Who holds the keys to successful cloud migration?

Any company embarking on a cloud journey should first examine the distance between its technology and accounting departments. The CIO and the CFO often don’t understand each other’s worlds, and the company is the loser. This is particularly true in a digital transformation project, often seen as an IT issue, while it’s usually an operational concern.

A cloud migration project involves far more than the old debate about capex versus opex, when investments in your own IT infrastructure are replaced by a pay-per-use model using infrastructure owned and maintained by the hyperscalers.

The ability to scale up and down to handle unexpected workloads and avoid losing any business through a surge in demand is a major benefit of cloud. It also offers companies the chance to redesign their processes and apps to be cloud-native. The increased agility lets them create and launch new products and services more quickly, and use new cloud-based software to analyse their data more effectively.

A lesser-known benefit is the ability to eliminate costly database licensing fees by migrating data to one of the purpose-built cloud-native databases. This can mean a significant saving, since database licence fees often cost millions of rands a year.

The cloud also enhances a company’s risk, compliance and disaster recovery profile, which are operational rather than IT concerns.

The cloud affects how companies manage their balance sheets, and many projects fail, stall or are never approved because the CFO resists the change to traditional accounting practices or isn’t aware of the overall business benefits and associated changes in accounting practices.

Similarly, the CIO is often unaware of what guides financial decisions, leaving them unable to challenge the traditional notions of how technology should be paid for. The IT department is usually given capex to invest in the infrastructure that supports the company. This must cover the cost of the equipment, long-term maintenance agreements and licensing to support it, hopefully with sufficient capacity to cope with peak demand periods.

Moving to the cloud eliminates all that. The IT department rents all the processing power, licences and data storage, scaling up and down as necessary and only paying for what is used.

The cost moves from capex to opex, and frees up cash that would have been committed on infrastructure for value-adding projects elsewhere.

Yet the CFO rarely champions a cloud migration project because accounting best practices favour capital investments, which are seen as enhancing the assets of the business, rather than increased running costs, which are viewed negatively.

If an IT team lacks sufficient opex, accounting practices alone can scupper the organisation’s ability to benefit from the cloud’s numerous potential benefits. Some CIOs work around this by paying upfront for a fixed amount of cloud services for a multi-year period, which qualifies as capex. But that defeats the point of being able to scale up and down as necessary.

What can be done? Placing the facts before the CFO will demonstrate the financial and operational benefits of the cloud. The funding around a cloud project must be resolved from the start, because the IT budget may increase initially. This could be due to R&D, rewriting apps to be cloud-native, and training for employees.

The disconnect between the IT and accounting departments dilutes the impact of cloud adoption in many organisations. Without the financial team’s support, the promised benefits are rarely achieved. Innovation needs to be supported or driven by the business and financial leaders, not the techies.

An effective approach is to create a multidisciplinary centre of excellence in an organisation that is considering cloud adoption or migration. This team will need guidance, for without it, cloud services may be squeezed into the existing business without changing any of the rules. Like any journey, it pays to be prepared.