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Crafting a cloud business case execs can't resist

For some executives, the cloud is still a frightening proposition. But with a solid business case, even the biggest cloud skeptics become believers.

Despite cloud computing's growth, it's clear many companies still don't know how to drive a cloud project forward. In some cases, businesses are either picking the wrong benefits or meeting too much opposition internally. But, once you get past those two challenges, cloud resistance evaporates.

A successful cloud business case does three things: prove the benefits of cloud, prove the choice of cloud provider and defend against objections. All of these relate to the identification and delivery of cloud benefits, so start there. Cloud computing offers three distinct benefits, and most projects can draw from all of them to build support and momentum.

Cloud's big three: cash, costs and agility

An important benefit to include in your cloud business case is the ability to reduce capital costs and improve cash flow. Most IT projects underutilize previously purchased hardware. But with cloud, organizations only purchase their required computing resources, which is generally more cost-effective than acquiring physical servers, storage and so on.

In addition, cloud computing can be expensed, meaning that the full annual cost is written off against business revenue. Purchased computers must normally be depreciated, so while a company pays the purchase price, it can only deduct a fraction of that cost per year. For small and midsize businesses, this difference creates a critical benefit.

A second benefit of the cloud is reduced support and licensing costs. A server that's been bought must be supported with a maintenance contract. In addition, it needs to be powered and cooled, and skilled resources may be needed to monitor the system. In the cloud, the hardware for infrastructure as a service, platform as a service (PaaS) and software as a service (SaaS), along with some or all of the software in PaaS and SaaS environments, are provided as a service. This means the support comes from the cloud provider. In many cases, the use of cloud services -- particularly SaaS -- will result in significant cost reductions.

The third major cloud benefit is business agility, which affects the time it takes to deliver an IT application to support a new business opportunity, as well as the ability to match computing resources to variable business loads.

In regard to both of these business agility components, elasticity makes the cloud superior to traditional on-premises systems. There is no protracted purchase and installation period, no need to buy computer resources large enough to match your estimated maximum needs, and no need to make secondary purchases when you find you've guessed wrong. Cloud capacity can be ordered with no delay and can be expanded or contracted with usage to avoid overspending.

Many cloud planners make the mistake of running first to the people who sign off on project financials. But the best way to start a cloud approval process is to begin with the IT department and the line departments affected by the application being run. That means finding out whose budget the costs will come from. For this group, you'll need to generate a total cost of ownership (TCO) chart. This will show the cost of acquiring, sustaining and supporting the cloud and the purchased IT alternative for a fixed period -- usually either three or five years depending on how long on-premises computers are kept in your company.

The TCO chart should show expected savings from using the cloud. This means your opening position with the line departments is that the cloud will cost them less. The TCO will rely primarily on the capital cost savings and the support and operational savings; don't introduce agility benefits here because they are more difficult to quantify.

Still, don't ignore agility entirely. The best way to introduce this characteristic is to ask your line departments how they respond to a sudden expansion or reduction in business, and how long it would take to make the necessary changes. By explaining how the cloud adapts to business changes, you can validate a powerful benefit despite the fact that it's difficult to quantify.

Manage objections to your cloud business case

After IT and line departments are on board with a cloud migration, it's time to get financial approval. This also starts with TCO, but CFOs and similar managers will want a financial comparison of five-year cash flow with the cloud versus purchased IT resources.

By matching deductions with spending, the cloud will almost always improve cash flow. Buying computers, however, won't do that.

Objection management is the last issue, and one you shouldn't undertake until you've addressed the benefits. The most common objection to the cloud is, "Will it really save me money?" If you've done your TCO and cash-flow analysis properly, you should be able to eliminate that skepticism.

Other objections will center on:

  • Cloud costs rising over time while computer costs won't
  • Cloud security
  • Auditing and compliance requirements not being met in the cloud

All of these can be answered.

Cloud service providers have steadily reduced their prices. In contrast, every TCO element in private computing -- with the exception of computer prices -- gets more expensive over time. The cloud is a good bet for stabilizing costs.

On the security and compliance side, cloud computing doesn't really raise risks that company Internet use hasn't already raised. Organizations can apply security and compliance practices to cloud resources. It's just a matter of learning how the cloud provider best supports encryption, physical data security and so on.

You know the risks from the Internet. You also know the security practices that are used within your current data center. Apply those practices to the cloud provider or cloud service you've selected. Your cloud provider will be able to help with case studies and tools to create the needed level of cloud security.

Most resistance to the cloud comes from a failure to communicate benefits and address risks. Do both, in the right order, and you should be able to sail through the review process and be on your way to a successful cloud project.

About the author:
Tom Nolle is president of CIMI Corp., a strategic consulting firm specializing in telecommunications and data communications since 1982.

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