CIOs 'enchanted' by cloud, but lack metrics to justify investment

Although most CIOs are anticipating making significant investment in private and public cloud technologies over the next 12 months, they currently report they are not tracking the "fundamental metrics" required to make the case for ROI.

The survey, titled IT Survey on Cloud Computing, Virtualization, and IT Financial Services, was conducted by Apptio, a provider of on-demand Technology Business Management (TBM) solutions, in partnership with the Worldwide Executive Council (WEC), a research firm that facilitates dialogue between executives and Wall Street investors. WEC interviewed 100 U.S. CIOs from firms representing a broad range of vertical industries, including healthcare and technology.

The survey reveals that the majority of IT decision makers don't have the necessary metrics to build an intelligent business case for moving applications and infrastructure components to the cloud. Moreover, the vast majority of those surveyed indicated that they neither possess the ability to track utilization nor are they able to recover these costs via "chargeback" or "showback" methods, further complicating their ability to calculate ROI for the business.

"Our research shows that while enterprise CIOs remain enchanted by the cloud and the promise of instant scalability and automated provisioning, they're still struggling to understand the economic drivers behind the cloud decision," said Keith Muma, vice president of the Worldwide Executive Council. "Like a traditional supply chain manager, CIOs must be able to calculate their Cost of Goods Sold (COGS) to build a strong business case for the cloud. This survey demonstrates that fundamental metrics like tracking, utilization, and the ability to present a 'bill of IT' back to the business will become essential to CIOs as their cloud strategies mature."

Key findings of the survey include:

• Eighty percent of respondents get some amount of their current server infrastructure delivered through a private cloud, however, nearly 90 percent report they are not charging end-users based on their private cloud consumption, representing a significant gap in financial transparency and accountability of IT service costs.
• While a majority of IT executives (64 perent) believe that tracking utilization levels of virtualized and cloud infrastructures will be "important" or "very important" during the next 12 months, nearly 40 percent said they are not currently tracking utilization levels of virtualized and cloud infrastructure.
• Almost 90 percent of IT leaders surveyed believe it will be either "important" or "very critical" to improve IT services tracking in virtualized and cloud environments in the coming year.
• Eighty percent of IT executives surveyed believe metrics related to cloud would grow in importance over the next 12 months and almost 75 percent believe there is very high value in being able to accurately measure the COGS for their "cloud-based" operations.
• Nearly half of executives surveyed (48 percent) report the cost of cloud services to their business units as a lump sum of all IT costs, while more than 20 percent do not provide any reporting back to their business units.

"Everyone is talking about how the cloud is transforming IT, but too little is being said about the economic drivers that ultimately support the cloud decision," said Chris Pick, chief marketing officer at Apptio. "As this survey demonstrates, most CIOs do not have the ability to precisely calculate what it costs to deliver IT services to the business. Without a solid understanding of their fully loaded baseline costs, they're unable to benchmark their own services to third-party cloud providers and consequently, they're incapable of delivering IT services at market rates."