Why CIOs and CFOs are learning to love the cloud

Can web 2.0 technologies deliver lower fixed costs and greater financial flexibility for IT?
Written by Natasha Lomas, Contributor

Can web 2.0 technologies deliver lower fixed costs and greater financial flexibility for IT?

Cloud computing could find fans in both the IT team and the finance department as organisations increase their focus on the financial management of IT.

Cloud computing refers to applications which are hosted on and delivered from the internet, and accessed via a web browser. These tend to be sold on a subscription basis: for CIOs the attraction is fewer up-front costs compared with having to buy and support software themselves. And with CFOs looking to reduce fixed costs and increase financial flexibility where possible, such technologies have caught their attention too.

Dave Aron, VP at analyst group Gartner said its 2010 CIO Agenda research shows an "aggressive change" in tech investment priorities with cloud computing and web 2.0 technologies accelerating up the rankings into second and third place, while virtualisation topped the list.

Gartner said 2010 will be a 'transition' year for the IT department - in which economies are moving from recession to recovery but IT budgets remain tight. And while last year the CIO's emphasis was on efficiency, 2010 will see a strong strategic focus on productivity.

"[It's about] doing more with what you've got as opposed to continually driving for less," Aron told silicon.com. "But within that there may be a change in investment mix - so you may be spending less on certain infrastructural services and more on some informational and strategic."

Cloud and web 2.0 have had a fast rise up the rankings since last year's survey, and this is down to two factors, according to Aron. Firstly the relative maturity of the technologies in question - "they're more ready for prime time; people having piloted, tested, seen others do it and believe it's not just marketing hype, it's something real and helpful".

The second big driver is a fallout from the recession: the desire for greater financial agility.

Aron said the recession has caused IT organisations and stakeholders such as CFOs to really scrutinise the financial management of IT.

"One very interesting factor is operational leverage - the proportion of costs that are fixed. And [cloud computing, and web 2.0] technologies really promise quite a lot of financial agility - reducing the proportion of IT costs that are fixed, and also in terms of time and mindshare of the CIO and senior IT management.

"It's not exactly the same as outsourcing but effectively moving certain infrastructure or management responsibilities and capabilities outside to allow them to focus on being more strategic."

Web 2.0 technologies are interesting to CIOs both internally for improving collaboration and also externally for engaging with "broader groups of stakeholders in new and different ways", according to Aron - be it as a means of delivering customer service or even engaging customers in the product development process.

However, even though CIOs might now be convinced about the benefits of the cloud it doesn't mean they're plotting a wholesale services switch overnight.

"This is a statement of intent as opposed to what they're going to spend on cloud computing," says Aron. "But it does say they're pretty sure it's serious and they're going to lay the foundations this year."

"It's serious in terms of their mindshare. They're going to start making it happen, lay the foundations for it, they're sure it is something real and something important, and it will be able to deliver in the next few years for them - that's what this is saying. I don't think most CIOS are ready to wholesale change a lot of their services over to cloud-based," he notes.

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