Finance in the Cloud: Why CFO's Should Love Virtualization

Welcome to the first edition of finance in the cloud.  This will be the first of many posts in what I hope will be an informative and interesting series.

First, I'd like to introduce myself.  My name is Chris Locke and I am the CFO of SingleHop.  I have been a Hopper since May 2012.  Nearly 20 years into my career I feel rejuvenated and cannot wait to get to my desk in the River North area of Chicago every morning.  During my career, I have worked in public accounting, consulting, and I have been the CFO of publicly traded, family-owned and private equity owned businesses.  I have been involved in growing businesses, turnarounds, buying businesses and selling businesses.  I couldn't be more excited than to be at SingleHop as we work to grow our business while helping our clients to maximize their investments in IT infrastructure.  I also am excited to be at a company that is well positioned in a high growth industry that is changing the way that all businesses approach IT investment and management.

Over the course of this blog I will share my thoughts on finance, accounting, and business intelligence as they relate to our business, the IaaS and cloud computing industry and our clients.  I hope you will find my thoughts interesting and helpful.

I will start Finance in the Cloud by sharing my thoughts on how IaaS and cloud computing impact a business from a CFO's perspective.  In almost every case, decisions to modify a company's IT infrastructure by moving to the cloud will go through your CFO's office.  This blog will help you make the arguments you need to make to get your CFO's stamp of approval and buy in to your cloud strategy.  Today, I will start with how to explain virtualization to your CFO.

Why CFO's Should Love Virtualization

Let's be frank, most CFO's don't understand half of what the IT team is talking about.  The seismic shift that is occurring in IT infrastructure options is difficult for IT professionals to keep up with, let alone someone who does not deal with it every day.  In this case, when presenting a cloud option to the CFO, you should start by selling him or her on the benefits of virtualization.  Virtualization should strike a strong chord with the CFO as it is the epitome of asset utilization.

University of Michigan published a practical example of the cost savings of virtualization
University of Michigan published a practical example of the cost savings of virtualization

Most CFO's are now comfortable with the legacy IT model.  A department needs an application.  That application requires software.  That software requires servers.  Maybe one, probably a few: an application server, a database server, a web server.   The company must outlay the cash to buy those servers.  Each piece of equipment has been configured to accommodate the peak work load - so no one will have service interruption.  But we all know that this is overkill.  While each server has a peak workload, the reality is this generally doesn't all happen at once.  Or if it does, it's easy to find a similar application design in your company that requires similar workloads at different times.  Why have two servers that while having peak workload times, sit idle most of the day?  Through virtualization, the workloads can be shared by one server or configuration instead of two.

While CFO's might not inherently understand server virtualization, they do understand asset utilization and leveraging fixed and capital costs.  For the cost of one configuration, plus some virtualization software, you can double triple or more your asset utilization.  The return on investment in such a scenario is significantly higher than if separate environments are deployed for each application.  Now you are taking like a CFO!

The first step in convincing your CFO is to fully explain virtualization - it will pave the way for the next topics I will address and have the CFO as one of the strongest proponents of your cloud strategy.

Thanks for your time and ill see you soon to discuss the next topic for finance in the cloud - the benefits of outsourcing.

Additional Reading

TechNewsWorld: A Primer on Virtualization

SearchCIO: Virtualization Basics

Small Business Computing: What is Virtualization, and Why Should You Care?

Simple Talk: Price Differences Between Standard and Virtualized Environments in a Typical Office