Blog: Demystifying Cloud Economics – Top 3 Considerations for a Valuable Migration
As more CIOs get educated about the numerous advantages, Cloud could bring to their business, what they lack is the coherent understanding of how to carry out the transformation without making their existing IT infrastructure more complex, fragmented, and cost-intensive. For any organization to derive the highest value for its business, it must consider the long-term ROI of Cloud by building a structured and tactical migration plan.
Businesses must also understand that Cloud isn’t a matter of merely “lifting and shifting” the on-premise applications and data to cloud platforms. The process is a complex one. It requires companies to build new capabilities to be “cloud-first” environment. It also requires businesses to work with an overall framework that defines the Cloud journey and associated ROI. This framework will not only guide decision-makers to make appropriate, balanced, and risk-aware Cloud choices but also give them a holistic view of the overall economic impact of Cloud migration. The framework provides CIOs and CFOs clear visibility into cost reduction and the benefits associated with productivity and agility. A Forrester Consulting study found that “cost complexity is the largest source of confusion and misaligned expectations” when an organizations plan is moving to Cloud.
Lay the Foundation Right – TCO Analysis
Motifworks and Microsoft Cloud Economics Team have developed a unique Solution Assessment program to support customers as they plan to migrate their workloads to Azure Cloud—with a sole business objective to eliminate risk, cost, and administrative overhead of building out on-premise. This assessment program helps businesses create an inventory of the current resources, further quantifying the size and scope for Cloud migration.
Whether you plan to shift the IT spend away from CapEx and more on OpEx or part of the plan is to retire end-of-life infrastructure, it is essential to know the assigned costs for each of the existing infrastructure. A holistic solution assessment equips businesses with an actionable roadmap comprising specific financial metrics, including TCO and ROI based on comparisons with your current costs to evaluate and identify the long-term gains. Developing a base level TCO model remains a prerequisite during the pre-migration stage—for two reasons, from an economic point of view—first, it will help businesses gauge several cost-saving opportunities that Cloud would bring, and second, it will better quantify the value of success once you start moving to Cloud.
Businesses tend to underestimate the costs associated with Cloud usage and migration, translating into unpredictable costs—specifically in pay-per-use models. Solution assessments cut the ‘Cloud chaos’ and help businesses plan, evaluate their Cloud options, and put together a budgeting process for a Cloud-first mandate, further maximizing investment and improving QoS of the infrastructure environment. It also maintains a lean IT organization and eliminates overprovisioning of infra and IT services.
Don’t Undervalue ‘Indirect’ Savings and Business Agility
Very few will dispute the hard cost savings in Cloud such as reduced spending on hardware, software, storage, operational costs, and overall operations-oriented personnel—costs that are typically easier to identify and quantify. On the other hand, indirect or soft savings are more complicated to quantify accurately; however, can be as valuable as Cloud’s hard savings. Clearly defined soft savings in terms of increased developer productivity, improved employee and customer satisfaction, and ability to align new opportunities into existing business processes among others will help in creating a more cogent business case for Cloud adoption.
On the other hand, agility remains the most underdefined value of Cloud. If you define the value of Cloud in terms of your business being more agile—specifically in today’s disruptive market—you quickly get to the value numbers, you envision. Studies have revealed a direct link between cloud computing and business agility. Since, greater and more lasting cost reduction, faster revenue growth, and effective risk management remain some key benefits of agility, CIOs need to deploy Cloud’s best practices to ‘transform their business’ and not just as a weapon to drive their IT strategies. Moreover, as companies move ahead of SaaS, CIOs are looking to leverage a modern technology platform that enables IT to deliver new products and services to users and global customers by using PaaS and Web Services available in the Azure Platform.
More than the ‘Traditional’ CapEx v/s OpEx Debate
While it remains crucial to assess the current on-premise application and infrastructure maintenance costs that include indirect and direct costs, businesses must consider the ‘blind spots’ and cognitive biases to avoid making any ‘irrational’ decisions. No visibility with respect to timeline considerations, absence of a full dependency plan, and limited knowledge of technologies that help achieve the Cloud goals are some major blind spots that require deliberation to derive sizeable value for your business.
There is more to Cloud economics than the CapEx and OpEx debate. Factors such as the position of an organization within the IT lifecycle, TCO, and other transformation costs including application development, migration planning and execution, talent re-skilling, and lock-in period need to be weighed for a winning Cloud migration journey.
Cloud economics is an ongoing process. Moreover, as the spend on Cloud gets big in the coming years, businesses need a more sublime outlook towards Cloud migration. Companies must not shy away from investing in services that not only optimizes and reduces your Cloud spend but also tracks spending, raises the alarm through abnormal consumption patterns. Organizations that come up with a dedicated cloud cost management and optimization framework, as opposed to an ad-hoc optimization model, will emerge winners. Build a comprehensive TCO baseline basis your current needs and develop the roadmap from there.
Commit yourself to more extended duration models for running the workloads to increase cost-saving compared to the regular Pay-as-you-go model. Based on the AHUB and 3YR Reserved pricing models, Motifworks noted an average 37% savings across multiple clients. The C-suite understands the criticality of partnering with a cloud services provider that can deliver the right people, process, and technologies – ensuring optimized cloud consumption, like Motifworks.