Unraveling the cloud's impact on financial models

In traditional enterprise settings, IT finances are typically a matter of figuring out how little the company can spend while still getting the job done. Managing the budget is as easy as tracking how much is spent in software and how much each device, which is typically just running a single system, costs to run, and planning capital investments. According to a recent IT Business Edge report, managing finances is much more challenging, but rewarding, in the cloud.

Using the cloud complicates financial planning. When deploying the cloud, capital spending declines, and is replaced by monthly subscription fees for applications and services. Issues are complicated further by virtualization, a technology that splits physical devices into multiple virtual machines. Virtualization fuels the cloud, making its efficient distribution models possible. However, managing device costs and understanding what each system costs is difficult in virtual environments. According to the report, the primary issue plaguing businesses running the cloud is figuring out how to precisely monitor the cloud's impact on their finances.

The report said the challenges associated with managing finances in the cloud should be considered a good thing. Overall, the cloud will help companies reduce spending while improving productivity. As a result, CIOs that are forced into more budget meetings should be excited about the opportunity to collaborate on financial strategies and show off how much technology is helping the business. However, Chris Pick, chief marketing officer for Apptio, told the news source most companies are struggling to closely monitor cloud spending so much that they are unable to take advantage of the complex pricing model. Pick attributes these challenges to a lack of tools that are capable of monitoring cloud spending in enterprise settings.

The Worldwide Executive Council recently completed a survey for Apptio, and found many businesses are not even bothering to track their cloud spending. According to the survey, the majority of respondents plan to increase their investments in cloud computing and virtualization. However, 40 percent of respondents said they either do not track cloud usage levels or recognize they are not able to track usage well.

The IT Business Edge report said IT departments will need to start improving their efforts to closely monitor their financial investments. According to the report, IT departments have not historically been the most diligent book-keepers, but this has to change if companies expect to maintain their success. Current economic conditions are fueling budget cuts and an increased awareness of spending, making accurate financial tracking critical. As a result, the report said many businesses may struggle to deploy private cloud models because executives will favor public clouds when IT departments are unable to adequately explain how much private clouds will cost.

A recent report from Centrom Information Technology said businesses absolutely need to develop strategies to move to the cloud. While the report appreciates that some businesses may have clearly defined and legitimate reasons to not move immediately to the cloud, it said the cloud is an inevitable conclusion and every businesses needs some sort of long-term plan to upgrade to the technology.

"I believe that there will be a point where virtually every business will have some commitment to cloud computing. The differential factor will depend on the ratio of the services that they elect to migrate off premise, and their internal level of technical expertise in managing their cloud services," said Christopher Stark, president and CEO of Cetrom.

Businesses that are still uncertain about the cloud need to remain aware of the technology, the report said, as a solution is bound to arrive that can support their specific needs. Missing out on such advances may leave companies behind their competitors.