How to avoid CIO and CFO clashes over cloud spend

Nearly 60% of organizations overspend their budget on cloud resources, due in part to mismatched IT and finance perceptions, according to a Cloudability report.

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Poor financial management related to cloud costs negatively impacts businesses, according to a Tuesday report from Cloudability.

Some 80% of the 303 IT and finance professionals surveyed across the US and UK said that poor cloud money management slows or halts cloud adoption (53%), cripples innovation (25%), lowers quality of service (38%), leads to sprawl and under-utilization of resources (40%), and increases costs (22%), the report found.

Despite these concerns, 58% of respondents said they overspend their budget on cloud resources—and of those, 69% said they overspend by up to 25% more than budgeted, the report found. Enterprises also are not leveraging cloud provider pricing, according to the report: 63% said they purchase less than 40% of their cloud instances via reservations/commitments.

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Another 57% of professionals surveyed said cost management is a daily worry, but fail to do anything about it for fears of hindering innovation (45%), believing the amount is too small and not worth resolving (50%), or not doing chargeback/showback (65%).

The IT and finance cloud disconnect

Much of the cloud budgeting issues can be traced back to a disconnect between IT and finance, according to the report, which ultimately hurts the business.

The IT department is often unaware of the burden cloud budgeting has on finance, the report found: 51% of finance respondents said they occasional overspend on cloud resources, compared to 37% of IT respondents, who are less aware. Some 68% of finance respondents said they are alerted to overspend only after it's too late, whereas 80% of IT respondents said they are alerted before the overspend takes place, the report found.

Collaboration between IT and finance in a formal reporting capacity remains rare, as only 28% of professionals surveyed said this happens in their organization, the report found.

The CIO and CFO play key roles in any organization, but the two have historically faced challenges working together over budgets and technology investments. Budgets tend to be the largest point of friction, as those are not typically a strength of the CIO, Khalid Kark, US CIO program research leader at Deloitte, told TechRepublic. On top of that, many times CIOs are investing in assets that may not have direct ROI.

However, CIOs can take the following steps to improve their relationship, Matthew Guarini, vice president and research director at Forrester, told TechRepublic:

  • Deliver on foundational elements. CIOs must provide the cost and efficiency up front to CFOs.
  • Demonstrate to the CFO that the CIO is an equal partner in the C-suite, capable of delivering business value. This may involve the CIO rethinking the metrics used to evaluate IT to those that use business outcomes.
  • Show that your IT team can think innovatively, and produce new technologies that deliver stronger outcomes for customers.

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Image: iStockphoto/Przemyslaw Koch

By Alison DeNisco Rayome

Alison DeNisco Rayome is a Senior Editor for TechRepublic. She covers CXO, cybersecurity, and the convergence of tech and the workplace.