1.
The
Economics
of
the
Cloud…
‘Cloud
9’
for
the
CFO?

2. The
Economics
of
the
Cloud…
‘Cloud
9’
for
the
CFO?
Table
of
contents
Executive
Summary
3
Methodology
and
the
Survey
Universe
4
Survey
Findings
5
Appendix:
Respondent
companies
list
10
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2

3. The
Economics
of
the
Cloud…
‘Cloud
9’
for
the
CFO?
Executive Summary
"The first rule of any The advantages of cloud-computing are commonly known: You donʼt need
technology used in a upfront infrastructure investment; scaling up is relatively easy; and the service
business is that provider is likely to be more efficient than your company.
automation applied to
an efficient operation The ability to pay as you go from a service provider rather than spending
will magnify the upfront feels natural to a CFO — thereʼs nothing new about buying services.
efficiency. The Whatʼs new is that cloud-computing offers a delivery and financing alternative
second is that to one of the bastions of corporate capital expenditures: IT.
automation applied to
an inefficient If a CFO can see better cash flow, lower risk and visibility, he or she will likely
operation will magnify become a cloud-computing convert in no time. It is, however, not always a
the inefficiency" bed of cash flow for everyone. Service level agreements, increasing monthly
costs and data ownership are all potential trouble spots that will need to be
- Bill Gates resolved.
While it may not make sense for a company to apply a cloud-computing
"Any sufficiently model to every enterprise service, smart CFOs should seriously examine the
advanced technology trend for some of their services. The big question now isnʼt whether to adopt
is indistinguishable cloud computing, but rather, where and when to adopt it.
from magic."
The CFO Institute, in association with Microsoft, conducted a survey amongst
- Arthur C.Clarke CFOs and senior finance professionals to gather their perceptions and
understanding of cloud-computing, and its potential economic and efficiency
benefits.
"Once a new Our CFO Survey revealed the following:
technology rolls over
• The majority of CFOs consider investment in technology as a means
you, if you're not part
to cut costs.
of the steamroller, • Reduced up-front costs, increased flexibility, and competitive
you're part of the advantage are the key benefits of implementing a cloud computing
road."
solution.
• Over 30% of CFOs surveyed are already using or are considering to
- Steward Brand use a cloud computing solution, indicating a keen interest in cloud
technology.
• A concern regarding security and compliance was the number one
impediment to large Indian corporations in adopting a cloud
"We're changing the computing solution, followed by loss of control and compatibility.
world with
• One third of CFOs consider themselves responsible for taking the
technology.”
lead in implementing a functional and cost effective cloud computing
-­‐ Bill Gates solutions. The majority feel that it is the CIOʼs responsibility
• A high percentage of CFOs were not aware that cloud computing is a
green technology.
In conclusion. Given the CFOʼs belief that cloud computing can offer
substantial savings, process flexibility and competitive advantage, they would
be keen to explore its implementation provided issues related to security and
compliance and loss of control are managed effectively. CFOs also need to
be convinced that cloud computing is a proven and tested technology, which
they expect will happen in due course of time.
3

4. The
Economics
of
the
Cloud…
‘Cloud
9’
for
the
CFO?
Methodology and the Survey Universe
The survey was conducted by the The CFO Institute, in partnership with Microsoft. The results are
based on approximately 30 individual CFO responses.
(Please refer to the Appendix for the complete respondent companies list)
Respondent companies by sector Respondent companies by size
4

5. The
Economics
of
the
Cloud…
‘Cloud
9’
for
the
CFO?
SURVEY FINDINGS
The majority of CFOs
It is not surprising that a
consider investment in majority of CFOs consider
technology as a means to
investment in technology as
cut costs…
a means of cutting costs.
Those that thought
otherwise considered
investment in technology as
a means to improve
processes. “The fact that
costs are reduced is simply
a side effect”, says SK
Joshi, Director Finance,
Bharat Petroleum
Corporation.
Reduced upfront costs and
The majority of respondents considered reduced up-front costs, increased
competitive advantage were flexibility, and competitive advantage as key benefits of implementing a cloud
considered to be to prime
computing solution. Surprisingly, however, most did not consider its ability to
benefits of cloud
computing… enable a company to react quickly to changes in market conditions as a key
advantage.
… helping the company INSIGHT: Michael Schrage, Research Fellow, MIT Sloan Schoolʼs Center for
react quickly to markets Digital Business explains that the cloud can accelerate and compress both the
conditions is a benefit that
development and the test times for innovation and change… “you can do this
CFOs are not aware of
with suppliers and customers. It is a big deal!”, he says.
About 10% of respondents
Over ten percent of the respondents had already implemented a cloud
had already implemented computing solution, while another twenty percent are planning to implement in
cloud computing. 20% are
the near future. A large portion of the respondents had no plans to install cloud
planning to implement...
computing solutions, a thought echoed by Robin Banerjee, CFO, Suzlon who
5

6. The
Economics
of
the
Cloud…
‘Cloud
9’
for
the
CFO?
explains that having already invested heavily in infrastructure, they would
consider it as an option when the time comes to update hardware
infrastructure. His concerns about cloud computing not being a proven
technology would hopefully get addressed by then, he says.
At IL&FS, their internal security policy does not allow the use of wifi networks,
thus making it difficult to even consider cloud computing as an option, says SN
Mukherjee, Chief Operating Officer.
INSIGHT: Michael Schrage emphasises that the question that needs to be
... those that are not
planning to implement addressed explicitly is "Are the business unit heads satisfied with the flexibility
should seriously consider offered by their existing IT infrastructure, as they are the ones that need to be
the needs of those that
require flexibility from the IT responsive and adaptive to the market changes. Just because you've spent a
infrastructure lot of money on something doesn't mean you're getting value. There's a saying
in America that goes "where you stand" depends on "where you sit". The CFO
may be happy with how things are going, but the business unit heads may
think otherwise. Cloud computing can offer low cost flexibility with quick turn
around times.”, he says
What
is
your
standpoint
on
adopPon
of
cloud
compuPng?
60.0
50.0
50.0
40.0
30.0
23.1
20.0
15.4
11.5
10.0
0.0
Already
using
it
Plan
to
use
or
are
No
plans
Don't
know
considering
using
it
Concerns regarding security
Currently, a concern regarding security and compliance was the number one
and compliance are the impediment to large Indian corporations in adopting a cloud computing
number one impediment to
solution, followed by loss of control and compatibility.
implementing cloud
computing...
SN Mukherjee explains “when we send an email, we don't know where it
goes… it goes into a cloud. We are moving from data abstraction to
infrastructure abstraction, which can be unsettling.”
6

7. The
Economics
of
the
Cloud…
‘Cloud
9’
for
the
CFO?
The majority of CFOs surveyed were fairly neutral when it came to their
impression of reduced time to impact compared to regular investment in IT
hardware/infrastructure.
“Although the time to implement a cloud computing solution may be fast,
additional time will be required to prove that it works”, says Robin Banerjee.
Can
Cloud
CompuPng
substanPally
reduce
the
Pme
required
to
implement
an
IT
soluPon,
as
compared
to
a
typical
upfront
CAPEX
based
IT
project
decision?
1
=
Strongly
disagree
and
7
=
Strongly
agree
7
1.3
6
3.8
5
5.1
4
11.5
3
5.1
2
0.0
1
1.3
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
INSIGHT: “Time to Impact” - if a business unit has a new and interesting
idea, it can be easily tested on the cloud. It can give a customer the ability to
customize an order, which would otherwise take forever on traditional ERP
systems…You use the cloud to prototype the template with a few customers...
learn from that, and that becomes your gateway. You then use middleware to
7

8. The
Economics
of
the
Cloud…
‘Cloud
9’
for
the
CFO?
integrate the innovation with your existing ERP system, Michael says.
The majority of CFOs have
The majority of companies have placed a high priority on reducing their capital
placed a high priority on expenditure to operating expenditure ratio, which is all the more reason to
reducing their capex to opex
consider cloud computing as an effective means to reduce capital expenditure
ratio...
and increase IT infrastructure flexibility.
INSIGHT: Cloud computing and traditional computing (ERP etc) are not
necessarily rivals. If you collaborate with the CIO and business unit heads, you
can have the best of both worlds. You can have the cloud give agility,
nimbleness and responsiveness to business process and business units, and
have the existing infrastructure provide centralized support, Michael says.
8

9. The
Economics
of
the
Cloud…
‘Cloud
9’
for
the
CFO?
The majority of CFOs feel
One third of CFOs consider
that it is the CIO that should themselves responsible for
take the lead in
taking the lead in
implementing a cloud
computing solution... implementing a functional
and cost effective cloud
computing solution. The
majority feel, however, that
it is the CIO who should be
held responsible for taking
the lead, and changing ITʼs
internal charging model to a
pay-as-you-go type
framework. Over ten
percent felt that the CEO
should take the lead.
Many CFOs are not yet
A high percentage of CFOs
aware that cloud computing were not aware that cloud
is a green technology...
computing is a green
technology.
Cloud computing can save
energy and money. When
an organisation requires
additional computing
power, a cloud computing
set up can draw on its
additional computing power
and resources, just when
itʼs needed. Energy and
other associated costs for
running servers the rest of the time can be avoided. Cloud resources provide a
reserve that can be allocated without the need to pay for the resource sitting
idle in one fixed location. Therefore, cloud computing enables an
organisationʼs IT infrastructure to be far greener than it is currently.
To
know
more
about
cloud
computing
please
visit:
http://www.microsoft.com/india/cloud/
9

10. The
Economics
of
the
Cloud…
‘Cloud
9’
for
the
CFO?
Appendix
List of respondent companies
1. ABB Limited
2. Abu Dhabi Commercial Bank (ADCB)
3. Alok Industries Limited
4. Bharat Petroleum Corporation Ltd.
5. Bosch Chassis Systems India Ltd.
6. Ceat Ltd
7. DCM Shriram Consolidated
8. Ericsson India
9. Essar Projects (I) Ltd
10. General Insurance Co. Ltd
11. Govt. of India
12. HCL Infosystems Ltd
13. Infosys Technologies Limited
14. Infrastructure Leasing And Financial Services Ltd
15. Ispat Industries Limited
16. JSW Steel Ltd
17. Maharashtra State Electricity Distribution Co. Ltd.
18. Mother Dairy
19. Punj Lloyd
20. Reliance Comm
21. Suzlon Energy Ltd
22. Tata Chemicals Ltd.
23. Tata Consultancy Services
24. The New India Assurance Co Ltd
25. Toyota
26. Voltas
27. Wipro
10