Why CFOs are happy to see the back of old school CapEx technology approaches
Nutanix’s Rowen Grierson explains why CFOs should be investing in subscription-based IT solutions.
For years your IT teams have discussed the shape of old school vs new school IT architectures. According to IT, one promises dramatic change while the other is bound to leave you behind.
But when we strip away the CIOs’ IT jargon, what does this mean to the CFO and more importantly, the bottom line? And can any of this save you money? The transformative impact the last 12 months has had on IT will be long-lasting, and one model CFOs are only too happy to see the back of is old school CapEx technology approaches.
Purchasing IT via a consumption or subscription model doesn’t only save time wasted in budget arguments, but helps pave the way for the flexibility in purchasing that an organisation craves. The IT team will tell you they need to scale and adapt business-critical systems at the same pace that business is moving. At the same time financial teams want to put to bed five- to 10-year contracts where the purse strings are constantly tightened. Both are achieved with consumption-based procurement models.
Where do you sign?
But let’s not forget the peace of mind that long term contracts provide. Traditionally businesses would identify the technology they needed, work to get it deployed, demand that it be future-proofed for five years, and then go live – a great form of insurance.
The problem is that your IT teams need to make sure that systems keep up with the speed of business, so to map out a system for the next five years, an organisation needs to know absolutely what their future holds. It just isn’t possible in today's business climate. Companies are tired of their CFOs being held to ransom by vendors because they based a decision on what they hoped would be a future-proof CapEx expenditure.
When the cloud and its attractive consumption-based modelling walked into the scene, it was at first just a flirtation. “Too good to be true, there must be a catch, it’s going to cost more in the long run, you have no insurance” was the natural kneejerk reaction by organisations entrenched in counting the success of IT in five- to 10-year contracts. However, the impact on the customer was an equal and opposite waste opportunity to have the flexibility to buy more of what they consume and less of what they don’t.
Hybridity makes sense
Hindsight is always 20/20, and it is important to note that some early cloud adopters that marched heartlong into the cloud did get burned, and the evidence was on the balance sheet. Conservative organisations moved one piece at a time, which gave them insight into what works in the cloud and what doesn’t. The technical model winning the race speaks to hybridity between on- and off-premises solutions – namely equipment the business still owns and services you procure from a third party (cloud).
But the billing model is enjoying no such flexibility. CFOs are demanding their CIOs don’t get caught in inflexible contracts that drip-feed new functionality to them over long periods and then chew up all their available finances, which has turned the traditional protracted licence model into a risk factor. Because of this, some of the world’s biggest vendors are turning to subscription models that deliver on the consumption and X-as-a-Service promise.
The belle of the ball is a cloud-based fractional consumption model with an on-premises cloud platform. This gives your IT teams the flexibility to build, change, expand, contract, or evacuate and retire nodes, software, and systems in a more controlled, manageable, and cost-effective way. The real benefit to the financial team is not just seen in actual savings – but through the ability to give IT the freedom they need to adapt and change at the speed of business.
The IT Dilemma
Changing how it delivers systems and solutions to business poses some risk to the IT industry, which is why there has been resistance by many large vendors to offer subscription-based product offerings. Without guaranteed billions of annuity revenue in the bank, how much can they really invest in R&D? Do they have enough money to expand their headcount?
All are valid concerns and raise the question: are the vendors your IT team is selecting adaptable, and will the solutions you are investing in go the distance? The overall benefit to an organisation is that the hand of IT is finally being forced to deliver on continuous value, not just value for today, or the promise of value with an update, but value every day.
As a CFO you can now keep IT accountable, walk a real-time journey with them based on whether the solutions they are investing in are delivering real business returns, and ultimately you get the visibility into their expenditure you crave.
The bottom line? Subscription-based IT solutions are available and IT teams need to start demanding them, not just to give financial teams more visibility, but to give your organisation the bargaining power you have always craved from your IT investments.
The genie is out of the bottle, and no amount of coaxing is going to get it back inside. As the financial team you want flexible billing options, you aren’t opposed to signing contracts because you also like the assurance these provide – but the IT industry needs to start to migrate to a shared risk model and stop overselling products your teams will never use but instead sell you only what you consume.