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Cloud Economic Value: Where is it?


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Nick Barron

Product Manager - Cloud Services

Here at Softcat, we discuss cloud technologies with many of our customers and are seeing increasing evidence of a move to a 'cloud first' strategy for many. 

With the vast array of functionality now available from cloud even the most complex tasks can be realised, delivering true digital transformation in ways previously thought unimaginable. But the most frequently raised question is, “What will the cost of using cloud be to my business”?  


Cloud economics – The market analysts

Cloud economics has been highlighted as one of the major areas of focus in 2017 by leading industry analysts, and from what we are seeing this is certainly true. Those same analysts also state that using cloud could cost your business money, or save your business money, further adding to the overall challenge of understanding what the true cost of cloud will be to an individual business!

Changing technology landscapes

We know that using cloud is easier than ever before, with millions of transactions per hour and new services being provided globally every single day at unprecedented levels.

In many cases, due to the simplicity of provisioning to cloud, many organisations have simply moved existing workloads 'as is', and although we are not saying this is wrong, we are certainly asking whether this is the right mode of transformation for each individual business (read more in our previous blog). 

Others have seen shadow IT services emerge, inadvertently provisioning ungoverned workloads that create cost sprawl and security risks due in most part to a lack of understanding of how cloud architecture works, and how this should be managed moving forward.

Here at Softcat, we believe that cloud can save you money, provides scale, offers agility, gives extra security and delivers the 'speed to market' that is so necessary now for businesses and organisations to remain competitive. But we believe that it is essential to invest in the research at the very beginning of the process. This requires the right engagement model that will help drive the right decisions to support the right cloud economics.

Top tips to achieve the right economic results

Softcat believes that to achieve the right economic results there are 5 main areas to consider when making your decision. Here are our tips:

  • Know what you have and how you spend it today - Work out the existing cost of IT today including 3rd party contracts, associated software support, data centre and staff investments. Detailed cost analysis of current IT with the aim of understanding the overall cost is critical for a successful cloud transformation.
  • Understand your travel plans - You want to get to cloud but are not sure how to get there. Take the time to define and consider each application workload and how they can or cannot work in cloud. Is it a lift and shift? Can an application be recoded as cloud native? Can it move to PaaS (platform as a service)? Can software move to a 'per user' model? Should it stay on premise?

Work to define application workload placement but remember when planning, the transformation services will cost money. In some cases, it could end up being the largest investment due to the potential DevOps culture change that may ensue.

  • To CAPEX or to OPEX – In cloud you will move from capital expenditure (CAPEX) to operational expenditure (OPEX). This may require a change in finance processing and operational models. Make sure you understand how this will impact your organisation as it will when the bill comes in. If you want to manage long-term cloud spend you do have options, such as Amazon Web Services reserved instances or Microsoft Azure's ability to allow spending commits via certain license agreements. Review and consider these options as they could be cheaper in the long run but planning is essential.
  • Benchmark usage patterns - Understand when an application workload is used and when it is not. Cloud is a 'pay as you go' service. To find cloud savings look to create a flexible policy whereby resources are not always on if they don't need to be. Why pay for idle time? So be confident in understanding application usage patterns.
  • Monitor and analyse - Use new technologies to monitor and plug in the analytical tools to help make pro-active decisions when services are running in cloud. These tools and functions are available to manage spend, so use them. If you don't know how to use them, bring in an expert to help you. The investment of pro-active monitoring and the right advice will save you money in the long run.

How can we help?

Softcat believes that with adequate planning and cost governance there is an easy way of learning to understand what the real cost of cloud is to your business and in turn help to define the return on that investment. It is less about making IT in the cloud cheaper and more about making the services efficient to gain the most value from using cloud.

Softcat has a great team that really 'get' cloud and can help make it work specifically for you, so get in touch using the form below or talk to your Softcat account manager for more details.