The cloud vs. traditional hosting: financial agility like never before

Aug. 29, 2018 / By AJ Dandrea

Can we all agree that cloud technology offers tremendous benefits in platform and cost reduction? In my stewardship of the cloud for 3M Health Information Systems, I’ve also learned how much the cloud has enabled me to consistently impact operating income and the costs of our goods sold (the “bottom line” in finance speak) than when we were using traditional hosting. In the 2000s, our endeavors to host technology, services and products (TSPs) relied on careful planning, capitalized expenses and depreciation schedules. When we decided to invest in a TSP, the cost had little variance as a contracted agreement; it became a fixed investment, a fixed endeavor. Our migration to the cloud has changed the economics of cost from a rigid investment to an opportunity to financially impact the bottom line of our businesses.

For example, quarterly financial targets for many enterprises are often an exercise in execution, as well as give and take. The cloud has allowed us to scale back when necessary, right size perfectly and maximize utilization. We can ask our developers to automate shutdowns of development environments every evening and weekend. We can align our compute footprints to the exact need of the workload, while allowing for variance. Additionally, we can measure and track utilization to an accuracy that is nearly impossible in non-cloud hosting. Investing in the cloud also requires an investment in economics not normally required in traditional hosting. It is no longer enough for information technology managers to meet once with the chief information officer for an annual CAPEX plan. Cloud finance is a profession and requires more than the part-time capability of an IT manager.

Despite these benefits, cloud technology requires some caution. The platforms and cornucopia of services can become a distraction for development teams and may require extra diligence to regulate what your teams consume. With hundreds of services available, your journey to the cloud should include an investment in strong technical leaders who can drive discipline in selecting the right menu for your TSPs. Also, your cloud partners may constantly challenge your financial discipline with their role in upselling and increasing your cloud spend, citing benefits that may not provide a tangible impact on short-term economics.

One thing is for certain: In an enterprise where single digit percentages are extremely important, the cloud can enable or cripple your ability to react and impact the bottom line. I encourage you to invest in disciplined technology leaders and treat cloud finance management as an essential skill and important role for information technology managers.    

AJ Dandrea is operations manager of the cloud hosting organization at 3M Health Information Systems.