The present decade will go down as the realization of the cloud.
Although the previous decade tends to be recognized as the decade of the cloud, a few SMBs popularized the public cloud due to adoption a few years earlier, slowly gaining momentum.
With typical IT organizations spending a significant part of their annual budget on IT infrastructure, it’s reported that shifting data management and processing to the cloud can save them between 10–20% of their total budget.
Together with the competitive advantage the cloud offers, below are five insights adopters should consider from a cloud economics POV.
1. Identify Cost Savings
While few will dispute the cost-saving benefit of the cloud, there must be a compelling business case that clearly defines its value to your organization including hard and soft benefits.
Every company determines what cloud ROI means to them. However, beyond the arguments for or against capital expenses (CapEx) versus operational expenses (OpEx), SMBs and start-ups may simply adopt a pay-as-you-go model, paying only for what they use, when they use it.
For large enterprises, the decision may not be so simple.
Larger organizations will require additional investigation to identify and make the right economic decisions, detailing operational cost and benefits.
For businesses, the cloud presents an opportunity to break away from the perceived high-cost, slow-to-respond typicality of most IT organizations.
2. Defining Hybrid Cloud Economy
As opposed to a black-and-white decision between public and private clouds, many organizations find a hybrid of the two makes economic sense.
When it comes down to it, the main difference between public and private cloud economies is the burden of demand and supply as well as the scope of infrastructure use.
In the public cloud, the user based on demand will determine how much the provider will supply. The private cloud is more of an enclosed economy where the user itself based on demand will have to create the supply.
Not all businesses will fancy the hybrid cloud option, however, a comprehensive cloud strategy should offer IT leaders and CIOs insights to which offer the best TCO (Total Cost of Ownership.)
3. Quantify Agility and Utilization
Although TCO, CapEx, and OpEx are major factors to consider for optimal cloud economics, the greatest business value the cloud offers is agility and scale of user utilization.
IT execs need to assess CSP (Cloud Service Provider) infrastructural capabilities to scale up and down to support business needs on demand.
Cloud agility reduces the need to wait for software and hardware procurement and installation, offering users the ability to quickly solve business problems.
With this feature, businesses can venture into new markets, better retain new customers, avoid compliance issues, and move as fast as they need to.
Typically, high utilization requires higher IT spending, however, depending on your service setup, the cloud offers significant savings near 100% utilization and virtually infinite agility.
4. Increasing Developer Autonomy
The benefits of cloud computing have become more evident through the years that in 2014 alone, nearly 50% of business-unit-aligned developers were already building apps in the cloud according to Forrsights surveys.
As more programmers consider both public and private clouds top infrastructure priorities, IT executives need to evaluate different cloud architectural frameworks to increase developer autonomy and speed.
Not only will this optimize cloud utilization and spending, but businesses will better meet customer-related cloud expectations.
Traditionally, app development teams required feasibility studies, manpower and IT assessments as well as manual approval for resources before development commenced.
The cloud took care of that as the environment is readily available with flexible price models. What took weeks and months to prepare can now commence in days.
5. Define Your ROI and TCO
How should IT leaders price their cloud options? — Ideally per unit-cost for each type of service.
Beforehand, prices should be generated after a full TCO (Total Cost of Ownership) analysis. A TCO analysis includes the total cost of the IT estate: hardware, software, licenses, app development, maintenance and support, data centers, power, and backup/data recovery capabilities.
However, whereas TCO determines your spending and savings, ROI (Return on Investment) determines what business value is generated taking your TCO into account.
Beyond the hard savings a TCO might reveal, soft benefits often overlooked in ROI calculations include cloud agility, improved developer productivity, speeded time to market and other intangibles.
It’s critical you understand and define your ROI and TCO to get the full value of the cloud.
In conclusion, to optimize your cloud-based platforms, you need periodic cloud analytics and reporting.