Why CFOs need to pay attention to ‘cloud neutrality’

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As the pros and cons of a modern cloud economy come into focus, financial leaders can define how a company’s cloud investment strategy will impact its financial health. 

Net neutrality — the idea that companies that provide access to the internet shouldn’t unfairly block, slow down, or interfere with traffic even if that traffic competes with their services — was a buzzy topic in the tech industry until its demise in 2018. 

As the dust settles on net neutrality, a new, arguably bigger issue looms: cloud neutrality.

Chief financial officers are uniquely positioned to help companies respond to cloud neutrality for several reasons.

First, CFOs play a vital role in aligning business and finance strategy for growth, while driving value creation by staying one step ahead of the market.

The future of data security is undoubtedly in the cloud. In a recent report by London-based consulting firm Deloitte, 48% of finance executives polled in a survey said cloud technology would be critical to the performance of their finance organization two years from now.

CFOs can help the rest of their organizations understand why moving data is essential to financial health.  

The power of the cloud

 

The cloud, whose physical manifestation presents itself in the form of racks of computer servers in a nondescript data center, has become the platform of choice for businesses to secure vital data, connect devices and power the economy.

By 2022, research firm Gartner Inc. projects nearly 60% of businesses will use an external service provider’s cloud-managed service offering, which is double the percentage of organizations from 2018. 

The multibillion-dollar cloud economy is owned by a handful of large tech companies like Amazon, Google and Microsoft.

These companies host their own competition by providing offsite storage and computing power to businesses that otherwise couldn’t afford the hardware to do those processes alone.

This privately-owned infrastructure is now essential to the modern internet economy. The internet’s reign has ended, and the cloud serves as its successor.

These tech giants controlling the cloud are perceived as (mostly) gentle giants, but when provoked, these tech behemoths could wield a powerful blow to startups, small- to mid-sized businesses and any company that disturbs them.

That’s not a bad thing. It’s just the reality of our increasingly digitized world.

CFOs keep the lights on

Just like net neutrality, there will be ongoing conversations about who should have access to this new economic driver. Ultimately, that power will belong to those who can pay the highest price.

Unlike the cloud, the infrastructure of the internet was publicly financed and subsidized.

For now, these cloud providers are content with the revenue generated from sharing their infrastructure. Cloud computing was a $227.8 billion market in 2018, according to Gartner.

But businesses — both small and large — need to realize their vulnerability if the landlords decide to turn on their tenants.

In other words, what happens if the Microsofts of the world decide to shut off the lights?

As companies explore the cloud’s potential impacts and business uses, CFOs have a unique opportunity to help define how a company’s cloud investment strategy will impact its financial health. 

So why should CFOs be paying attention?

The cloud is critical to the tech economy. Outsourcing storage and computing processes allows startups to grow at a fast pace with little overhead.

As companies migrate their data to the cloud, they see a return on investment in the form of reduced IT costs. The process also enables new strategies and business models, fresh product and service offerings, and innovative forms of revenue generation.

But control of the market for cloud services is consolidating under the few tech giants with enough money to keep the cloud in the sky (so to speak). 

CFOs should strategically plan cloud storage now because neutrality could be a factor in the near-term and few small- to mid-sized companies have the resources to replicate the cloud infrastructure.

What can CFOs do about cloud neutrality?

CFOs should be actively monitoring the cloud economy. Every business —regardless of whether it’s a certified “tech company” — is now a data company.

Most finance chiefs already assess which economic factors directly influence revenue and what signals they are sending about future sales. Cloud neutrality should be added to that list.

In summary 

The potential for tech landlords to slow, block or hamper the transmission of data is something to think about. There are few roadblocks in place to prevent big companies from turning on their tenants.

CFOs have the responsibility to forecast areas of vulnerability for their companies. Cloud investment is one of those possible vulnerable areas.

Sources: Forbes.com, Wired.com, Insidebigdata.com