One of the key principles in economic investment curricula is the principle of “sunk costs.” Bluntly, this means if you have invested in a proposition which you know is losing… don’t throw good money after bad.
When it comes to IT strategy, this same principle applies. Traditionally, the extremely high cost of capital would form a gravitational drag against other interests and distort the original business case, such as SAN’s, mainframes, etc. The classic example is the purchase of a SAN. The high cost of capital would mean that the company would need to load the decision with as much usage as possible (marginally justifiable) in order to maximise ROI.
In a similar vein that follows “Pork Barrel Politics,” quite often any RFP looking to purchase a service from a supplier can become horribly overloaded with high expectations, which can ultimately compromise the potential of benefit. Either the business sees the cost of the potential solution and needs to load with usage (as above). Or given the difficulty of procurement, the business sees this as a chance to get what it wants and will load extra requirements upon it, which often then will change the selected target platform adversely.
As I mentioned before, the great news is if you are considering cloudsourcing, then capital investment in hardware and software is effectively off the table. It is now possible for CIO’s to make rapid and agile decisions based on the business service imperatives rather than asking for one massive investment and then justifying it by loading it with every possible additional scope usage.
My final thought here is this:
