The Art Of Cloud Persuasion: What Are Your Potential Customers Saying To Their CFOs?

For many companies, a move to the cloud often starts with a heart-to-heart conversation between the CIO and the CFO. And sometimes it's no easy feat to convince the company's financial leader that embracing a cloud services model is in the best interests of the bottom line.

Marcus Schmidt, director of product development at West IP Communications, has seen this exchange play out before, and he knows how difficult it can be for an IT professional who comes to the table unprepared. IT jargon doesn't do much good in the CFO's office.

"This conversation is one of the perennial topics we face as a cloud communications provider," Schmidt told CRN.

[Related: Selling Cloud Services: 5 Things You Should Never, Ever Do]

As with any other serious business discussion, it's a good idea for the IT pro to come into the meeting room armed with the data and well-conceived arguments that will help present a compelling business case. It also doesn't hurt to try to understand the mindset of the CFO and strategize about what he or she needs to hear before coming on board.

With that in mind, Louisville, Ky.-based West IP, a Unified Communications-as-a-Service provider, has put together some thoughts to guide IT professionals in the art of cloud persuasion.

"Really what it comes down to when you talk to the CFO is going to be a question of is that CFO's mindset more capex-averse or opex-averse," Schmidt told CRN.

"Opex is where the cloud shines," Schmidt added.

The full range of financial benefits of shifting the company's IT model from a one-time expenditure to recurring payments is often not well understood. Business executives usually make a simple comparison between the cost of entry into a premise-based solution -- the capital expenditure -- and the cost over the expected lifetime of that solution of paying for the cloud service instead.

The way they more rigorously formulate that comparison is by charting a depreciation curve for the on-premise product. That curve eventually intersects at an inflection point with the cost timeline of the hosted model. Market research suggests that inflection point usually happens around year six or seven, which is about the same amount of time that most on-premise solutions typically last, Schmidt said.

Which sounds like a good argument for on-premise infrastructure -- by year six or seven the purchased equipment has paid for itself, and if it survives beyond that inflection point and remains useful it starts looking like a great investment.

But it's an equation that oversimplifies the two models and yields a preliminary calculation that doesn't accurately assess the true total cost of ownership, Schmidt told CRN.

In other words, it isn't always apples-to-apples.

The more apt model for the CFO to consider not only compares costs over the life of a product, but also the uncertainty involved in accurately assessing long-term IT needs, as well as the changing workloads of an evolving company and workforce.

Most companies make big capital purchases with a best guess -- they don't know exactly where they will be years down the road. If they grow or don't buy enough equipment, they'll eventually need to get more. If they purchase too much, the equipment will be mothballed. The scalability of the cloud puts such problems to rest.

The reluctance of many CFOs to embrace cloud solutions stems from their lack of confidence in the technology's return on investment. So to ensure a fair comparison, another bit of advice from West IP is to veer the conversation to one about predictable expenses.

Next: Conveying The True Costs Of Owning Infrastructure

The depreciation curve for the on-premise solution often neglects to take into account the true costs of owning infrastructure, which includes expenses associated with upgrading firmware, installing patches, and the time, energy and effort that goes into managing a complex on-premise environment, Schmidt told CRN.

Contrast that with the fact that most cloud providers bundle maintenance and support fees into the monthly service charge, so the customer knows exactly what they will be paying down the road and doesn't need to fret about extra, unexpected costs -- music to the ears of most CFOs, Schmidt said.

The benefits of the cloud are even more pronounced for businesses that are seasonal, allowing customers to ramp up and down their level of service to correspond to their needs.

"We have a couple customers that are this way. One specializing in taxes and one that does lawn care and fertilizer," Schmidt said.

For those types of businesses, the argument to the CFO becomes even easier to make, he said.

Finally, Schmidt advises the CIO or IT administrator to ask the CFO if the company wants to keep up with the latest technologies and yield the benefits in productivity and employee satisfaction that come with staying current with technological trends.

"Cloud services can be upgraded faster and easier by the vendor to keep up with the latest trends," Schmidt told CRN. With on-premise technology, you're pretty much stuck for years with what you've purchased.

Ultimately, deciding between a cloud and on-premise IT solution is a decision unique to every company. There's no answer that's universally correct, but financial leaders should understand all the pros and cons of each course before choosing one or the other.

For the IT pro who knows a move to the cloud is the right call, West IP encourages emphasizing five points in that discussion: opex over capex, predictability, no extra costs, seasonal benefits and always having the latest technologies.

That argument might just turn the mind of a reluctant CFO, Schmidt told CRN.

This article originally appeared as an exclusive on the CRN Tech News App for iOS and Windows 8.