Enterprise LOBs are rushing to implement cloud-based SaaS solutions, often without support from IT. However, although initial pilot costs may be minimal, as applications begin to scale, their financial impact becomes significant. What steps can CIOs take to address this problem?
Step 1: Recognize What’s Lurking in the Shadows
Organizations that have successfully managed cloud sprawl accept the fact that entrepreneurial leaders in non-IT organizations will continue to conduct SaaS pilots. These enterprises monitor the accumulated technical and financial debt and make decisions when such debt approaches non-acceptable levels.
Step 2: Address Cloud Sprawl as a Business and Financial Impact Issue
Establish full transparency of cloud initiatives across the enterprise. This provides insights to both senior management and LOBs of the full impact of cloud initiatives on the organization.
Step 3: Create a Cloud Transparency Team
Establish a cloud transparency team supported by senior leadership — CEO, CIO, CPO, and CFO – that discovers and reports the extent of cloud sprawl across the entire enterprise in real financial terms.
Step 4: Identify Current Cloud Initiatives
The cloud transparency team should identify and document the initiatives, stakeholders, spend, cost centers, and vendors related to cloud initiatives throughout the enterprise. Many initiatives may be in pilot mode; others may be in production, where costs have a more pronounced impact.
Step 5: Capture Planned Cloud Spend
This requires a focused collection of the financial components of each cloud implementation from project leaders and SMEs across the organization; it should also identify the key integration points of each cloud instance —with both in-house systems and other cloud applications.
Step 6: Perform Technical Debt Analysis
The cloud transparency report collects cost information on a three-year forward-looking horizon; this enables the organization to quantify and address future technical debt. Full business impact of all cloud implementations can be assessed for their fully loaded bottom-line financial impact.
Step 7: Undertake Cloud Sprawl Management Review and Ongoing Reporting
The CIO should take the lead, with the support of senior management and in partnership with vendor management, finance and LOB management, to establish cloud transparency reporting as a critical element of enterprise planning and budgeting.
For more information, see Cloud Sprawl: Quantifying and Addressing Current and Future Financial and Technical Risks (Document #US43317017 on idc.com).
Aaron Polikaitis is Vice President of Vendor Sourcing and Management research with IDC’s IT Executive Program (IEP). Learn more about what IDC’s IT Executive Program can do to help you lead your business by visiting idc.com/itexecutive.
Martha Rounds, Research Director