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MDSL Blog

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The One Thing On-Premise and Cloud Computing Have in Common

Everything you’ve read for years has reported how very different cloud computing is from on-premise networks. They talk about elasticity, self-service, shared resource pools and reduced operating costs.

It’s all true!

But there is one thing that on-premise networks and cloud computing have in common. They are both ways to manage information in your enterprise, in fact cloud has always been positioned as an eventual replacement for on-premise infrastructure.

What they both have in common is that, whichever is your primary IT strategy, it must be managed.

IT is a Business Operation

Like shipping, receiving, finance, sales, and marketing, information technology (IT) is a business operation. It is budgeted as are other business operations. It is measured just as any other business operation is. It participates in the production of profit, just like all other business operations.

It must be managed as an operating department. This takes us beyond measuring performance and scanning for anomalies. Clearly there are technology-based components to the process of managing any IT operation, but that’s not where the point of commonality occurs.

As with all other operations, we want to do our best to keep costs to a reasonable minimum and return to a maximum level.

Fiscal management of an on-premise infrastructure involves accounting for capital investments in IT premises equipment such as servers, storage, switches, routers, and other components. To this we add various utilities and services such as electrical power, cooling, fire protection, physical premises security, space, network connectivity, hardware maintenance, software support, and more. Many of these expenses vary from month to month.

Cloud computing requires similar tracking, though the amounts don’t vary as much. As users are added and removed their licenses must be accounted for. Otherwise, each user will use some cloud services and not others. While the community may be somewhat more dynamic, the variability of the license costs is significantly less. One substantial exposure here is making sure that licenses for departing employees are re-assigned to other new users before additional licenses are purchased.

IT as a Profit Center

The holy grail of computing is to have IT represent a sufficiently significant strategic advantage that it represents a true profit generator, rather than the cost center it has always been seen as. Many IT Maturity Models are developed to demonstrate how this can be accomplished. But these do not address one of the foundational requirements for establishing IT as a profit center. To prove that IT is generating revenue that exceeds its cost, you must first know those costs.

MDSL has developed a key white paper, Critical Concerns Change When Controlling Cloud, which dives deeper into the processes required to fully and accurately track and manage the operating expenses involved in cloud computing. When you stop running technology on premises, you do not stop managing the expenses required to have the same technology services coming from cloud service providers.