The choice between different formats of cloud computing (IaaS, SaaS mostly) and their comparison to internal IT business service deployment must be based on objective criteria. But this is mostly uncharted territory in IT. Many organizations have difficulties implementing a realistic chargeback solution, and the real cost of business services is often an elusive target. We all agree that IT needs a better form of financial management, even though 80% of organizations will consider it primarily as a means for understanding where to cut costs rather than a strategy to drive a better IT organization.
Financial management will help IT understand better its cost structure in all dimensions, but this is not enough to make an informed choice between a business service internal or external deployment. I think that the problem of which deployment model to choose from requires a new methodology that will get data from financial management. As I often do, I turned to manufacturing to see how they deal with this type of analysis and cost optimization. The starting point is of course an architectural model of the “product”, and this effectively shows how valuable these models are in IT. The two types of analysis, FAST (Function Analysis System Technique) and QFD (Quality Function Deployment), combine into a “Value Analysis Matrix” that lists the customer requirements against the way these requirements are answered by the “product” (or business service) components. Each of these components has a weight (derived from its correlation with the customer requirements) and a cost associated to it. Analyzing several models (for example a SaaS model against an internal deployment) would lead to not only an informed decision but also would open the door to an optimization of the service cost.
I think that such a methodology would complement a financial management product and help IT become more efficient.
I’ve been relatively quiet for a while – for two reasons: (1) I’ve been making the rounds, IBM PCTY in various countries, Forrester analyst days, client meetings, etc., and (2) I’ve been doing some serious research because I’ve decided that it is time to revisit my IT Financial Management report from last year. Why?
First of all because the market is really heating up. Every client conversation these days sooner or later turns to IT Financial Management in general and how to better understand and manage the IT budget specifically. Secondly, I’ve come to the conclusion that there is an adoption s-curve for IT financial management similar to the one for business service management that I published a few years ago. See the Implementing BSM report.
Here is what I am proposing:
And last but by no means least, a few vendors have started to take the next logical step – taking IT Financial Management to the cloud. This is important because Cloud Financial Management offers the critical information that allows businesses to accurately plan, budget and gain cost control over their cloud computing spend. This is a discipline that, we believe, will become essential as cloud computing in its various guises (public, virtual private and private clouds) begins to dominate the business world.
Stay tuned for an update on who’s playing in that market.