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Business Cloud Summit: Nucleus Research talks Cloud economics

2nd Dec 2009
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CIOs lost credibility due to the Y2K debacle according to Nucleus Research's Rebecca Wettemann, and so their Cloud Computing plans must have a clear business case. Wettemann explains how.

At the turn of the century, CIOs lost credibility after budgeting for Y2K failures that never happened. They now need to be able to present a clear business case for Cloud investment and projects need to be less risky, and more predictable in their results - particularly as economic uncertainty has created greater pressure to reduce CapEx and an increased focus on payback and risk.

That was the message from Rebecca Wettemann, VP Research of Nucleus Research, at the Business Cloud Summit in London as she emphasised that investment in the Cloud isn’t just about short-term ROI – it’s about investing in the road ahead.

Building the business case for Cloud Computing is not difficult, but requires a structured approach, suggested Wettemann. She advised CIOs to “plan for the three I's: incremental, iteration, and increasing use and benefits”. The three main metrics used to measure the value of technology are return on investment, payback period and total cost of ownership (TCO).
When investing in new technology the primary concern is ROI. While there have been four figure percentage returns from Cloud Computing projects in recent years, it shouldn’t be about the percentage of returns, argued Wettemann, it’s about a structured understanding of what you spend and what you get. Building the business case for Cloud Computing isn’t just about coming up with an ROI number, it’s about understanding and using that business case to maximise returns in the long-run.
TCO looks at the costs but ignores the benefits. While it is an effective way of comparing two similar applications and good for budgeting, it’s a bad way to choose applications and ineffective when it comes to prioritising projects. Wettemann described it as a "one-sided view of Cloud Computing". While initial cost and ongoing TCO may be flat for Cloud apps, over time companies can add incremental value. “It’s not just about the overall budget, but the benefits are likely to grow and evolve over time if you’re focusing on innovating and getting the most from your cloud applications,” Wettemann explained.
From a TCO perspective, Wettemann offered the following tips for building the case for Cloud Computing:
  • Include all costs – even the little ones
  • Take advantage of knowledge transfer
  • Don’t skimp on training
  • Make it a roadmap for successful development.
  • Success checklist
  • MOM – If you can’t explain it to your mother you shouldn’t be doing it
  • Talk to references
  • Get the roadmap
  • Get an SLA with teeth
  • Be a squeaky wheel – be very active in the process.
Wettemann also presented Nucleus’ top 10 predictions for 2010. Among these were:
  • Shortening sales cycle for ISVs
  • Migration of traditional costly apps to the cloud
  • There’s an app for that: Developers will increasingly build multiple components and widgets and keep iterating
  • No one will have two or three year application plans anymore
  • SAP: There’s not an app for that – SAP is not going away but organisations will look to streamline costs in this area
  • Contracts with teeth: Articulated service agreements will be more prevalent and they won’t just focus on security, but will also cover how companies can exit from such agreements
“The key to any software deployment is pitching effective adoption,” argued Wettemann. “Cloud Computing still requires those same efforts in the areas of training, development and deployment to be successful. Human adoption is just as important in a Cloud environment as it is with any other”.

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By korvix1
02nd Dec 2009 11:52

The key to any software deployment is pitching effective adoption

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