CIOs: At What Stage is Your Thinking on Cloud Economics?

CIOs: At What Stage is Your Thinking on Cloud Economics?

Summary: Cloud computing can save you money - but will it?

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Is your cloud strategy centered on saving money or fueling revenue growth? Depending on where you land on this question could determines a lot about your experience level with cloud services and what guidance you should be giving to your application developers and infrastructure & operations teams. According to our research the majority of CIOs would vote for the savings, seeing cloud computing as an evolution of outsourcing and hosting that can drive down capital and operations expenses. In some cases this is correct but in many the opposite will result. Using the cloud wrong may raise your costs.

But this isn’t a debate worth having because it’s the exploration of the use cases where it does save you money that bares the real fruit. And it’s through this experience that you can start shifting your thinking from cost savings to revenue opportunities. Forrester surveys show that the top reasons developers tap into cloud services (and the empowered non-developers in your business units) is to rapidly deploy new services and capabilities. And the driver behind these efforts – new services, better customer experience and improved productivity. Translation: Revenues and profits.

If the cloud is bringing new money in the door, does it really matter if it’s the cheaper solution? Not at first. But over time using cloud as a revenue engine doesn’t necessarily mean high margins on that revenue. That’s where your experience with the cost advantaged uses of cloud come in.

There is a discrete thought process and experiential path CIOs go through to reach these conclusions which Forrester has documented in my latest research report, “The Three Stages of Cloud Economics.” Like many maturity models your organization must gain experience in the first stage to understand and start reaping the gains from the latter two which are where savings turn into profits.

In this report we detail how NetFlix and NVoicePay have turned on Stage Three Cloud Economics and are outplaying their competitors as a result. You can do this too, but not if you remain on the sidelines of cloud computing. Sure, the Amazon Web Services outage gave many an enterprise pause about the cloud but Stage Two and Stage Three CIOs were unphased by it and are laughing their way to the bank because they know that this news event will push their Stage One competitors further and further behind them.

You can’t afford to pass up the opportunity cloud computing presents for turning IT from cost center into revenue driver. Get your hands dirty and start evolving your thinking.

Topics: CXO, Banking, Cloud, Enterprise Software

James Staten

About James Staten

James Staten is a Vice President and Principal Analyst at Forrester Research, serving Infrastructure and Operations professionals.

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4 comments
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  • RE: CIOs: At What Stage is Your Thinking on Cloud Economics?

    EnterpriseCIO.com poll found the same thing: cloud is outsourcing...cast your vote.

    http://www.enterprisecioforum.com/en/poll/cloud-computing-just-another-form-outsourcing-or-akin-sourcing-parts
    John Dodge
  • RE: CIOs: At What Stage is Your Thinking on Cloud Economics?

    Our customer base has been saying the same thing. The cloud enablement empowers business to do more, quickly, in order to beat the competition--so revenue enhancement. Additionally, costs can be cut in a variety of ways, but not simply through moving an app to the cloud and "declaring victory" because CapEx has been reduced in one instance. An integrated, holistic approach to cost transformation across a family of applications is more meaningful, and in the end more effective for the enterprise. Generally that takes more thought and planning.

    For more info on the cloud economics discussion, especially for the enterprise, check out a quick video on cost transformation. http://www.youtube.com/watch?v=mHl5n8_JnOc

    Charles Kronauer
    Patni Computer Systems Cloud Practice
    PatniCloud
  • RE: CIOs: At What Stage is Your Thinking on Cloud Economics?

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