Businesses that are serious about finding the right mix of public and private cloud services need to first get to grips with their IT spending, argues silicon.com’s Nick Heath.

In the past the CIO was the gatekeeper of all things tech – the master of of the IT universe. Today much has changed: public cloud services such as Amazon’s Web Services (AWS) make it easy for the tech-minded layman to understand the cost of technology. Tap the number of virtual machines you need into AWS’ online calculator and up pops a price – it’s IT made easy.

While this might sound like a positive step, the democratisation of IT, the fact remains that many organisations still lack the information needed to allow managers to judge whether a public cloud service is better than what they’re getting in-house.

A recent survey by analyst house Ovum found that almost half of CIOs questioned said their business had no chargeback policy for monitoring and billing internal departments for the computing resources they use. This lack of granular data on the IT resources consumed by internal departments gives rise to risk: managers who think they can get a better deal from a third party cloud provider than they can in-house may opt to switch to the external supplier. The problem is that, given the limited use of chargeback, the costs these managers are comparing may well be apples and oranges. The amount these departments “pay” for in-house IT is likely to cover all sorts of extras beyond the base storage or server costs – the likes of compliance management and security policies. While, chances are, these tangential but important services may not be included in the public cloud provider’s cost breakdown.

Without good data on in-house IT provision the move to the public cloud becomes tricky. On the flip side, perhaps a particular public cloud service really could be a better deal for an organisation but the ill-defined cost breakdown of in-house provision makes it difficult to tell.

And chargeback isn’t just useful for weighing up public cloud deals, the additional insights into patterns of IT use provided by chargeback will help an organisation building a private cloud infrastructure to create an efficient architecture that can cope with the peaks and troughs in demand. If internal departments are to be able to make informed decisions about where they get their IT from, then CIOs need to understand the true cost of in-house provision.

Of course, tracking IT use is easier said than done. But the additional challenge of monitoring spending shouldn’t be enough to deter implementation of a chargeback model, or at least a showback model – which charts resources consumption without levying charges.

Businesses that fail to measure the true cost of their estate run the risk of making costly mistakes when it comes to deciding on the right mix of public and private cloud.

Two vital areas are often overlooked or seems to be contentious when evaluating the operational/financial and delivery aspects of cloud services.

1. Do you already operate a chargeback or show back system?

The promise of the cloud is that costs are more transparent and more easily applied to individual users/departments/divisions. Call me old fashioned but this has been possible for years since the advent of the good old spreadsheet. The truth is it is a way of thinking and culture more than a technology. If you do not have a culture whereby individual department heads understand the true cost of their services and the impact of hiring decisions then the provision of cloud services which by definition are easy to procure could drastically impact your costs.

2. This isn’t about getting three quotes – This needs planning and consultancy

Current thinking tends to be when looking at the purchasing of managed services, I know what I need and therefore I will select three suppliers to provide some costings and heck why should I pay for consultancy? Personally I have never thought that an effective way to procure services but until now it has worked -sort of. However that’s not going to work going forward. When looking at a cloud solution you are fundamentally changing the style of service provision. This demands a more structured process including a discovery process and consultancy around the actual transition if appropriate.  Professional services business will almost certainly propose these. It is tempting to cut corners but the results can be disastrous resulting in service outages, downtime and a poor user experience.

It’s up to the CIO to make sure that doesn’t happen.

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