Like any disruptive technology, cloud computing promises to help businesses do things better, faster and cheaper. However, I am convinced that when presented the choice of doing things better and faster on the same IT budget versus doing things the same with a reduced IT budget, competitive growing businesses consistently choose time over money.
The representation of lower TCO as a cost savings is misleading,
because virtually every cloud business case built on lower TCO
is really a time savings masquerading as a cost savings.
This opinion is based entirely on my own experiences, but recent surveys by Sandhill.com and Banking and Technology depict a very consistent, fact-based picture of when and why IT professionals choose the cloud. Let’s face it. CIO’s don’t win awards for saving money. CIO’s win the praise of their companies, their colleagues and their user communities when they deliver better capabilities faster than the competition. It is time savings, not cost savings that is driving cloud adoption.
Speed Fuels Competitive Advantage
Technology has become essential to virtually every business operation. Entering new markets, launching new products and offering new services invariably result in new IT requirements. And, it is often the case that these new requirements sit squarely on the the critical path to getting things done. The classic SaaS CRM adoption tale is the new VP of Sales with an unforgiving quota who signs up for a SaaS CRM even though it goes against the corporate IT standard, because it is the quickest and surest route to business success. Fast moving IT departments are competitive assets to their companies. Slow moving IT departments become liabilities.
On-Demand Increases ROI
The on-demand cloud combination of rapid, elastic deployment and pay-as-you-go pricing can add up to superior ROI, even when total out of pocket expenditure of a cloud service significantly exceeds that of an on-premise software alternative. Time to value shrinks and CAPEX becomes OPEX as big up-front investments are spread out over time into modest renewal payments. Time leads; money follows.
Flexibility Drives Efficiency
The cloud versus on-premise software decision is not unlike that of buying versus renting an automobile. If the vehicle is not critical to your business, then cost effectiveness will be your primary concern and your best bet is purchase combined with a minimum amount of maintenance. If the vehicle is a race car, again your best bet is purchase combined with heavy customization and dedicated pit crew. But if the vehicle is a critical, everyday workhorse to your business, then reliability becomes your chief concern. You will want to keep it in like-new condition to ensure smooth operations. In this scenario, rental becomes a compelling alternative to purchase. The rental company keeps the car in top condition. You can easily upgrade to the latest model. You can adjust your motor pool to match demand. And, you don’t have to hire a mechanic.
More Time Means More Opportunity
Economists like to use the term “opportunity cost” to define what could have been had we used our time more wisely, revenue and savings missed. But the real culprit behind opportunity cost is time, or rather not enough of it. Every IT department has a seemingly inexhaustible backlog of valuable projects. The challenge is never doing less with less, but doing more with less. Offloading IT workloads to the cloud increases the leverage of IT workers by freeing up time to tackle valuable projects that would otherwise never make it off the backlog.
Saving Money is Really Saving Time Too
SaaS and cloud computing vendors claim their solutions offer dramatically lower total cost of ownership (TCO) when compared to on-premise software. However, the representation of lower TCO as a cost savings is misleading, because virtually every cloud business case built on lower TCO is really a time savings masquerading as a cost savings. The majority of the TCO savings in every cloud vs. on-premise analysis comes from the reduced IT staff required for deployment, training, administration, maintenance, and upgrades. However, it is the rare cloud IT project that actually realizes these cost savings by following up the launch party with a layoff. Staff is universally reassigned to the next project on the backlog, thus revealing the true business motivation to be the need to update the technology and free up staff: doing more better and faster, not less cheaper.