Weather predictions and the CIO: enough of Cloud Computing

Last month, I was part of a two day gathering (attended by a little less than 100 CIOs) at a great beach resort in the wonderful locales of Goa. It had stopped raining after 20 days of incessant rain, said the lady at the Reception while welcoming us. The next few days were expected to be cloudy, with some sunshine bringing smiles—the CIOs were looking forward to rewind, relax, and network while exploring some serious thoughts on IT during the day. Weather stayed faithful to the prediction—apart from the occasional showers, the sun played hide and seek with the clouds. I could recognize cirrus, nimbostratus and cumulus.

As the conference progressed, it was evident that every IT services and product company (irrespective of what they had to offer), created some connect with cloud computing. We had power management, data center hosting services, servers, virtualization, software, telecom services and some of the global top five IT companies—all talking about cloud computing as the essence of IT. This herd behavior had resonance with hype seen in the late ‘90s around the Web and Internet. Words from the past echoed, “Any company who does not have a Web strategy will be dead in the next decade”. We all know that most of the companies which had only a Web strategy fell off the cliff into the chasm of oblivion. Predictions and promises of the cloudy set mirror the irrational exuberance that was pervasive in the dotcom era.

Do you know what cloud computing is? A rhetorical question; the speaker did not wait for the answer and began his 30 slide presentation starting with what is virtualization. The next speaker added to the misery with green data center and energy efficiency, while acknowledging that IT contributes to only 2% of the carbon emissions. If everyone did their bit, carbon emissions would come down by 0.4%. And, if all of us moved our entire infrastructure to the cloud, maybe that figure will go up to 0.7%. Save the world, move to the clouds. Over the next day, almost everything (from basic definitions to use case models and in between) was pushed down on the hapless audience, which braved the frontal attack while wistfully looking at the sunny sky outside.

Out of courtesy to the speakers and organizers, CIOs continued to field the inane presentations as well as panel discussions on clouds, clouds, clouds, and some more clouds. A resurgent CIO challenged the vendor’s wisdom (on stage) about treating the audience like kindergarten kids. They were challenged on solutions for the enterprise’s current ailments or help for the CIO’s real life problems; not just talk about irrelevant solutions. CIOs broke into spontaneous applause which would bring a politician pride, but evinced no answers from the speaker—again, like the politician. Sections of the audience wandered away after every break, leaving behind a thinning crowd for subsequent speakers. The sun too teasingly invited captives to come out, as the waves’ murmur tortured the spirit. The CIOs saw merit in discussing cloud formation in the skies—no connection with the conference room’s discussion.

With the ecosystem yet to evolve and create meaningful cloud transition strategies for enterprise users, the IT vendors will do a favor by not increasing the hype and aligning to reality. Privately, most vendors acknowledge the fact that clouds are as yet mature, since the concept is surrounded by a lot of questions that require hard answers like security, geographical data residency, privacy, licensing, and many more. Their organizational compulsions prevent them from being honest in a public forum—lest it be seen as them not toeing the party line. Thus, vendors and consultants will do well to listen to their customers before charging ahead on their favorite subject for now, cloud computing.

As the conference was coming to an end, a tweet escaped the room, “Cloud in the sky, cloud in the room, my mind is cloudy too after listening to so many speakers on cloud computing”. Personally, I enjoyed counting the clouds outside than the utterances inside.

IT Chargeback, gain or pain ?

Every so often, the subject of chargeback raises its head, and challenges (un)conventional wisdom. In the recent past, it has been in the news as a critical requirement for deployment of cloud computing. Many reports have been written on why IT chargeback makes sense—especially in a diversified enterprise, with multiple business units using IT services provided by a corporate function. Almost everyone uses the rationale that chargeback helps IT allocate fair (?) cost to consumers of these services, and thus possibly provides the budgeting framework for KTLO (Keeping the Lights On) or BAU (Business As Usual).

I looked up IT chargeback on Wikipedia, and found the paragraph below as the closest definition:

“IT Cost Transparency is a new category of IT Management software and systems and that enables Enterprise IT organizations to model and track the total cost to deliver and maintain the IT Services they provide to the business. It is increasingly a task of Management accounting. IT Cost Transparency solutions integrate financial information such as labor, software licensing costs, hardware acquisition and depreciation, data center facilities charges, from general ledger systems and combines that with operational data from ticketing, monitoring, asset management, and project portfolio management systems to provide a single, integrated view of IT costs by service, department, GL line item and project. In addition to tracking cost elements, IT Cost Transparency tracks utilization, usage and operational performance metrics in order to provide a measure of value or ROI. Costs, budgets, performance metrics and changes to data points are tracked over time to highlight trends and the impact of changes to underlying cost drivers in order to help managers address the key drivers in escalating IT costs and improve planning.”

A mouthful indeed! Now, I agree that IT cost transparency matters, but chargeback? Having been part of enterprise IT across industries and IT models that included chargeback systems or none at all, my perspective:

1. Chargeback systems are important if IT is a “service provider”, and needs to justify every expense; innovation will have limited scope in this context
2. Chargeback systems will always be challenged by the majority of business units, as being an unfair practice
3. You will be required to reduce costs year-on-year irrespective of volume, and especially when business goes through recessionary cycles
4. Even after automation, the effort required for maintaining and managing data can be humungous. This will have the IT team on a defensive stance, churning out unusual associations of metrics in reports

So why is chargeback coming back again? Does virtualization, cloud service, or the next disruptive technology suddenly turn the tables in favor of chargeback? Does it really matter which specific function or business unit pays for the service, considering that it’s a zero sum game for the enterprise? So why should you bring in the complexity of managing unit costs for transactions, memory, CPU, storage, bandwidth, man hours and licenses?

When IT shops struggle to get incremental budgetary support, the practice of chargeback is typically seen as a vehicle to justify the high cost of KTLO or BAU. This is evident if you consider that with the exception of manpower cost, all other metrics have been on the downward spiral over the last decade. Thus, marginal reductions in these KPIs help in sustenance of inflated budgets, while keeping the attention away from metrics that matter (like contribution to business growth, profitability or customer retention).

CIOs should carefully evaluate why they need to implement IT chargeback mechanisms. After all, if they have aspirations to move to the next level of evolution, they should be enamored by business, and not expend energies counting pennies.