Getting funding models fit for cloud: How to stop holding businesses back
When well implemented, cloud caters to the business need to be more agile, flexible and responsive. But many companies using cloud struggle to reap its full benefits. This often has less to do with cloud itself and more to do with how it’s managed across different functions. Most specifically, businesses are held back by outdated and decentralised funding and investment models, and by lines of business taking responsibility for IT deployment.
Line of business managers implementing cloud solutions to meet an immediate need may well solve a short term problem. But even one line of business which takes control of its own IT spending can have serious knock-on effects right across the business. We dug deeper to find out how this is affecting business across EMEA in our new report which examines how culture is affecting cloud success.
Our research finds the issue of ‘shadow IT’ – when line of business departments implement cloud technology independently of IT – is not uncommon with 66% of CIOs controlling less than half their company’s IT budget.
Another point was made clear: cloud funding models require urgent change in order for businesses to achieve greater flexibility (74%), the ability to deliver more cloud services (72%), and increase innovation (66%). A new approach to cloud funding would also help reduce overall IT costs, according to 70% of those surveyed.
Added to this, disjointed projects and implementations, duplicated IT resources and working at tangents are all major consequence of decentralised IT funding models. 35% of survey respondents working in IT said lines of business departments are purchasing cloud services the company already has.
As if that wasn’t bad enough, calculating return on investment on these deployments is often tricky, particularly with hidden costs associated with shadow IT implementations. We found that 33% of respondents working in technology said lines of business operating without the input of the IT team spent too much on IT, 30% said they bought the wrong cloud services, 38% felt it added complexity to IT delivery, and 35% said it increased concerns around security.
The solution isn’t to take these IT decisions away from HR or marketing departments but instead centralise control of IT funding and deployment with the CIO. By doing this and working more closely with the CEO and CFO, the CIO can better steer the technology strategy needed for an enterprise cloud model which connects all cloud resources regardless of whether they are public, private, hybrid, on-premise, converged infrastructure or any other permutation. Such a model can eliminate the creation of cloud data silos which 46% of businesses said they experience.
Crucially, in order to make this model as effective as possible the way in which funding is structured must also change. The traditional view of IT as a cost centre means that cloud investments are not tied to revenue or innovation potential – and can fail as a result. Instead, IT funding should be tied to key projects and based around line of business activities.
By taking this approach, teams will be able to acquire services from a knowledgeable, specialist IT team who can offer solutions for cloud issues. For instance, an internal purchasing model which frames IT as a profit centre will remove issues related to poorly calculated ROI, reduce spending on cloud services and remove common complexities of an organisation-wide IT solution.
A whopping 95% of IT respondents we surveyed believe line of business managers buying IT adds unnecessary complexity to their role. It’s imperative for businesses to get past this problem with an integrated approach to IT in which the CIO works with lines of businesses to develop an organisation-wide enterprise cloud model. If combined with centralised and activity-based funding in which lines of business are accountable for their tech purchases, this approach will open the door to greater agility, flexibility, responsiveness. It will also spell the end to business silos and profligacy – music to the ears of any business.
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