July 11, 2016 | Written by: Lynda Stadtmueller
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In the old days, many IT employees used a simple gauge to assess the financial viability of their technology decisions: is there enough money in the budget?
Today, as chief information officers embrace the role of “strategic service broker” to the business, the organization must have a better understanding of how technology decisions impact the financial health of the company as a whole.
In this new role, the CIO may find a valuable ally in the chief financial officer, who can provide financial insight to technology evaluations.
Consider the rise of “cloud managed services,” infrastructure and application services hosted and delivered by an expert partner. According to a Stratecast survey, 36% of businesses currently use cloud managed services. That number is predicted to double in the next two years.
CIO perspective: cloud managed services solve IT challenges
From an IT perspective, the managed services model is appealing. It reduces the burden of hardware and software maintenance; introduces flexibility to redeploy technical resources; and ensures consistent, service-level-agreement-backed application performance.
CIOs are sensitive to the high costs associated with self-managed cloud services, such as infrastructure as a service (IaaS). In the Stratecast survey, IT decision makers said for every dollar they spent on IaaS, they spent more than $3 to manage the service. Most of those costs are absorbed by managed service providers.
But do managed services make financial sense for the business? The CFO can help decide.
CFO perspective: flexible investments support business agility
Contrary to some widely held beliefs, the CFO’s role is not to save money. It’s to ensure money is invested wisely. As such, the CFO brings a different perspective to the managed services decision. For example, the CFO is interested in:
- Granular reporting. CFOs usually report revenue and margin at a business unit or product level. Managed services may offer sophisticated workload-level cost and usage reporting.
- Opex vs. capex. Capital investments (capex) are rigid and come with accounting complexities for things like depreciation. As operating expenses (opex), managed services are a more flexible investment.
- Financial compliance and risk management. The CFO is responsible for protecting corporate assets. The right managed services partner supports regulatory requirements and security needs.
- Flexible workforce. CFOs consider the full costs of maintaining a workforce, including compliance with local laws. Managed services offer staffing flexibility.
Calculating total cost of ownership
Together, the CIO and the CFO have the purview to assess the total cost of ownership for managed cloud services by considering factors beyond subscription fees. The CIO calculates the costs that can be avoided with managed services, such as procurement and maintenance of hardware and software, as well as labor and training. The CFO can help quantify the benefits associated with the continually optimized service delivery of managed services. For example, greater application availability and faster transaction times can result in revenue gains and increased employee productivity.
Whether you are in the information or finance organization, the smartest technology investment is the one that delivers maximum value to the business. By understanding the total costs and benefits, companies may determine that cloud managed services are the best choice for their business.
To learn more about choosing a Cloud Managed Services Provider that meets the needs of both CFO and CIO, sign up for the full report: Are Managed Services the Best Financial Choice for your Business?