Comment A lot of noise is currently being generated around Cloud Computing and flexible IT infrastructures based on virtualised platforms.

There is no doubt that the technologies to be found at the heart of these types of solutions have matured considerably over the course of the last couple of years. However, both face significant challenges before any of the currently available offerings can be fully exploited by organisations.

Now if we instead consider using cloud-like solutions that are operated by the organisation itself, there are far fewer objections to overcome and this "service delivery" approach to IT is already finding favour. But beyond these considerations there is another, far more challenging, issue to be addressed for both for the cloud approach to IT service delivery as well as to the concept of employing a truly virtualised, flexible IT infrastructure to support business operations across the entire range of services delivered, and this concerns the models of IT budgeting in common use today.

Most IT departments operate on the basis of budgets that are fixed in advance for the following year. The budget may be added to on a project by project basis but by and large the major areas of expenditure are identified in advance and funding limits put in place. It is readily apparent that such IT financing models are ill-equipped to cater for much variability.

In many organisations these out of date budgetary models may also interfere with attempts to manage IT resources as a whole rather than on the application or project terms that dominate infrastructure equipment acquisition today.

It is clear that traditional models for IT budget setting and management are focussed squarely as cost control metrics. This is not suitable if the potential flexibility inherent in fully virtualised IT infrastructures are to be realised and, by no means incidentally, thereby be utilised to deliver the full business value potentially available through effective IT usage.

Against this background, organisations must begin to show they can migrate to value based IT funding to be in a position to reap maximum business benefits that modern IT should, and can, deliver. This poses challenges that far exceed anything posed by even the most complex IT technology project.

Freeform Dynamics is a community oriented industry analyst firm. It is The Register’s research partner and all of its published output, including reports based on large scale telephone research and feedback from the Reg Technology Panel, is available free of charge from www.freeformdynamics.com.

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