Forrester's Advice to CFOs: Embrace Cloud Computing to Cut Costs

Surely by now you've heard the position that cloud computing is a great financial investment because of the money businesses save from not having to buy extra hardware and software infrastructure.

SAAS (software as a service) lets companies pipe applications and other software over the Internet, aka the cloud. Businesses pay for this software by the drink, and Microsoft trumpeted its cloud computing entrance this week.

Forrester Research has whipped up a new report that advises business managers on how to sell chief financial officers, those folks scrutinizing the bottom lines of your businesses, on cloud computing. The report aims to provide some respite from recession fears.

Forrester analyst Ted Schadler lists three key benefits to the cloud, starting with speed. SAAS enables businesses to get up and running in a flash. The analyst said a financial services firm migrated its employee portal to a cloud-based vendor and launched it in two months, while another firm he surveyed has spent the last 18 months building its employee portal in-house.

In short, the cloud is ready-made. Customers don't build; they subscribe and receive services—including anything from Web conferencing and hosted e-mail to enterprise applications such as CRM and HRM—immediately.

Two, he said businesses should ship IT tasks to cloud computing specialists, who "worry about the nuts and bolts so that you don’t have to." This enables the IT staff to focus on more important business processes.

Finally, he says CFOs should be attracted to the by-the-drink payment plans of cloud computing because it keeps cash in the bank longer.

Instead of buying hardware, software and consultants to set up and run applications, businesses can pay a cloud-based provider by the user by the month. Moreover, businesses pay for only what they use and can terminate the contract; classic on-premises solutions require businesses to pay with no certainty about the return on investment. That means more risk, which CFOs hate. Schadler noted:

"The financial benefit of paying by the month rather than upfront is great when times are good, but especially important during a downturn. And while cloud computing is not yet ready for many enterprise IT needs, cloud-based collaboration services are a viable option for most firms today. And Forrester believes that cloud-based application services will become increasingly important as the providers mature."

There are several collaboration platforms that charge companies per user per month, and while platforms such as Cisco Systems' WebEx Connect, IBM's Lotus Notes and Sametime, and Microsoft's SharePoint are as enterprise-ready as you'll find in the market, many can use the kind of maturing Schadler mentioned.

Google, for example, is slowly getting there, thanks to adding SLAs (service-level agreements) to core applications such as Calendar, Docs, Talk and Sites. A raft of startups, including Zoho, Socialtext, MindTouch, CallWave, DimDim, Yuuguu and Yugma, are all looking for more of the collaboration pie.

Salesforce.com, NetSuite, SugarCRM and smaller players such as Appirio can help with SAAS CRM and sales force automation. All of these providers are driving SAAS growth.

Not surprisingly, Gartner found that online collaboration and enterprise apps such as CRM are steering SAAS growth, propelling the SAAS market to surpass $6.4 billion in 2008, a 27 percent increase from SAAS' 2007 revenue of $5.1 billion.

Schadler has more advice on how to broker SAAS deals in the downturn, which you can read in his report. ZDNet's Larry Dignan adds his 2 cents in this post.