By Lawrence M. Walsh, CEO and President, The 2112 Group
Overall business technology and telephony spending is somewhat of a mystery. Surveys and research reports often peg nominal IT spending around 3-5 percent of total revenue. But analysts assume that another 2-3 percent is spent by non-IT departments through discretionary budgets.
In IT parlance, such spending is often called “rogue IT" or “shadow IT," as it is not authorized by the IT department or paid for out of IT funds. Rather than going through the often laborious and time-consuming process of getting IT to adopt, acquire and integrate an application or service, LOBs will “go rogue" and buy IT or telephony services out of their own pocket.
Cloud computing is making rogue IT spending easier and more mainstream. According to a recent Forrester Research report, 56 percent of software-as-a-service (SaaS) purchases are driven by business groups to meet the specific needs of business processes and operations. Another 49 percent of industry-specific SaaS adoption – such as manufacturing logistics tracking and health care recordkeeping – is driven by business management rather than IT.
The Forrester report not only reflects that more non-IT budgets are being used for cloud computing, but the nature of who controls IT and telephony decision-making is changing too.
Cloud computing doesn’t require the heavy infrastructure such as data-center hosting, application integration and professional configurations. Many of the applications sought by businesses come ready to use out of the virtual box. Configurations and customizations in the cloud aren’t necessarily performed by in-house IT staff, but rather the cloud service providers, IT solution providers and consultants. This makes the acquisition and operation of cloud services far easier than hardware and software solutions.
Acquisitions are made easier by the economic model of the cloud. On-premises solutions build with hardware and software came with high upfront capital costs and required real estate to house the equipment. The cloud uses an operational expense model and requires little to no real estate. Business managers can sign up and start using a cloud service with little upfront costs and little impact on the operating budget.
The increasing influence of business managers in cloud computing decision-making means IT solution providers and telephony agents can no longer resign themselves to only talking with the IT departments and telephony managers. Technology services will need to engage with line of business managers to gain access to what will undoubtedly an increasing share of wallet in cloud spending.
Lawrence M. Walsh is CEO and president of The 2112 Group, a technology business advisory service that specializes in optimizing indirect channels and partner relationships, and principle blogger at Channelnomics. He’s also the executive director of the Channel Vanguard Council and moderator of the Channel Partners Cloud Convergence Council. He is the former publisher of Channel Insider and editor of VARBusiness Magazine. You can reach him at firstname.lastname@example.org.