A journey of a thousand miles begins with a single step. —Lao-tzu
Cloud computing is real and it’s here to stay. If there are any lingering doubts about the increasing role and presence of the cloud in the enterprise, here are some facts and figures worth considering about the current and future state of the cloud:
- According to IDC, by 2015, one of every seven dollars spent on packaged software, server, and storage offerings will be through the public cloud model, representing a compound annual growth rate of 27.6% since 2010.
- According to Gartner’s recent survey of more than 2,000 CIOs, cloud computing (IaaS, PaaS, and SaaS) ranks third (behind analytics and mobile technologies) in their 2013 agenda.
- 90% of Microsoft’s 2011 R&D budget of $9.6 billion was spent on cloud computing strategy and products, indicating a huge transition in how enterprise customers will deploy and consume IT services and infrastructure.
- 48% of U.S. federal agencies moved at least one workflow to the cloud following the new requirement that these agencies adopt a “cloud-first” policy.
These impressive facts confirm the shift in momentum toward the cloud, and they should serve as a wakeup call to IT practitioners that they must give the cloud the appropriate level of attention. It’s no longer a question of whether or not to use the cloud, but of how and when.
Also, something really interesting is happening as the cloud matures and evolves: It’s turning out to be the biggest gift that ever fell into the laps of IT, because it has the power to transform IT from a cost center to a value enabler and creator. However, there’s still a fog of mystique and vagueness about how to best engage the cloud and how IT should leverage it to support the business. This article offers a roadmap for drafting a strategy for a successful cloud adoption.
Why do I need a cloud strategy?
Creating a strategy based on your actual needs and requirements will make it easier to navigate the myriad of options in the evolving cloud ecosystem. The good news is that most IT organizations already have a mandate to evaluate the cloud for their IT needs; and although the natural tendency is to rush in and implement a cloud solution, you need to do your homework and due diligence first in order to understand whether the cloud is a good fit for your environment.
How do I go about creating a cloud strategy?
Your guiding principle should be to create value for the enterprise; your goals should be to optimize cost and find areas where the cloud can enable value creation; and your objective should be to make IT more agile and responsive to the needs of the business. My recommendation is to start small. Moving to the cloud can be a daunting and intimidating undertaking. Therefore you need a clear methodology to assess your environment and determine what applications can be easily moved to the cloud. The following seven steps offer a template for creating your cloud strategy.
Step 1: Inventory all your applications that IT manages: How many applications do you have? List all applications that are currently running in your environment, including both commercially available and custom applications. The outcome should be a comprehensive list of all the applications managed by IT. Don’t be surprised if there are hundreds of applications on the list.
Step 2: Determine whether each application is core or context (separating the wheat from the chaff): Building on step one, map each application on your list to the business process that it supports. If the application supports a key business process, then categorize that application as “core”; if it doesn’t, then categorize that application as “context.” The outcome of this exercise should be two lists: a list of core applications and a list of context applications. In general, about 60% percent of all applications are context.
Here are brief definitions of core and context to help you categorize each application.
- Core: Any activity that creates sustainable differentiation in the target market resulting in premium prices or increased volume. Core applications provide true innovation and differentiation. Core management seeks to dramatically outperform all competitors in the domain. An example of a core application could be a unique customer support system.
- Context: Any activity that does not differentiate the company from the customers' viewpoint in the target market. Context management seeks to meet (but not exceed) appropriate accepted standards in as productive a manner as possible. An example could be a tape backup and archival system.
Step 3: Identify the stage of the IT assets’ lifecycle: Is the target application due for a hardware or software upgrade any time soon (say, within the next 12 months)? The typical depreciation cycle for the physical assets is 3 to 4 years, so assets that are due for a software or hardware refresh may be perfect candidates for the cloud. The outcome of this exercise is a list of all assets with their retire/refresh dates.
The typical asset lifecycle phases are: plan, acquire, deploy, manage, and retire. Focus on assets that are in the “manage” and “retire” stages.
Step 4: Perform a technical analysis of the target applications: Assess the level of customization, amount of intellectual property, number of integration points, network connectivity requirements, and security that each target application contains or requires. You should be able to answer the question, what would it take to move this app to the cloud? The outcome should be a comprehensive document assessing the technical feasibility of moving this workload to the cloud.
Step 5: Perform a financial analysis of the target applications: Compare the cost of running the infrastructure on premise versus off premise. Be sure to include direct costs like staff, data center (space, cooling, power, and so on), software costs, maintenance, and support. The financial analysis should also consider the impact of a capex-centric budgetary process compared to an opex-centric one. These are not subtle changes, and it would be wise to consult with your finance team to make sure that IT is aligned with the company’s financial strategy. At this point you are beginning to build a business case, so naturally the outcome should be a business case outlining the financial pros and cons of moving the targeted IT applications to the cloud. An interesting concept to recognize here is that in the cloud we are no longer talking about “total cost of ownership” but “total cost of operations”, the new TCO.
Step 6: Evaluate whether the cloud can optimize cost and/or create value: This is a critical step in the process because you are now ready to determine whether the cloud offers an opportunity to optimize cost (expense reduction) or to create value (increase revenue). Remember that the goal is not just to move a workload to the cloud but to create value in the process. For example, take a backup/archive workload, typically considered a necessary expense. If you were to move this workload to the cloud, not only you are reducing cost (no more tape, dedicated hardware, software, or staff) but you are creating the opportunity to unlock the data and making it available to the business –turning dark/dormant data into an asset that can be used for analytics, dev/test and other use cases. This is the transformative power of the cloud, transforming an otherwise “context” application into a “core” and hence differentiating asset for your company.
Step 7: Engage your technical partners, vendors, and peers: After completing the first six steps, you’ll be in a better position to create a sensible strategy and start engaging your technology partners and vendors, based on your specific technical and business requirements. So, are you ready for the journey?
In my next blog we’ll talk about moving low-risk, high-impact workloads to the cloud.