In every enterprise’s finance department, there is a nasty little concept known as the “sunk cost.” That’s money spent that can never be recovered. (The concept also comes up in poker games, but that’s not today’s topic.) No one, whether in IT or finance, wants to waste money they’ve already spent. That’s why – and stop me if you’ve heard this before – many people hesitate to cancel a project, even though they suspect that it might not be as successful as originally planned.
It’s why some enterprises end up with shelfware that sucked up a lot of resources and never created a lot of payoff.
It turns out that the biggest benefit of the cloud is side-stepping this money-sucking problem. When IDG Research Services surveyed IT managers, asking what the biggest benefit they’ve derived from cloud computing is, a surprising topic filtered up to the top: scalability. Scalability was cited by 60% of respondents – more than lower capital costs (54%), offloading of IT resources (50%), and far more than reliability (27%) and performance (22%).
What is scalability, really? Within the IT realm, it’s the ability to react quickly to changing business conditions. The cloud is designed for that, and for the concept of the distributed enterprise. You need more processing power for analytics or Black Friday, so you start thinking about infrastructure as a service. You need to set up a new software application quickly, so you set up software as a service. You need to do development quickly, so you contract with a platform-as-a-service provider. No matter where the business need is, the cloud is there.
See what’s missing? The time-consuming, painstaking process of budgeting, procuring, configuring, and managing new systems – a huge part of the sunk costs and lost time that go into new IT projects.
What’s also missing: the time spent agonizing about whether a project should be killed. The financial fundamentals of cloud computing make it easier to say, “This isn’t working. Let’s move on.” It’s also easier to say, “We have a real opportunity here; let’s invest more in it.” The result: new levels of agility.
Think about what that means for an IT department’s reputation. How many times has the CIO been referred to as “the abominable no-man” – that is, saying that projects can’t be done in a particular time frame because of a lack of money or a lack of resources? How many times has someone agonized over that horrible statistic (courtesy of research firm Gartner) that 80% of the budget is “dead money” – money spent for system maintenance but not for innovation or growth. The cloud helps enterprises recoup some – and maybe, someday, all – of that dead money.
That’s why cloud computing is so exciting. It strips away the inertia that plagues so many projects, the desire not to waste money. A distributed enterprise doesn’t waste what it doesn’t spend in the first place. In an increasingly competitive world, the ability to react quickly and to pivot smoothly becomes the new benchmark of success. The enterprise that can see opportunities wherever they may be, seize them, and then either capitalize on them or jettison them, is the one that will thrive.
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