I agree, Dick Benton, a partnership with Finance is critical to private cloud success
Dick Benton recently published a two-part article on “Calculating Cloud ROI” in which he states that the ability to calculate cloud ROI is a necessity and calls out a few key strategies for success as a private cloud provider. Reading it caused me to daydream (is it possible to have a “day-mare”?) about some of our experiences related to budgeting and demonstration of value to our stakeholders. Many of his suggestions were well aligned with my experiences and some lessons we learned “the hard way.”
We learned that applying a few basic strategies can help form a partnership with the consumers you serve as well as significantly reduce the stress, tension, and the sometimes unhealthy competition that often exists between private cloud providers and their consumers.
#1: State gains in business terms
In a previous article, I referred to some simple strategies that included becoming a partner with our business consumer colleagues. This can happen much more rapidly when we learn to speak their language more fluently. That is not necessarily as obvious and simple as we believe it will be. We need to evolve from technical and invoice-based language, to language that encompasses additional items such as strategic or other value delivered.
For example, which of the following is more likely to get a senior executive’s attention: “We just upgraded our sort and search tool and saved 20% on maintenance for a $20K expense reduction”; or “We were able to drive online orders up by 20% and increase revenue from online sales by reducing the time it takes shoppers to find items from 2 minutes to 1 second or less, while reducing the cost of the software that does it by 20%.” Too often we choose the former format, which, ironically, might even result in a budget reduction of $20K.
#2: Finance is your new best friend
Benton suggests that if the team does not have a financial analyst “you may need to make friends with someone in Finance.” I agree completely, though I would argue that a partnership with the Finance team is essential even when you are fortunate enough to have a financial analyst on your team. Back when I was driving CA Technologies private cloud program the partnership with Finance was a key to our success. Without it, there were a number of times our service could have been discontinued, even though it is now recognized as a key strategic advantage to our business.
The Finance team knows more about the direction of the business than almost any other team. Our Finance colleagues were often able to help us identify new opportunities to provide strategic value, while helping us to better understand business priorities. They helped make our team much more nimble, responsive, and effective by helping us to shift focus to those things that were of most value to the business at a given point in time. They also helped ensure our communication to stakeholders and senior executives was stated effectively and focused on things that mattered most to them. In return, we were able to help achieve our mutual targets by applying resources more effectively.
#3: Be proactive with stakeholders
Almost any discussion of successful transformational change management or service strategy would (hopefully) mention the importance of communication with key stakeholders. Though I have participated in and lead a number of major transformational initiatives I do not believe that stakeholder communication was ever as critical as it was in my role as internal cloud provider.
Being transparent and open with stakeholders is, as a matter of practice and honor, always critical. What surprised me was the frequency with which we had to be in front of our stakeholders and the number of sources of information we had to be prepared to discuss. Cloud computing is very exciting and many, many people are interested in and excited about it. For us, that meant 13,000 very smart people with ideas about how services can be leveraged, how things are best done, and how much less expensively they could be done were they done differently. We were bombarded with requests on a daily basis for information at what seemed like an exponentially increasing rate.
In reality there were a number of basic items that could be used to satisfy the majority of requests, many of which Benton documents in his article. We found that we could address most of these with two categories of data/information: The service we delivered (SLAs, ITIL process…) and the value we delivered (cost savings/ROI, reduced time to market, strategic value delivered…). The key was, of course, delivering that information before executives and stakeholders asked for it, and leveraging their trusted advisors to ensure it was in a format they could easily consume.
#4: Think beyond “cost only”
This is an area where I would very much appreciate hearing your opinions and comments from your personal experience, as I have been engaged in a debate about it nearly daily for weeks, perhaps months.
My experience is that while cost or expense reduction is (almost) always a factor in decisions relating to the funding of a private or public cloud service, it is not always the only, or most critical, factor. To be clear, I am not suggesting that cost should not be a consideration. I am not aware of a single business that is in possession of a leprechaun or a rainbow, so I would conclude there is also no endless pot of gold at their disposal. I am simply of the mind that given the evolution of our industry and the state of the economy cost control is expected. It is table stakes, and expected to be included in every business case. But it’s not always as simple as “lower the cost.”
Take, for example, the hypothetical statement I made above: upgrading the search and sort capability would increase online orders by 20%. If that drove revenue up by $1 million, would it be worth an increase in expenditure of $20K? How about $100K? And there are often other factors such as security or responsiveness. Vaughan Merlyn referred to several in a recent article. So it’s not always only cost, though it is always about keeping costs to a minimum. Failing to consider factors beyond cost may result in lost opportunity.
Regardless of your response to the previous section, as Benton suggests, it all begins with measurement. Without good measurement, how can we decide whether 15 cents per hour is a good rate for a service? Without clear measurement, how can we demonstrate the level of services we deliver or their value to our customers?
So, is it all about cost? Which measures do you feel are most critical or valuable to cloud consumers?
Originally Published: March 04, 2011