As more companies look to drive digital transformation initiatives, it’s not surprising that cloud-based technologies and software-as-a-service (SaaS) have become so popular. Different analyst firms are predicting up to 100% growth rates for SaaS spend and up to 300% on infrastructure-as-a-service (Iaas) over the next three years. For the functional business leaders who are driving these digital initiatives, cloud and SaaS services provide a lot of benefits, including easy setup and inexpensive running costs. They’re also paid for out of operating expenses without needing approval for capital investments. Most importantly, business and functional leaders see an opportunity to get things done – like bringing new products to market – without needing to gain permission from or rely on the IT department or traditional IT infrastructure.
All of these benefits make SaaS, IaaS and PaaS good business sense. However, after the initial honeymoon period where investments accelerate unchecked and no one really knows how to scrutinize or present the tangible results of cloud spend, CIOs and other business leaders are now beginning to experience the brunt of one of the major downsides associated with unfettered access to cloud technologies: a phenomenon known as Cloud Shock.
Cloud Shock is the moment when a budget holder – or in the worst-case scenario, the CFO – realizes that the true cost of cloud spend is not only much higher than forecasted but can’t easily be explained or justified.
This story is becoming more common as companies deal with the results of under-budgeted and under-governed cloud use. In many cases, this is not even “IT spend;” it is spend on technology by business units and business leaders outside of IT.
However, unfortunately for the CIO and their software asset managers, the CFO still usually looks to IT to explain where money is being spent on technology, for what purpose and what benefit. This puts CIOs and their teams in an incredibly difficult position if they don’t have complete visibility of the technology consumption across the organization, regardless of who is controlling the spend and who is actually using the technology.
As the move to the cloud becomes more widely adopted, CIOs that want to avoid their titles meaning “Career Is Over” need to put plans into place to track, manage and explain cloud spend. The goal isn’t to limit adoption of good and appropriate technologies, but to avoid risks and unnecessary over-spending. After all, most organizations expect to spend more on technology to support their digital transformation initiatives; but few can afford to over-spend on redundant or inappropriate technologies.
Facing the Consequences
There’s no definitive timescale for the onset of cloud shock; it could happen in a single quarter or build over a few years. But when the shock hits, it is normal for business managers to immediately head to the IT department to look for answers and help to reconcile their cloud bills. Without proper visibility and management steps in place, it is extremely hard to tell exactly from where (or from who) the costs resulted. Even though this type of technology spending power is spread throughout the company, the issue is left with the IT and software asset management (SAM) groups to handle.
Before the CFO or other business managers come knocking, there are a few steps IT leaders can take to prevent cloud shock before learning that the company’s cloud spending has spiraled out of control.
Taking Control to Avoid Cloud Shock
Whether you call it Shadow, Ghost or Rogue IT, the fact is that this major headache for IT teams is now business as usual for most organizations. Cloud and mobile technology delivery have enabled vendors and service providers around the world to adopt a new sales model often mockingly referred to as ABIT.
ABIT stands for “Anyone But IT” and it describes how SaaS, IaaS and mobile technology vendors have increasingly come to recognize that it is easier and faster to sell to the business, rather than IT stakeholders. In the vendors’ view, IT asks too many questions, does too much due diligence and actually considers some of the longer-term knock-on effects of technology purchasing decisions. All of which slows down the deal!
The net result of this “collusion” between the business and the technology vendors – effectively cutting IT out of the process – is that many business units ultimately end up “spending in the blind,” which drives up cloud costs for the whole company.
A Software Asset Management (SAM) platform with cloud capabilities provides full visibility of on-premises technologies along with cloud and SaaS implementations to provide a single view of the complete Hybrid IT infrastructure, and the applications being deployed and consumed within the organization.
To avoid Cloud Shock, IT leaders need to:
1. Know what cloud technologies are being consumed
To avoid or address cloud shock, the first thing is knowing what cloud technologies and services are being consumed throughout the entire company, regardless of who set them up or is currently paying for them. Getting this baseline audit, and managing it go-forward is fundamental to keeping cloud shock at bay. Look for a SAM solution that automates the discovery of both on-prem software and SaaS across the organization. You’ll likely discover more than one zombie virtual machine hanging around.
2. Manage subscriptions
Once companies understand what technologies and services are being used, pull subscription data from the most-used SaaS applications. Understand what subscriptions have been provisioned, to whom and at what level. After going through current subscriptions, companies can begin to eliminate applications that are not actively used or do not have correct licensing issues (e.g., too many users, not enough users, etc.) Effective subscription management for SaaS apps can yield significant cost recoveries for companies, never mind the added benefit of avoiding non-compliance fees. Save time and administrative burden with a SAM solution that can automate entitlements with the most important, most used cloud vendors like Office 365, Salesforce, Google G, Dropbox and Cisco Webex.
3. Create a governance process for creating Cloud/SaaS instances
Develop governance rules and regulations to ensure the business understands the process for acquiring technology and budget approvals for cloud investments. Management dashboards can provide accurate budgeting, forecasting and cost allocation – protecting the enterprise against overspend and compliance risks while embracing the opportunities offered by business transformation initiatives such as cloud-first strategies, DevOps and business unit IT.
It’s not just about Cost
There’s another big reason for IT leaders to want a clear line of sight to cloud use – and that’s security and compliance (a broader topic that could fill a book). The cloud has enabled data to move off company premises – housed with outside storage and application providers. The cloud enables more efficient access to data for employees, likely from mobile and personal devices. Though this flexibility helps drive productivity, it creates a hurdle for IT teams when it comes to ensuring a secure network. Security and compliance are big hairy topics, but it’s not hard to see that taking inventory of the cloud technologies and policing how and where data is shared is critical.
While most organizations accept that the need to fund digital transformation initiatives will require more money to invest in technology, few can afford to over pay for cloud services that don’t drive business value – or take on the risk of unmanaged access to data. By monitoring and managing all forms of cloud spend and use, the IT and asset management teams can deliver new values to CFOs and lines of business managers, helping avoid costs and giving decision makers the confidence that they are investing wisely and not opening the business up to unnecessary risks.
Act today: become a Technology Guardian
While cloud shock is an increasingly-common phenomenon, it is possible that it hasn’t hit your organization – or perhaps the right people in your organization – yet. That’s not a good excuse to kick back and delay. Instead, pre-empting the onset of cloud shock is a great way for IT leaders and their teams to proactively collate and share insight about the organization’s use of (and spend on) technology before questions are asked (or, indeed to prompt questions to be asked, which could help cement the need for IT input in important technology decisions).
One of the best ways for CIOs to avoid having their job title come to mean “Career Is Over” is to reestablish the value of the IT function to the organization. Not to demand control of all technology spend and consumption, but to become the Technology Guardians that provide insight to the business and ensure that every dollar spent on technology is driving business benefit.
