Financial implications

Cloud has the potential to have significant impact on IT spending through cost savings, reduced capital expenditures and more. Too often, analysis of the financial implications of cloud computing stops with a simple look at the shift from capital to operating expense. To fully realize the financial promise of cloud, CFOs like you must look deeper to understand where cloud can deliver measureable results. You must assess the viability of shifting capital expenses to operating expenses; you need to evaluate your TCO models for adaptability to cloud; and most importantly, you must develop a financial roadmap to guide your organization as it journeys to cloud.

Education

Financial Implications: What every CFO should consider: PDF 422 KB Mathematical Proof of the Inevitability of Cloud Computing: PDF 622 KB Forrester – The Three Stages of Cloud Economics: PDF 415 KB IDC – IT Cloud Decision Economics: PDF 342 KB

Questions to Consider

How will an increase in operating expense resulting from IT spend on cloud impact your financial statement over the short and long term?

How does the traditional assessment of IT project costs and TCO need to change to reflect the variable nature of cloud-based projects and solutions?

What is the value of your existing IT assets? What other criteria needs to be in place to appropriately identify which business processes and IT infrastructure can/should move to a Cloud-based solution?

Best Practices

“ By establishing a financial roadmap that was tightly aligned to our technology roadmap we maximize the full potential cloud offers our business and our customers.”

“ While cloud has been around for a while, understanding the financial impact it can have on an organization is new. Cloud can be complex and there often isn't a clearly defined path for adoption. As I work with my CIO and other business leads, understanding the impact cloud will have on the strategic financial decisions I make is important. The industry has done a good job articulating the technical benefits and risk associated with cloud but could do a better job translating those benefits into the language of the CFO who increasingly has responsibility for the overall IT decisions made.”

“ The growth and demand we are seeing for cloud computing is unprecedented.”

“ With cloud and modular datacenters, we are able to effectively shift the procurement of assets typically needed for a new datacenter from Capex to Opex, lowering our debt and the requirements for capital.”

“ The competitiveness Frontline brings to the market is predicated on how successfully we're able to adapt to changing market demands. As trends such as cloud computing grow and become more broadly adopted, we need to understand how this will impact internal operations and ultimately the services we provide our customers. By evaluating the financial implications of cloud, we were able to determine that we could effectively transition capital expenditures to an operational pay-as-you-go model that continues to provide all of the same benefits without the upfront costs.”