In part one of this post I talked about the lack of insight that currently exists over ROI for users of cloud computing. I actually contend that this is an underlying problem for IT generally and not just for cloud. IT departments have traditionally been seen as a cost center and as such, the most that has usually happened is that IT costs are amortized across the different business units. true there is a small degree of charge back and cost allocation that occurs with IT expenditure, but it is fairly rudimentary and disconnected from the main systems of record.
It’s fair to say that much attention is being given to accurately providing organizations with a more clear picture of their cloud expenditure. Companies like Cloudability (but, as always, see my disclosure) are doing a great job of tying together all the disparate spend within an organization and reporting on it so IT departments can get an accurate sense of how much is being spent, and where. But recently I’ve begun to think about the next natural progression of this – the need to tie these spend insights, to some kind of financial revenue figure.
The problem we have is that within an organization there are two sides of the house – IT and finance, that are largely disconnected. Tools like Cloudability are well integrated with other IT systems – be they management, actually IT products or monitoring functions. But they tend to be wholly disconnected form the financial systems of record – the ERP and core accounting tools. True finance eventually gets the IT bills, but generally in a converged view that doesn’t give them the ability to derive any real cause and effect insights from them.
So. What does my ideal system look like?
I’d love to see a situation where IT cost tools are integrated with financial tools, but in a granular way. I note that Cloudability recently introduced what they’re calling their “tribes” feature – functionality that allows different spend to be aggregated to a particular project or business unit. I’d like to see this sort of functionality tied to reporting codes within the ERP.
What I envisage is a day where IT and finance can sit down and readily see the actual costs incurred during any particular project, but also see the revenue that the project generated. This will then deliver a completely accurate ROI measurement that can be analyzed alongside the non-financial metrics.
It seems to me that we are in a very early stage of the cloud when an organization can make broad brush comments about cloud unlocking the potential to try new things, get formerly impossible projects off the ground or focus on core business. These are all accurate and highly beneficial outcomes of using the cloud, and ones which I articulate often. But as the cloud matures, and comes into the orbit of more traditional, empirically-driven organizations, we need to find much more accurate and finite measure of the benefits that cloud brings. In striving to either focus on TCO, or articulate some ephemeral agility benefits, we do little to encourage the creation of these more concrete metrics.