How to keep an eye on cloud costs throughout your organisation

It’s never been easy for individuals, or departments or entire organisations to calculate how much technology is costing them, but it’s never been more difficult than it is today.

There was a time when the budget for information technology could be clearly identified, in organisations of all sorts of shapes and sizes. But the cloud delivery model has changed the way we access software applications and data storage and processing power, and the way we pay for these – and this goes beyond pricing models based on consumption.

It’s not just a case of non-IT managers dipping into their operational budgets to finance on-demand access to software such as dashboards or marketing automation tools. In the same way as many decisions about which cloud software or services to use are leaving the IT department, so is control over the money that will pay for them. ‘Business managers are taking more control of the budgets that were traditionally managed by IT,’ says Daryl Plummer, a managing VP at Gartner Research, and this can make IT costs harder for businesses to assess and control.

Historically, IT and finance have often looked at IT budgets together, and considered IT expenses on the basis of how well they support the company’s company's strategic goals. But this becomes more difficult to do as more of the money spent on IT comes from operating budgets. As Greg Bell, a principal with KPMG LLP observes, by the time some investments in Software as a Service (SaaS) become apparent to finance, ‘they can be difficult to corral or change’ even if they do not reflect either financial budgets and or IT plans.

Forecasting future costs can be tricky too, because ‘as a service’ technology can come with costs that are not always obvious to the uninitiated. Buyers need to look out for obscure cost-escalators, and factor in the costs associated with data duplication or integration with other corporate systems. Calculating the real costs of any technology purchasing decision also calls for the consideration of issues related to financial management, financial reporting, taxation and various other (quite complex) accounting-related matters, as CloudPro previously highlighted here, here and here.

As there are increases in user numbers, system complexity, customisation, integration with other applications, and access device types, there’s also an increased need for specialist help from systems integrators or consultants, and this can potentially increase costs for the buying department, and for other departments. A cloud-based system that seemed affordable and simple to implement and manage when it was ‘ring-fenced’ and there were just two users can end up having an impact on other departments – and their budgets.

Not that all ‘departmental’ investment in cloud services is coming from budgets that were never intended to pay for it. The budget for IT is increasingly being allocated and managed from within a department, either as part of its overall operational budget or as an additional departmental IT budget. ‘We are seeing the movement of money around organisations and IT budgets are shifting into different parts of the company,’ reports Plummer, and by 2015 Gartner expects around 35 per cent of corporate IT spend to be managed outside the budget of the IT department.