Saturday, June 15, 2013

CIO Debate: Can The Cloud Cut Your Business Costs?

More and more CIOs are crafting their cloud strategy, but before pushing their ‘cloud envelope’ further, understanding the clear business goals is first things first to watch over the cloud, and well-planning is half way to success.

1. A Clear Business Case Justification for Cloud 'Movement'

 It is very important that any business considering the cloud ensures that they have a clear understanding of how they want to use it in their business and that they complete a detailed business case involving ALL areas of the business.

  • The business case should look into all impacted aspects (integration, feasibility, security, connectivity, transformation, service quality, etc.) and not only get captured by the cloud glam light and foresaid benefits. Understanding clearly all these aspects will ensure that a business selects the best solution for themselves (private, hybrid, public), otherwise, you could see your business having to justify higher cost spend instead of presenting cost savings. 
  • Dig Deeper and Understand all Aspects. There are obvious benefits that can be obtained, however, there are also important costs that businesses need to assume which might not be so obvious (transformation, integration, feasibility). You need to dig deep and understand all aspects of how your business will use and benefit or interact with the cloud solutions as you may find that you have to weigh initial investment costs against the other benefits such as flexibility, long-term savings, feasibility  

2. Can Cloud Cut your Business Cost 

The decision should not be based on costs alone; the decision should be based on user requirements.  It can only be answered on a case by case fashion by comparing the TCO of using an IT department internal to a business unit, to an internal shared service organization.

  • The costs will be affected by varies factors,  such as how many users the service is amortized over, the structure and variety of service units offered, the desired level of warranty, the currency and tax implications, the pricing model, fixed and variable costs, and so on. Where the cloud has the possibility of saving money is where the load on your infrastructure is peaky and predictable. On-premise you have to provision for more than your biggest peak even though your normal throughput is much lowered. Where the cloud comes in is that your on-premise capability can be slightly higher than your normal throughput and your peaks are burst into the cloud 
  • Cloud helps your first and foremost to turn CAPEX into the variable cost, which makes your business more flexible and agile, financially, technologically and from a business modeling perspective. Because Cloud comes in multiple forms, from private, over hybrid to the public, in itself, it offers lots of flexibilities, companies never had before. It's a game change, further, for any organization lower CAPEX makes sense as one gets the latest technological spread without really buying it and near zero lead time for implementation. However, in the longer term and with the kind of business, type of data which needs to be generated/ retained will determine the cloud benefits proposition as the requirement may outgrow the cloud service provider limits necessitating bigger providers having larger technological breadth. 
  • Enterprises need to be realistic about the kind of savings that can be found in the Cloud. In that other example of disruptive technology, distributed processing, lower costs of adoption were ultimately balanced by the higher total cost of ownership (TCO) including costs of management complexity (server sprawl). Cloud's key differentiator is flexibility and scale. Is cloud cheaper? It depends on a number of factors such as
    -- application traffic volume, load variability and needed to compute and storage capacity
    -- components and time period over which one is measuring total cost of ownership
    -- service level commitment
    -- security and privacy
    -- economies of scale of the user and the vendor  

3. More Cloud Benefit 

 Any brainstorming about IT should begin with the organization and its context; it's strategic and tactical objectives, competitive advantages, as well as core competencies. Therefore, the answer is where are your total benefits vs. total costs in the long run? Does it benefit you and your firm presently, or in the future? This is where the CIO must bring the beacon, with full "what is" spreadsheets or databases; a question that should have been decided and implemented by now. Where, when, and how are you now? Where, when, and how will you be in the future? It should always be remembered that each business is different and the cloud is not a panacea for everybody's problems

  • You enable your workforce to be more independent and responsive to your clients needs by allowing them to self-serve cheap computing environments on the cloud to take off the ground small ideas that can turn out to be big and make profits.  You will also increase client satisfaction and will have opportunity innovate and to develop new services that weren't possible without spending up-front capital investment. So in the short, medium or long-term, you will have a more agile and responsive business that doesn't have to go through the intensive bureaucratic process of having business cases approved to do anything!  
  • The cloud is the way to go. You can focus on innovation rather than maintenance only. There are so many mature cloud infrastructure providers that the risk factor is minimal. You still must have a strong technical staff. The only difference is that they will now focus on business processes and another high end arena to differentiate the business. For cloud evaluators and adopters, capital cost savings and rapid application deployment are strongly positive reasons for adopting cloud solutions 
  • Cloud will help business become more agile, resilient and elastic for the longer run though the lack of standard, security, integration., etc are still main concerns; from one of comprehensive global survey reports, the top driver going to cloud
    a. Reduced cost
    b. Reduced time to market
    c. Operational efficiencies
    d. Free up data center space
    e. Avoid operational expenses, preserve capital  
Cloud computing is a new consumption and delivery model inspired by consumer internet services, which includes on-demand self-service, ubiquitous network access, location independent resource pooling.  Leaving aside the cost issue, "Cloud" offers flexibility, elasticity, and agility. etc. But cloudification is not for efficiency only, but to encourage IT doing more with innovation, and help the business become more agile and resilient.


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