For thousands of IT Finance Managers and Chief Information Officers (CIOs), fall is the time when final budgeting negotiations are taking place. No one looks forward to the annual ritual of arm wrestling to get the money needed to operate for the next 12 months. It is a time consuming process, sometimes rewarding, but mostly frustrating. There are limited dollars and so many good ideas that require funding.
Most of you have developed reliable processes to forecast the biggest expense lines in your budget. Downloads from your HR systems support your salary estimates. Contract management tools handle your leases and maintenance lines. Asset tracking systems detail your depreciation and possibly licenses. Making those investments in the right tools and maintaining the data accuracy within each tool gives you the ability to defend your projections. If you can forecast the cost of people, hardware, and software, you have most of your budget covered.
However, IT spending is changing. I’m betting you have an expense line with public cloud dollars that is becoming very difficult to predict. For most, this is an expense item that is highly variable and rapidly growing. Cloud expenditures usually end up in a contract services line somewhere because they are classified as operating expense. You do your best to estimate and defend the spending and hope any deviation will not be too large by end of year.
A recent Goldman Sachs study showed cloud spending, as a percentage of IT spending, was about 5% in 2014 and expected to reach 11% by 2018. Think about the implications of this figure. How are you going to manage a highly variable expense line which makes up over 10% of your annual spending? The charges seem to come from everywhere: shadow IT, self-service provisioning, and SaaS (News - Alert) applications. No other type of spending is so user driven and so outside your control.
No wonder 57% of respondents to a survey at Microsoft Ignite said improved forecasting was the most important use of cloud usage data.
Forecasting requires history. When you have invoices and usage data from several vendors saved in a series of spreadsheets, you can’t really get a clear view of what is happening overall. You need a consolidated view of all of your spend across all of your providers. After all, there is no vendor lock-in in the cloud world – workloads can be shifted from one provider to another without penalties and without your knowledge.
It is imperative that you identify who is using your IT resources and why. Metadata in the cloud usage records is key to slicing and dicing the usage into meaningful business intelligence. An automated method of interpreting that metadata consistently is required. You must be able to have a conversation with the business owners (LOBs) that are using public cloud resources and learn what they are planning for the next year. Demand does not come from within IT, it comes from those who use the services.
If you haven’t already acquired a solution to manage hybrid cloud costs and resources, you need to start looking now. If you have a tool that handles a single vendor, consider how long that tool will be adequate to support your enterprise as more providers are added to the mix.
Why juggle your data sources one-by-one when you have solution options which will aggregate all of your providers into one database and includes business analytics to make the most of your data? Reduce your forecasting pain and increase the credibility of your funding requests by using dashboards with visuals that tell the story better than any trend line.
So this fall, be better prepared for the annual budget negotiations with data-driven insights that support your real business needs.
About the Author
Penny Collen is the Financial Solutions Architect for Cloud Cruiser, Inc. Her work in operations and development provides a foundation for business process analysis across a broad spectrum of disciplines, including asset management, service pricing, software capitalization and activity-based cost models for hybrid IT. Ms. Collen is sought as a trusted advisor on IT financial processes and shares her knowledge through Web lectures, seminars, workshops, interviews, blogs and articles.
Ms. Collen holds a BS in Business Administration from the University of Nebraska Omaha; an MBA from Creighton University. The IT Financial Management Association recently named her “Educator of the Decade.
Edited by Kyle Piscioniere