Subscribe / Unsubscribe Enewsletters | Login | Register

Pencil Banner

As CMOs Grab IT Budget From CIOs, Cloud CapEx and OpEx Shift

Bernard Golden | Jan. 29, 2013
If analysts are correct, and the CMO eventually wrests control of the IT budget from the CIO, then spending on cloud computing will get a lot less predictable and a lot more complicated.

In short, the new world moves from predictable CapEx to unpredictable OpEx. You can expect many more midyear budget recalculations as cloud-based application costs move all over the map.

ROI, Not TCO, Drives OpEx Spending

TCO is the mantra of IT organizations. IT is a cost center, and it's a given that the focus will be on keeping costs down. The less you spend, the more that's available for the overall company's profit.

Consequently, IT organizations negotiate to keep costs to a minimum and are loathe to consider more expensive alternatives. After all, from an IT perspective, spending more on one product means having less to spend on another. This is particularly true in a capital-rationing environment.

If IT is allocated only a certain amount of capital to spread across all capital needs, then it's going to try and trim spending in every area to stretch the capital as far as possible. Generally, the most effective way to sell to a CIO is to offer a way of doing something cheaper than it's being done now, because that will reduce TCO.

CMOs, by contrast, focus on ROI. CMO spend is bound to be focused on measurable business outcomes, and the applications they use (or have built on their behalf) are directed toward achieving those outcomes.

For a CMO, the question is, "If I spend an IT dollar, how much do I make?" Even more important, "If I spend a dollar, what is my margin on that dollar. Is it the same as the previous dollar I spent, less or more?"

The business case for a CMO is simple: If I can make as much or more margin by spending an additional dollar, I'm going to spend it. Moreover, if achieving that increased margin requires using a product or service that is not the lowest cost, I'll use the more expensive product, even if that part of my cost structure is higher than it might theoretically be.

This is not even to mention the topic of agility. For a CMO or LOB executive focused on making his or her numbers, getting to a solution and starting to earn margin more quickly is more important than getting the lowest possible cost for something. This is undoubtedly going to cause heartburn for IT executives planning private clouds because they can (putatively) be run less expensively than public cloud options. CMOs are focused on the here-and-now, not the someday-less-expensive.

LOB executives have to make their numbers. If they don't, they lose their jobs. No one will wait around for a supposedly better cloud service-if executives don't start making their numbers right away, they won't be around to see the results.

 

Previous Page  1  2  3  4  Next Page 

Sign up for CIO Asia eNewsletters.