Posts Tagged Cloud Computing
Cloud Computing – a Capital Idea?
Cloud computing boosters use the selling point that establishing large amounts of storage or computing requires no “up-front capital investment”. Pleading before the gods of capital within corporations has been a bane for IT and business operations functions forever. All those appropriation request forms and cash flow analyses – not much fun when you want the servers installed and the software loaded.
What has always been interesting to me is that more thought, analysis, decision-making and accountability goes in to managing the capital investment portfolio than you often see in managing operating expenses. The irony here is that “op-ex” is very often many multiples larger than the “cap-ex” spend in any given fiscal period. If a $400 million company (in terms of revenue) has an operating profit of 20%, then the company managers spent $320 million with likely much less oversight than the $15 million that they might have spent on projects.
At the end of the day, there is no free lunch. Just like leasing became the way to ensure “technology refresh” every 3 years, let’s make sure that cloud computing and all something-as-a-service offerings don’t wind up costing your company more or that the standards of decision-making are usurped by being able to fly more stuff under the financial controls radar.
The saying “you can pay me now or you can pay me later” became a “tag” line in old oil filter commercials where the idea was that you might pay more now for a premium filter but you would be avoiding the cost of replacing the entire engine later. Of course, the assumption is that you would own the car long enough for this to pay off. This was in the era when the majority of people traded-in and bought new cars in 3 or 4 year cycles. Not long after, 3 year leases perpetuated the cycle.
The reality, then, was that most people wound up paying now and they got to do it over and over because later never came!
Another myth that is related is the 3,000 mile oil change. Again, another marketing bonanza because it got people to pay to replace their oil and filters twice as often as the auto manufacturers recommend in the owner manuals.
So back to op-ex and cap-ex and buying infrastructure/software/platforms as-a-service. If I take the op-ex view, it is almost always an incremental view as in year-over-year budgets and the dearth of zero-base reviews. If I take the cap-ex view, everything is an investment and is evaluated as cash-flows over a defined “economic life”. This takes rigor and commitment and the potential for more eyes to see and more ears to hear.
It is not a bad thing to have the option of paying for something as a service. However, it is a bad thing if the selling point is that you get to relieve yourself of the burden of evaluating and justifying the all-in costs of doing it one way or another.
Remember, you can pay now or pay later. Some times, it is nice to get to pay later.
What do you think. Please leave a comment.
©2009 George M. Tomko All Rights Reserved
Management Issues in the Cloud
As an advisor to CIOs and a well-traveled CIO myself, I have come to appreciate the disruptive nature of technology innovation and the valid (and sometimes painful) introspection that it engenders.
Most of the time it comes down to being the bridge between “geek-ness” and sound business management practice. God bless our technical architects but, if it was up to them, we would be running things with a goal of technology exploration first.
Of course, we have a business to run and customers to serve. The CIO has to provide the ‘glue’ to such fiduciary necessities like internal controls, SOX, regulatory compliance, process management, security, business continuity, privacy, cost management and operational integrity.
Such things are not popular topics when talking about exciting new developments in cloud computing, social media, etc. Eyes roll when process frameworks like ITIL, CoBIT, CMMI, etc are brought into the conversation. So, among the plethora of content posted daily about cloud computing technology and enticing offers to get into new service offerings, it was encouraging to see some content about some basic management facts and considerations about the cloud.
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Do CIOs have their heads in the clouds?
By George M. Tomko
Without a doubt, conference agendas are brimming with cloud computing boot camps, breakout sessions, keynote addresses, expo booths. On top of this are the podcasts, webinars, whitepapers, e-mails, tweets, mailers, brochures and tee shirts touting the ‘new’ technologies collectively known as the cloud.
Is there a bottom-line here, anywhere? Not yet, maybe never. And, besides, if everyone is looking ‘up’ at the clouds, so to speak, there is no ‘bottom-line’ to look at.
There once was a day when almost all computing solutions were proprietary. If you were running applications and storing data on vendor A’s mainframe, you were also using vendor A’s specific network protocols and devices, software, etc. Occasionally, vendor B would have a compatible terminal or tape drive that you could connect. What an era that was for suppliers. Customer lock-in was a great thing.
Of course, computers and related hardware, software and services cost a mint. You might spend $5 million for the latest model of mainframe back in 1980. Then there were datacenters and round-the clock support staff. Massive.
It didn’t take long for people to see that having 3 terminals on your desk, one for each different suppliers system, was not only costly, but annoying.
Are we headed for the 2010 edition of 1980? Could this be, as Yogi Berra has so aptly put it, “déjà vu all over again”?
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A Cloud-y Day for CIOs
By George M. Tomko
Cloud computing. What a concept. Most people can remember days as a child, laying in the grass, looking up at the sky and imagining the shapes formed by clouds as they moved slowly by. There was something very majestic and beautiful, yet powerful. Some clouds were very thin and high in the sky and others were puffy and so low that you felt like you could touch them if you reached high enough.
Clouds usually signaled change. Black clouds brought storms. Overcast and cloudy days brought dreariness and sadness. Overall, a bright, clear day was almost always held in higher regard than cloudy days.
S0, as I ponder this notion of “cloud” computing, I have to say that it brings mixed feelings. Like my childhood days, I can imagine the cloud shapes and what they might represent. But, at the end, they morph into something else and disperse. But most of all, they take a clear sunny day and mess it all up.
I have been in this business long enough to know that clouds, as metaphors, have been plenty useful in talking about IT concepts — but mostly networks. It was the closest thing to a “black box” as there ever has been to enable someone to quickly get to the point that when you connect up to the cloud, your data comes out as it passes through some route to get to its destination. It did not mattter what the route was — the cloud served as the curtain, behind which everything got figured out just fine — not to worry.
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Take your Vacation-The Future will still be there when you get back!
I cannot believe it. Tomorrow morning, I am back to the ‘real’ world. You see, I have just returned from 16 days of vacation. I did not do a thing related to work, other than tweet some from my mobile. In effect, I put my brain in a jar and let it cool down. There is so much to occupy its time that burn-out or, in my case, flame-out, is a very real possibility.
As I began packing for this week’s business travel, I thought back to an article that I wrote in CIO magazine ‘way’ back in 2002 (available here). It had several themes, but the primary reason for writing it was that I actually accomplished a three-week vacation and felt that the world needed to know about it. By this time, I was less than 4 years as a CIO. However, in that time, I had been through enough global system and infrastructure deployments to fill several careers.
But, that was becoming something I could do in my sleep. 2002 was a time of the coming of age of the business savvy CIO. It was the only way that a CIO would be able to survive-at least those who considered themselves “strategic”. At that time, the average tenure of a CIO was something like 18 months and that wasn’t good for anybody.
At the end of the day, the true revelation about actually taking a three week vacation was more about the fact that I could let go of the techie stuff. I had built a high potential group of managers that were running things just fine. When I got back from that vacation, I was all fired up about diving into the business issues and strategic imperatives.
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