Anatomy of Cloud Finance (Part 1)

On one hand, Cloud is conceptually no different than other IT evolution – reduce costs, improve performance, or increase the quality of these systems; On the other, Cloud introduces paradigm shift – consistent publicly available utility-based computing, DevOps agility, and most strikingly it empowers many start-ups to scale overnight to become a unicorn with global footprints and market historically accessed only by big, giant enterprise.

Commonly not seen as early adopters, Enterprises are not laggards either in Cloud adoption, yet they are undoubtedly the most impactful commercial cloud revenue generator for the Cloud Powerhouse. Why is this aspect so important?

Because with all these clear benefits, there are still Enterprises that have not begun their quest for a pragmatic Cloud strategy, also, more remarkably, many organizations' cloud transformation plans are failing (One IDC report cited as much as 60% transformations failed). We have to understand why. Is that because Cloud remains hyped and wisely misunderstood? Or is it because Enterprises prefer stability (compliance, security and data privacy, you name it, the opposite aspects of innovation) over accelerated digital innovation enabled by Cloud? 

While there are varying factors Enterprises are not placing themselves fully in the Cloud value chain, in this article, I would like to explore how one of the most prevalent myths about the Cloud, that is it always save money, slow down the enterprise Cloud adoption. Cost savings account for the reason many enterprises use the Cloud and may truly be an explicit benefit, but for others, the perils of not understanding and appreciating the financial implications of the Cloud brings to an organization, may well be one of the chief causes of slow take-up of Cloud technology or a deterrent to an under-way Cloud strategy. [To be continued]

This is a three-part article. In the first part, we introduce a perspective that incomplete understanding of the finance side of the Cloud may impede Cloud adoption among Enterprises. In the second article, we will explore Cloud Cost Forecasting and Resource Chargeback in the Enterprise. In the last part, we take a look at Financial Governance for Cloud, and suggesting doing these 3 pieces right and early will help Enterprises smooth the adoption of Cloud.