Is cloud computing the answer to IT's budgetary problems?

Is cloud computing the answer to IT's budgetary problems?

Summary: I recently had an interesting discussion with the folks of Zenoss. Some of the ideas touched on in that conversation follow.

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TOPICS: Software, CXO, Cloud
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I recently had an interesting discussion with the folks of Zenoss. Some of the ideas touched on in that conversation follow.  This is a reprise of an article published on Zenoss' website. Thanks again, Zenoss, for the interesting discussion.

Many IT organizations have long faced the challenge created by one of the following realities:

  • The IT budget remained the same year-over-year, but IT’s responsibilities grew or,
  • The IT budget was reduced while the responsibilities stayed the same.

As 2012 looms on the horizon, IT executives are struggling with the budgetary process and are trying to find some breathing space in all of the bad news. Even though there are glimmers here and there of an improvement, it is clear that IT's world is never going back to what it was before.

Every obvious cost reduction strategy has already been tried or adopted

The organization has already outsourced research and development to a third party or moved development to a country that offers a lower overall cost structure. While this approach lowered some staff related costs, other issues came to the forefront. Some of them were difficult to resolve. Quality control and timeliness of project deliverables created some challenges. When bugs or workload slowdowns emerged, it was more difficult to get the right people focused on the problem. This approach has worked for some organizations but has not been so successful for others.

Helpdesk and support functions were outsourced to a third party or the support functions were moved to a lower cost environment. As with R&D, this move worked for some and created challenges for others. Response time or language issues created staff satisfaction and productivity issues. When customers became unhappy and couldn’t get the support they wanted, embarrassing comments hit the social media. Although it is not clear, some revenue slowdowns could be attributed to this issue.

Systems, network, application and database operational management functions were outsourced or they were moved to another geographical area. As with R&D, Helpdesk and support functions, this move created some challenges — for the same reasons. If IT applications and workloads were working well, this approach to operational management was observed to lower some costs. When things went wrong, however, staff and customers complained.

Windows and Linux workloads were consolidated on a fewer number of industry standard systems. While this approach did lower overall hardware and maintenance costs, now the organization needs staff that understands virtual machine software, monitoring software for virtual environments and VM orchestration software along with all of the other types of expertise already needed to support day-to-day operations.

To reduce software acquisition costs, the organization moved to adopt some open source software tools. This reduced the overall software license and maintenance costs, but key staff members needed additional training.

The key question now is what can be done in 2012 to address the changing business environment while still living within the IT budget.

Some thoughts about making the 2012 budget work

Although the nebulous phrase “cloud computing” appears scary and unworkable to some IT executives, others are learning that it isn’t an all-or-nothing approach.

Some organizations are taking the following steps to see if new places can be found for cost containment, steps that won’t reduce overall service levels seen by staff members or customers.

  • Examine real estate costs — Can some data centers be consolidated to reduce costs? Can some functions be moved to the data center of a service provider? Either of these steps could reduce overall real state costs.
  • Examine communications costs — Can lower cost communications suppliers be found?
  • Can old applications developed in house years ago be replaced? A number of applications might be replaced by a move to Software as a Service (SaaS) offerings. Collaborative software, planning software, R&D modeling and testing software and a number of other tools might be replaced by service offerings.
  • Examine the systems deployed today — Those supporting day-to-day operations could be maintained. Other systems, systems that support quarter end or year end processing might be outsourced. Infrastructure as a Service (IaaS) offerings from a number of service providers might offer a lower cost way to handle those processing needs.

Summary

IT’s issues for 2012 are complex and there isn’t a single silver bullet offering a tidy solution. A careful examination of what the organization is current doing might yet yield new ways to support today’s operations at a lower overall cost.

Cloud computing, while not a panacea, might be a very useful tool to consider for point problems. Maintaining management control of local, virtual and cloud-based resources, once considered an obstacle can be overcome. So can concerns centering on the topics of security, regulatory compliance and business agility can also be addressed.

Another very important consideration is the fact that each IT function has a complete lifecycle. Projects are based upon a cycle of activities that include gathering requirements, prioritizing the requirements, developing IT-based systems to address those requirement, testing those IT-based systems, putting them into production, and then gathering requirements for the next cycle.  At one point the IT-based systems might be run on-premise and later moved off-premise and execute from a service provider’s facility. At another point, it might be best for the organization to move them back in-house.  Organizations must remember to use tools that make it possible to manage IT-based systems, regardless of whether they execute on-premise or off-premise on physical, virtual or cloud-based systems.

Topics: Software, CXO, Cloud

About

Daniel Kusnetzky, a reformed software engineer and product manager, founded Kusnetzky Group LLC in 2006. He's literally written the book on virtualization and often comments on cloud computing, mobility and systems software. In his spare time, he's also the managing partner of Lux Sonus LLC, an investment firm.

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  • RE: Is cloud computing the answer to IT's bugetary problems?

    Not likely...
    Socratesfoot
  • Since the cloud is another 'type of out-sourcing model...

    it probably won't save any money from an IT budget.

    Consider that, in general, whenever you pay for someone else to do your job, you pay more ... not less. There is the base cost of the function (or service) and then their added profit margin. If you do it in-house, you just pay the base cost. Thus the cloud is unlikely to save anyone who already has an IT staff any money. It might help small businesses which have no-one on-staff with the requisite knowledge, but if you're already running an IT shop then it's only going to cost you more.

    Regards,
    Jon
    JonathonDoe
    • RE: Is cloud computing the answer to IT's bugetary problems?

      @JonathonDoe - as long as the small business reads up on the fine print.

      In which case they really may or may not be better off.

      That's the problem with relying on others. They might not exist to benefit you but to benefit themselves, even at YOUR expense.

      But, that's the system people seem to want.

      Happy Freedom Day.
      HypnoToad72
      • Agreed; the fine print is critical.

        @HypnoToad72 Additionally, no-one I have ever spoken to 'wants' the cloud ... but the sales-weasles and tech-bloggers sure do want to sell it to you.

        Have a happy, healthy, and prosperous new year!

        Regards,
        Jon
        JonathonDoe
    • RE: Is cloud computing the answer to IT's bugetary problems?

      @JonathonDoe

      One of the main points of an external cloud is multi-tenancy which spreads the cost of the resources over a large footprint, has the financial heft to deploy more sophisticated systems and ultimately delivers a service that has greater functionality and is more reliable. No one goes to the cloud for 1:1 system substitution...what's the point?
      justthinking
  • RE: Is cloud computing the answer to IT's bugetary problems?

    "Every obvious cost reduction strategy has already been tried or adopted"

    . . . including the cloud at this point, I'm sure.

    "The organization has already outsourced research and development to a third party . . ."

    Fail.

    "Systems, network, application and database operational management functions were outsourced or they were moved to another geographical area."

    Fail again.

    Sorry, but as much as these are touted, they just plain don't work. You lose customers, you decrease responsiveness, and you increase unemployment. It's lose all the way around.

    How about this?

    Give customers what they want. Quit pretending that outsourcing is the actual answer. Customers are the key. Always have been, always will be.

    Sounds to me like an organization that listens to the latest trends, not one that listens to its customers - and I can tell you, again and again that is always the wrong strategy.
    CobraA1
    • RE: Is cloud computing the answer to IT's bugetary problems?

      @CobraA1 - good points, thank you!<br><br>Of course, if one can persuade the customer of what they think they want...<br><br>And anything sold with the blind guise of "instant big cost savings" may ultimately be in for a shock...<br><br>Never mind skill rot when everyone adopts the same practices... but that only means the workers are "lazy"... but I digress...
      HypnoToad72
    • RE: Is cloud computing the answer to IT's bugetary problems?

      @CobraA1

      Aren't you the customer of the outsourcer? If they "Give customers what they want" don't you win?
      justthinking
      • RE: Is cloud computing the answer to IT's bugetary problems?

        @justthinking

        "Aren't you the customer of the outsourcer?"

        Probably. I'm sure some products I use may be through companies that outsource.

        "If they 'Give customers what they want' don't you win? "

        Yes, but good luck convincing me they've given me what I want. Especially after trying to get support for a defective product.
        CobraA1
  • And the vicious circle continues

    To express this in the form of an old school BASIC application:

    10. Budgets go down because people no longer buy the products or services

    20. As budgets go down, so do products and services being offered, and employees get laid off

    30. This means fewer people have money

    40. Goto 10

    RUN

    The cloud is EXACERBATING the problems. It is fixing nothing. Except, arguably, small businesses' ability to be self-reliant to store their own data and not rely on someone else, whose terms of service might "entitle" them to a royalty-free copy of that data...
    HypnoToad72