By Sanjiv Sachdev, Director, Strategic Business Value Consulting, Serviceware

Technology became fundamental to overall business strategy during the pandemic. But as we settle into a new sense of normality, many organisations will now be facing the dreaded ‘bill shock’. According to Flexera’s 2020 State of the Cloud Report, 23% of respondents admitted that current organisational spend on public cloud had run over budget. The cloud has myriad benefits but, just as with any other technology, it can be easy to lose track of costs.

Preparing for any form of digital transformation requires strong levels of transparency around prospective investment costs against ultimate ROI. In other words, investment of any kind must be able to prove its value, and fast, given the pressure that CFOs are currently under. A report entitled  Create A Business Case For Your Hybrid Cloud Strategy, authored by Bill Martorelli, Principal Analyst at Forrester Research, explains, “Cloud practitioners generally agree that a pure lift-and-shift approach won’t fulfil cloud’s promise to unleash developer productivity in the cause of business agility.” The report reveals that when it comes to hybrid cloud strategies, this need is intensified amid a host of potential pitfalls and hidden costs that could skew the ultimate success of any cloud journey.

To secure the visibility required to make this transition seamless and effective, the impact of a business case is critical. For the CFO, having a readymade like-for-like comparison of all entailed costs – not just the cost of the cloud technology, but also project management, training, change management and process re-engineering – is likely to be the difference between realising cloud’s undoubted benefits, or replacing one set of inefficiencies with another.

At a time where cost inefficiency is simply not an option, CFOs should be doing all they can to plan their journeys before they’ve even begun. This is where an integrated, high-performance and flexible IT Financial Management solution is needed to create a holistic overview of business spend.

A strategy based on business needs

Delving into the criticality of the past year, organisations are understandably eager to offset financial strains with improved flexibility, scalability and business agility – three tenets that cloud adoption promises to facilitate. Offering significant cost savings at a time of uncertainty feels like the holy grail, and it has culminated in a Forrester prediction that the global public cloud infrastructure market will grow a further 35%, to $120 billion. Last year, it was revealed that typically 22% of a company’s IT budget was being spent on cloud-based services, and this is predicted to rise to as high as 44% by next year.

However, while these challenging times have made the benefits of cloud all the more attractive, they’ve also put the timing and success of that migration under a lot more pressure. According to Gartner analyst Ed Anderson, organisations that lack plans to track and monitor cloud costs overspend by an average of 40%. Therefore, the need for clarity in a volatile and strained economic climate is paramount. The report by Forrester’s Martorelli comments, “A cloud strategy must be rooted in an actual business need that’s defensible and justifiable, not simply because it seems like the right thing to do. A strong sense of ‘why’ should precede the decision on ‘how’ and ‘when’.”

To get value from the cloud, you need effective governance, financial transparency and agile budgeting processes. Under a collective banner, this calls for a single source of truth – data-driven evidence of the right investments to make, and when.

Forrester’s research shows that from a use-case perspective, it can trigger insight into the direct costs involved with a migration or hybrid approach between cloud and on-premise. But it can also bring to light those additional, often forgotten costs related to data centre facility management and human resource. It’s a way to expose and tidy those investment anomalies that will decide the ultimate efficiency of an organisation’s new digital makeup.

Making cloud a reality

The ability to manage cloud costs will be unlocked by reliable financial management tools. Armed with more accurate data and comparable insights from suitable and business-specific use cases, the benefits of a cloud strategy can be laid out in clear projections and ROI – stripping away the hidden costs to reveal the true value, as well as the steps and investments needed to reach that ultimate value. In addition, by helping to free up liquidity, these tools enable agility around cloud options, across prospects of building, migrating, modernising, and even replacing models with software as a service alternatives.

Yet, like any significant digital transformational effort, a business case for cloud must be backed by sufficient commitment and consensus throughout the company. The report by Forrester’s Martorelli comments, “This initiative not only needs a set owner, but also must identify the stakeholders and potential for supplementing skill sets through training, hiring, or bringing in services partners.”

Given the current economic climate and competition within the industry, businesses must free up budget to reinvest in digital initiatives for growth. To get there, businesses need to embrace a much-needed exploration of, and migration to, the cloud. In order to unlock the true value of the cloud, the roadmap must be aligned with the business strategy of the company and this is where the greatest challenge lies.