By George M. Tomko

Many cloud computing boosters use the selling point that establishing large amounts of storage or computing requires no “up-front capital investment”.  Pleading before the gods of capital within corporations has been a bane for IT and business operations functions forever. All those appropriation request forms and cash flow analyses – not much fun when you want the servers installed and the software loaded.

What has always been interesting to me is that more thought, analysis, decision-making and accountability goes in to managing the capital investment portfolio than you often see in managing operating expenses. The irony here is that “op-ex” is very often many multiples larger than the “cap-ex” spend in any given fiscal period. If a $400 million company (in terms of revenue) has an operating profit of 20%, then the company managers spent $320 million with likely much less oversight than the $15 million that they might have spent on projects.

At the  end of the day, there is no free lunch. Just like leasing became the way to ensure “technology refresh” every 3 years, let’s make sure that cloud computing and all something-as-a-service offerings don’t wind up costing your company more or that the standards of decision-making are usurped by being able to fly more stuff under the financial controls radar.

The saying “you can pay me now or you can pay me later” became a “tag” line in old oil filter commercials where the idea was that you might pay more now for a premium filter but you would be avoiding the cost of replacing the entire engine later.  Of course, the assumption is that you would own the car long enough for this to pay off.  This was in the era when the majority of people traded-in and bought new cars in 3 or 4 year cycles.  Not long after, 3 year leases perpetuated the cycle.

The reality, then, was that most people wound up paying now and they got to do it over and over because later never came!

Another myth that is related is the 3,000 mile oil change. Again, another marketing bonanza because it got people to pay to replace their oil and filters twice as often as the auto manufacturers recommend in the owner manuals.

So back to op-ex and cap-ex and buying infrastructure/software/platforms as-a-service. If I take the op-ex view, it is almost always an incremental view as in year-over-year budgets and the dearth of zero-base reviews. If I take the cap-ex view, everything is an investment and is evaluated as cash-flows over a defined “economic life”. This takes rigor and commitment and the potential for more eyes to see and more ears to hear.

It is not a bad thing to have the option of paying for something as a service. However, it is a bad thing if the selling point is that you get to relieve yourself of the burden of evaluating and justifying the all-in costs of doing it one way or another.

Remember, you can pay now or pay later. Some times, it is nice to get to pay later.

What do you think. Please leave a comment.

©2009 George M. Tomko All Rights Reserved

As Twitter becomes more mainstream, it is tantalizing to think about what could be a powerful component of Enterprise 2.0. And, before anyone thinks that I am against such tools, think again. My purpose as a leader is to drive the dialogue that leads organizations to flawless execution of change. This is what most people would consider “doing the right things right”.

But, anyone who is even moderately social on Twitter can easily become impeded by what I would call the three “S’s”: “Scam”, “Spam” and “Slam”.

“Scam” would be loosely defined as the dominance of “multi-level marketing”, success coaches, “law of attraction experts”, follow-me follow-you services and get-rich quick snake oil. It can also take any other form of human frailty-fraud, abuse, theft, misrepresentations, malware, trickery and all other forms of maliciousness.

“Spam”, closely-related to, and a key tool of the Scammers, clogs up the timeline with auto-generated inoccuous inspirational messages, timed bursts of 5 or 10 tweets, incessant direct messages to your e-mail accounts, and all other ‘junk’ that floats into otherwise fruitful conversation.

“Slam” is, for now, a catch-all term for the impact of living in a social media world. For the individual, it may be dealing with the potentially addictive and distracting time sink of being social with an ever-increasing network of friends and follwers. It takes time to fall in line with learning the lingo and understanding the norms, following the trends, etc.

For an enterprise, “Slam” will be the tidal wave of dealing with establishing policies, legal implications, regulatory compliance i.e. SEC, confidentiality, intellectual property, employee rights, training, security, user support, integration with other communication channels and methods.

At the end of the day, “Slam” will be the biggest headache of all. Why? Because it involves linking the outside world to the inside world in ways that have, to this point, been rudely rebuffed by the corporate firewall.

If you want to think about it another way, what will the new meaning become to this well-known phrase: “what’s said in this room, stays in this room”. Consider that within the last few weeks, Twitter became the voice of a country (Iran) as it was experiencing wrenching social change. It was able to take us to places that no other medium was able.

Now, consider a multi-national enterprise. Are they ready to go totally social – all ‘books’, meetings, presentations, hallway conversations, strategy sessions, pricing discussions, competitive intelligence gathering – flung open, total transparency? No way. Controlled ‘experiments’ and gradual learning, perhaps.

I saw a really great blog post that documents one company’s attempt at opening-up Twitter at an all-employee meeting. After they conducted the meeting, they evaluated what had happened:

“The after-action review surfaced one of the primary concerns about using Twitter in the enterprise: security.  While most employees are and will be sensitive to providing sensitive information about the company on Twitter, it’s always a risk.  In this case, the corporate IT security folks had raised a (very big) red flag about using Twitter for the employee forum, but the CEO decided that, for this short duration experiment, the risk was manageable.”

So what did they learn. You can view the entire article: “Twitter in the Enterprise”,  by Patti Anklam.

In my opinion, you’ll someday see a ‘corporate’ version that is sanitized, monitored, partitioned with strong ID and credentials management. But, the ‘door’ to the outside world will, for the foreseeable future, remain closed.

What is your opinion?

©2009 George M. Tomko All Rights Reserved

Image: FreeDigitalPhotos.net