The Cloud

Why CFOs Need to Think Vertically

To get the most out of new technologies, CFOs must manage the groups that drive IT performance to make sure they’re talking about challenges and co...
Timothy ChouNovember 12, 2012

If you’ve been around for a while (like me), you may remember the tagline Sun Microsystems used in the mid-to-late ’90s to market its thin client, diskless computing devices: “The Network is the Computer.” In many ways Sun did, in fact, provide the computers that powered the early rise of the Internet, although falling PC prices and cheap bandwidth eventually put a fat client device in every home and office, and the slogan, as well as the strategy, was abandoned.

Today, however, I’d suggest the phrase has a richer, timelier meaning. 

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Once upon a time, if someone asked to see your corporate computer, you’d take him to a special room somewhere in your building. It would have a raised tile floor (to accommodate the wiring and pipes for your cold-water cooling system), and, over the din of powerful air conditioners, you’d proudly show off your Big Iron, your IBM mainframe. 

Today, that mainframe has become the sum total of your compute, storage, data-center, and network resources. In other words, your data center is no longer a room you put stuff into. It’s the locus, either physical or virtual, of your compute and storage tied together with all of the other compute and storage devices and capabilities located in all the other data centers (wherever they may be) that house the data you access and use to run your business. (And you’d be wise to make sure there are at least two paths your business can follow to access each of those data centers. Think superstorm Sandy. You shouldn’t need more motivation than that.)

Unfortunately, most of us think in terms of buckets and act horizontally.  Your company probably has a network group within IT that selects from a wide variety of cloud-service providers, and another group, probably in your real estate organization, that concerns itself with the support and maintenance of your data centers. (By the way, the real estate group may or may not be focused on power consumption and its costs.  If you’re CFO of a company where the ratio of servers to employees is 0.1:1, this may not matter to you financially. But if you’re headed toward becoming an information-powered business with, say, a server-to-employee ratio of 10:1, then it matters a lot, both in dollars and your company’s carbon footprint.) And, most likely, you have a third group within IT to manage the compute and storage infrastructure. 

Chances are these three groups don’t talk to one another very much because when you’re organized and managed horizontally, they don’t have much in common. The real estate group focuses on finding low-cost locations, independent of the cost of power or the amount of network bandwidth your company will need to access the data center. The real estate group may also be unconcerned (or unaware) of performance latency problems, or even the safety of the chosen location. (Is it in Tornado Alley? Who cares as long as it’s cheap?)

Meanwhile, your network team is optimizing for low-cost data transit, and it’s not thinking about a disaster-recovery strategy. The IT group is selecting for lightning-fast servers, and it’s not worrying too much about the cost of power (which doesn’t come out of its budget) or the amount of network traffic that will be generated by a particular deployment. That’s the network group’s problem.

To use a car analogy, organizing your critical IT capabilities in this fashion is like having one group in charge of tires, another in charge of wheels, and a third group designing the suspension: all incentivized around different targets, each independent of one another.  Sure, the car will be able to move, but will it be optimal in terns of cost and performance? Only if you’re phenomenally lucky.

Recently, I learned that a large financial institution had merged its real estate and IT groups. Clearly, it’s beginning to think and act vertically, and all the groups real estate, network, and IT infrastructure will be forced to talk to one another and understand how one group’s actions will affect the others from the perspective of cost, performance, and security. So now if you want to purchase more compute and storage because your company has new products or services that require more juice to bring to market, that decision will be based not just on how big a discount IT purchasing can get from Dell or HP, but on where that compute and storage will be deployed, the impact the purchase will have on your network bandwidth requirements, and, ultimately, how much it will cost to manage the security, availability, performance, and change requirements of the compute, storage, data-center, and network environments.

The first generation of compute and storage cloud-service providers are already thinking vertically, and whether you choose to build your own data center or purchase the computing capabilities from these providers, you’d be wise to start thinking, acting, and managing vertically yourself because today, your network, like Sun said so many years ago, is the corporate computer.

Timothy Chou teaches cloud computing at Stanford University. He is the former president of Oracle on Demand and the author of Cloud: Seven Clear Business Models.