Jeff Aden is Co-founder and EVP at 2nd Watch.
When planning a move to the cloud, CIOs often worry about if and how legacy applications will migrate successfully, what level of security and archiving they need, whether they have the right internal skills, and which cloud providers and toolsets are best.
There are also a number of business issues to consider, such as the changing nature of contracts and new considerations for budgeting and financial planning. For instance, transitioning from large upfront capital purchases, such as data center investments and software agreements, to monthly service fees, can help lower costs related to the management and maintenance of technology, much of which is underutilized. There’s also no need to deploy capital on unutilized resources - all positive changes. Yet pay-as-you-go pricing also brings a change in how IT is purchased: The CFO will need processes for monitoring usage and spending, to prevent so-called “cloud sprawl.” Here’s our take on the top considerations beyond technology planning for making a smooth move to the cloud.
Working with Existing IT Outsourcers
A recent survey by Gartner noted that approximately 70 percent of CIOs surveyed will be changing IT vendor and sourcing relationships over the next two years. The primary reason for this shift is that most traditional IT service providers aren’t delivering public cloud-related services or products that are suited for the transition to a digital business. Dissolving or changing relationships with longtime IT partners will take some thought around how to structure the right business terms. For instance, when renewing contracts with current vendors, companies may seek to add a clause allowing them to bifurcate between current services (hardware/colocation) and emerging services such as cloud. This will allow the right provider with the right skill sets to manage cloud workloads. If your company is within an existing contract that’s not up for renewal soon, look for a legal out, such as “default” or “negligent” clauses in the contract, which would also allow you to hire a firm with the appropriate skill set and expertise.
Limits of Liability
This contractual requirement gives assurances to the customer that the vendor will protect your company if something goes wrong. Limits of liability are typically calculated on the number of staff people assigned to an account and/or technology investment. For instance, when a company would purchase a data center or enter into a colocation agreement, it required a large CAPEX investment and a large ongoing OPEX cost. For these reasons, the limits of liability would be a factor above this investment and the ongoing maintenance costs. With the cloud, you only pay for what you use, which is significantly less but grows overtime. Companies can manage this risk by ensuring escalating limits of liability which are pegged to the level of usage. As your cloud usage grows, so does your protection.
As mentioned earlier, one advantage of on-premise infrastructure is that the costs are largely stable and predictable. The cloud, which gives companies far more agility to provision IT resources in minutes with a credit card, can run up the bill quickly without somebody keeping a close watch of all the self-service users in your organization. It’s more difficult to predict costs and usage in the cloud, given frequent changes in pricing along with shifts in business strategy that depend upon easy access to cloud infrastructure. Monitoring systems that track activity and usage in real time, across cloud and internal or hosted environments, are critical in this regard. Additionally, tools that allow IT and finance to map cloud spending to business units and projects will help analyze spend, measure business return, and assist with budget planning for the next quarter or year. Cloud expense management tools should integrate with other IT cost management and asset management tools to deliver a quick view of IT investments at any moment. Another way to control spend is to work with a reseller. An authorized reseller will be able to eliminate credit card usage, providing your company with invoicing and billing services, the ability to track spend, and flexible payment terms. This approach can save companies time and money when moving to the cloud.
One way to maintain control while still being agile is to implement a service catalogue, allowing a company’s security and network teams to sign-off on a design that can be leveraged across the organization multiple times with the same consistency. Service catalogues control which users have access to what applications or services to enable compliance with business policies, while giving employees an easy way to browse available resources. For instance, IT can create a SAP Reference Implementation for a test environment. Once this is created and signed-off by all groups and stored in your service catalogue, it can be leveraged the same way, every time and by all approved users. This provides financial control and governance over how the cloud is being deployed in your organization. It can also move your timelines up considerably, saving you weeks and months from creation to deployment.
With any change in technology, there is a required shift in staffing and organizational changes. With the cloud, this involves both skills and perspective. Current technologists regarded as subject matter experts, such as SAN engineers, will need to understand business drivers, adopt strategic thinking and have a focus on business-centered innovation. The cloud brings tools and services that change the paradigm on where and how time is being spent. Instead of spending 40 percent of your time planning the next rack of hardware to install, IT professionals should focus their energies responding to business needs and providing valuable solutions that were previously cost prohibitive, such as spinning up a data warehouse for less than a $1,000 per year.
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