27: Episode 27: What’s a CIO to do, balancing recurring costs, IT fragmentation, and the promised benefits of cloud computing?
Cloud computing is always in the news — but the reason we are talking about it on the podcast is that this feels like a tipping point. Famously, Snowflake had a cloud-only strategy from day one, and that seems to have worked out pretty well for them. Now, others are moving in the same direction, with Atlassian planning to end sale and support of their on-premise server product and go cloud-only:
There is a recurring revenue trap. There is no way back. Cloud delivery does save time, but if you are a growth company, then as you add more users you pay more, and soon enough the cost has ballooned. Now what? There might not be an easy way back.
But the ratchet turns both ways: PAYG business models work for both users and providers, because they scale with utilisation (flat-fee cloud services with unlimited usage would not last very long). Marginal costs are a factor, and ideally you want to go up the stack and offer more differentiated services that command higher margins so that you can amortise your fixed costs better. Recurring revenue aligns incentives better between user and vendor:
This conversation is becoming more critical as cloud becomes the default:
The calculation is about CapEx vs OpEx, efficiency vs resilience. Also as companies modernize (or try to) there is often no business case. There might be a road to a business case — if your CIO doesn’t get fired!
IT Fragmentation is another factor. We all know shadow IT is IT, but there is an issue with the power of cloud offerings: too many people with too much power and no idea what they can do. Next thing you know someone turns on or off a feature and your company is paralyzed.
Finally, what about skills? All this abstraction risks creating skill silos; will new generations of technologists need specific vocational training? Will they be trapped in one particular domain, without transferrable skills?
Bicycles — bicycles are good
Smokeless Backyard Firepit – We all need to be outside this winter to survive the dark winter ahead. Be smart.
Exercising in front of YouTube videos