Data Centers

Think the cloud will cut your IT costs? Not so fast, say CIOs

Contrary to the sales pitch, cloud computing does not guarantee an easy and painless way for the IT department to cut costs.

Listen to the hype about cloud computing and you'd think it provides a quick fix for the CIO who needs to cut costs in a hurry.

And while its on-demand model offers the promise of reduced spend and freeing the IT team from the drudgery of looking after physical infrastructure, CIOs remain wary about getting carried away chasing savings in the cloud. As Kevin O'Connor, CIO for the technologies division of stock exchange operator NYSE Euronext said at the recent CIO Event, the risk is that cloud computing turns CIOs into a ‘hammer mechanic'. As he explained:
"A hammer mechanic is a very dangerous guy, he's a guy that comes to fix a car and the only tool he's got is a hammer, so everything looks like a nail. We need to make sure we don't approach cloud computing as if it is a hammer and can be applied to everything."
He added:
"The problem with cloud computing is that some people are using it as an abrogation of responsibility. They're saying 'Infrastructure is all the same, we will stick it all in the cloud and it will come right'."
Any decision to buy cloud services should be an end, rather than a starting point, resulting from an analysis of how cloud services fit an organisation's strategic goals, rather than born out of a desperate grab to save money. If CIOs take more of a strategic view about how cloud services could benefit their organisation there is scope to free up tech teams to concentrate on adding value to an organisation, according to Ian Alderton, CIO for the Royal Bank of Scotland. "There's definitely opportunities in some of those vertical in-cloud offerings, such as CRM or core banking systems," he said. "For example a core banking system is not a differentiator, it's a commodity, and I just want to put it in a black box in a cloud and provision that. I can then focus on those areas where I can differentiate - such as time to market, cost and customer service." Indeed where organisations have shifted to using cloud services to meet everyday corporate needs, such as CRM, their experience has not always been one of reduced costs. The cloud in itself is not necessarily a route to quick savings, but just like outsourcing before it, is just another tool for the CIO to use to strike a better balance between delivery and cost, when it is appropriate for the organisation. Assuming you can use the cloud simply to slash costs is likely to leave you disappointed. As NYSE's O'Connor puts it: "If you think that cloud will save you money out of the box, you will get burnt".


Nick Heath is chief reporter for TechRepublic. He writes about the technology that IT decision makers need to know about, and the latest happenings in the European tech scene.

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