put neutral hands on those controls. Until that happens, disputes like this can have you pounding sand for hours or days without recourse. Or "dependable cloud computing" may just be the latest oxymoron, pushing aside "reality television."
    dpnewkirk
  • Security is expensive

    mr1972:

    That setup is cheaper, they do not need to spend heavily in security hw/sw and keep them updated. Thay basically wash their hands of all responsibility. The draconian EULA is basically to cover thier derrieres from any unexpected (or should I say expected) setbacks.

    Maybe sometime down the road, when their client base is bigger and margins allow and/or market demands real security they'll step it up.

    In the meantime, the cloud is indeed not ready for most enterprise purposes.
    Acoyauh
  • This seems like a bad model

    "The Cloud" has a familiar model behind it, the dumb terminal and core computer facility of the 1970's. It's a sorry state of affairs that all we have managed to do is replace the parallel and serial connections with ethernet over the last 30 years.
    yet_another