An interesting breakfast briefing run by the Bathwick Group yesterday morning looking at the subject of Cloud Computing.
The topic is suitably amorphous in definition, but much of the conversation focused on Software as a Service (interestingly, few seemed that interested in the utility computing services like Amazon's EC2). One thread that allowed me to get some things to click into place was the impact that commodity computing might have on the way in which IT costs are attributed to consuming departments.
A number of years ago, when I was working at BBC Worldwide, I was involved in the implementation of an activity-based costing (ABC) model for attributing costs to the departments that consumed the services that we provided.
Never has an exercise resulted in so many people hating an IT department. Looking back, there were a few problems: people don't like being told they have to pay for things they previously got “for free”; people don't like to be told to pay for things they haven't requested; and people don't like to pay for things through internal cost charging.
Not only did we take all this flak, but most of it was by proxy for other internal services (particularly finance), where the costs of running things like the ERP system were being passed through as a technology cost.
SaaS (in particular) does seem to offer a way to break some of these blocks, and provide businesses with a greater level of transparency as to the costs of doing business. Whilst introduction of SaaS services in the beginning might highlight costs that were invisible before, they are generally going to be “real” (ie actual money leaving the company) rather than figments of the imagination of a management accountant, shifting pots of overhead from one cost centre to another.
If procured well, SaaS costs are also going to be truly scaleable. One of the biggest headaches associated with the ABC model was that whilst it made IT costs much more visible, it didn't leave business managers with any choices (“Hmm. That networky stuff looks expensive. I'll have a bit less of it, please”… “Erm, you can't.”). Turning off users here and there makes no difference to the overall cost of running a service in the 'on premise' world, but it does in a per user per year model.
All of this scaleability and transparency also gives me hope that one day I will also find the promised land of a CFO taking the hit of (SaaS) ERP costs on the chin and being honest to the business about how much the finance services he or she provides actually cost to run, rather than passing the buck to the CIO…
mmitII 