When considering cloud ( or any technological advancement ) do you think people consider the Benefit Line? That is the line that exists in their organization ( or their personal life ) that they use to justify staying with a piece of technology, or that drives them to embrace a new piece of technology.
So you have a Blackberry device. It costs you $25 per month, and serves you voice, mail and messaging. Where is your benefit line? Is it above or below the cost you outlay each month? I suspect it is well above the cost line , so any move to another piece of technology from another vendor will have to aggressively lower the cost line for you to see it is a replacement. For most of us, the benefit line has to be significantly higher then the cost line. I think that’s pretty obvious.
But in the corporate world, the blurring of cost and benefit lines is so immersed in complexity, legacy, obsolescence, governance and business transformation that the lines criss cross so significantly that businesses make ( or don’t make ) decisions based on quite often the wrong values.
Now in my humble opinion the graph above looks easy on the eye and fairly compelling provided ( and this is the hard bit ) that you can actually define what’s in the Benefit from IT bucket.
Clearly there are few worthy nominations for this bucket such as Increased business bottom line revenues, increased net new profits, market share, attracting new customers and so forth. Then you can add in things like customer satisfaction index, service availability uptime, security incidents ( or lack of them ) and so on. You can measure individual applications, business units, specific projects, geographic regions – whatever is important to the organization really.
Then the cost bucket will have the usual direct and indirect costs that we all love to hate – hardware, licensing, people and so on. Many organizations will nail this down to a ‘cost per transaction’ so they can identify how changes to anything that helps deliver that transaction will affect their benefit line. The transaction can be anything – a book being sold, a service provided or a fee paid for allowances. As businesses’ mature they really now are in tune with this discussion and are keen to see how IT is fairing with the delivery of this benefit line.
Why is this so important? Well the light bulb moment is when you can sit down and draw up your own benefit line. It could be a personal one as the Blackberry example or it could for someone in business you know well. Friend or customer.
Be careful though. Many people will say ‘trying to find a cost per transaction sounds good on paper but in reality its a waste of time’. Now I think these people are the same ones who say ‘ROI and TCO are for analysts; they don’t have a place in the real world’. Some of these people will go further and say ‘measuring the value of IT is pointless; IT is a cost center and we just write off the overhead without trying to measure the benefit’; we just try to reduce the IT budget each year’.
To counter these arguments against looking at cost and benefit lines I often think that there is a direct correlation between these two lines in anything we do with IT. Its just that it needs some effort to work out (1) what we want to measure cost and benefit as (2) getting people to agree the approach (3) getting people to want to measure and respond to the results and (4) using the results to consciously negotiate with suppliers and vendors who are ‘unable’ to position their products in the context of the cost and benefit line discussion. Remember also that there will be emotional benefit lines where key people will have the ‘corridor’ view of where these lines are ( and where they should be). Its usually the CEO or CFO or your father ( if its your daughter that wants the Blackberrry !).
Now take the diagram above and consider how you position cloud computing. Easy isn’t it? The last sentence to me is massive. What do you think?