Context
This is a simple question, but it is hard to provide a
simple answer. It has been asked by all companies plan to initiate their cloud
practices.
There are various cloud cost models on the market, including
those from AWS, Azure, Gartner , etc. However, none of them can provide a simple
answer to the question. The only practical right answer is: depends.
It is said that one of large cloud providers hired a PhD in
finance from Harvard. All s/he does is to figure out, make and tell a financial
case/story for the company’s potential enterprise customers.
Debate on “Whether Cloud
Saves IT/Business Cost”
When I led enterprise cloud practice initiations during consulting
engagements with large companies, the debate on "whether cloud will save IT and
business cost" was always on the table. Quite often the debate was about comparing
“apple” with “orange”. The various stakeholders were never able to achieve an “agreement”.
A typical dilemma is: some cloud-promoters may argue that
cloud will enable IT only pay for what they need without large investment
upfront. However, some IT leaders from infrastructure or data center team may
argue that the company already invested $20M on servers. We can provide what IT/business
needs for “free” by utilizing those servers, but it will cost “more” if you use
“cloud”. Hence, “apple” and “orange” continue to debate and never be able to
really convince each other.
The current common practical technique to address the debate
is:
·
In long term, cloud is the right directional way
to go.
·
In short term, cloud may cost more.
Then, “apple” side and “orange” side both feel “happy” to
move the initial cloud practice development forward. However, the debate will
continue but the focus will switch to how to split the strategic and tactic IT
investment budget on “cloud” and “local data center”. It becomes a typical “budget
discussion”.
Although it is practical, it only aligns the various
stakeholders together in short term. It is lack of clear and strategic
agreement on cloud practice, which is essential for a company’s success in
digital era.
Solution to Address
the Debate Practically and Strategically
In fact, “whether cloud saves IT/Business cost” is really a “wrong”
(or misleading) question, although it is a common-sense question in IT and
business. The right question should be: Whether cloud makes IT or business more
efficient and effective?
In business (including IT), the real challenge is never about
“cost”. It is more about, given the investment (cost), how much more value (profit)
the business will gain. If IT cost more but it creates much more value to
business, the “cost” is not an issue. The “cost” becomes right valuable “investment”
for business. Hence, it is more about whether IT can become more efficient and
effective with cloud per business needs, less about whether IT with cloud will cost
more or less this year than last year.
Therefore, the question “whether cloud saves IT/Business
cost” should be changed to “whether cloud makes IT/business more efficient and
effective”. Then the answer is a simple: YES. Although IT with cloud may have
higher budget/cost than previous year. IT with cloud will create more values to
business with less waste and debt. Cloud creates strategic and tactic values
for business in a more efficient and effective manner.
·
Efficiency:
o
Cloud enables a company only pay for what
business needs through trading capital expense for variable expense
o
Benefit from massive economies of scale
o
Stop guessing IT capacity
o
Stop spending money on running and maintaining
data centers
·
Effectiveness
o
Increase enterprise productivity, speed and
agility
o
Go global in minutes or hours
·
Innovation
o
Cloud enables a company to quickly gain new
digital capabilities (e.g. AI/Machine Learning, Big Data) which are critical
for a company’s success in digital era.
o
Faster digital innovate/transform
§
Approaching new digital techniques /capability
quicker from cloud
§
Freedom to try and fail with manageable minimum
cost until success
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