How a Cloud Infrastructure Can Save or Make You Money

How a Cloud Infrastructure Can Save or Make You Money

Before you left click that mouse to go to that other “work related” page, wait a few seconds while I explain what I’m talking about.  While there is a ton of hyped up, blown out and super hyperventilated information out there about how the cloud makes your life better, reduces your workload and ultimately makes your coffee and butters your toast, not much is said about how the cloud can help your company save or make money. Real money…not that kinda-sorta-maybe-coulda money, but real put-it-in-the-bank money.

Before I start my explanation, first let me say that there is no such thing as a free lunch and no one gets something for nothing.  The cloud, like any other technology or methodology in IT, requires CAPEX investment in order to be effectively utilized and have the desired benefits…and ultimately drive OPEX costs down over time (within the ROI horizon) or provide efficiencies that increase revenues.  No hocus-pocus, no magic…it takes careful thought and some hard work but, yes Virginia, revenue benefits and cost savings do exist in the cloud.  Of course you must calculate savings after all implementation expenses are accounted for…things like hardware and software acquisition costs, personnel and space requirements, training, etc.

Second, I am going to frame this discussion based on an internal, private cloud only (but many of the same characteristics exist for other types of clouds), as I just don’t have the space to explicitly differentiate here.

Third, I am going to compare costs based on a relatively mature “traditional” datacenter against the same datacenter but with a cloud infrastructure implemented and running in a steady-state. A traditional datacenter, in my view, is partially (<30%) virtualized with little to no automation or orchestration and is moderately managed from a holistic perspective.

Fourth, and my last condition before I begin my explanation, I am using the NIST definition of a cloud infrastructure (so no fancy bells and whistles) found here: http://www.nist.gov/itl/csd/cloud-102511.cfm.

OK, we’re all straight now, right?  Excellent. So how I’ll lay out the rest of this post is that I will first describe a couple of scenarios that exist in a traditional datacenter and then I’ll explain how they would be done in a cloud infrastructure. Last, I’ll point to where the revenue benefits are found or where costs are typically saved.

Time to Market/Value

  1. Traditional:
    1. A business owner or LOB owner decides they need an application built that will provide a new revenue stream to the organization so they describe, to a Business Analyst, what they want the application to do in the form of business requirements.
    2. The Business Analyst then takes those requirements and translates them to functional requirements (iterating with the Business as to end results required) and then uses those as the basis for the technical requirements which describe the supporting hardware and software (COTS or purpose built).
    3. A Technical Analyst or developer uses the technical requirements and produces a series of hardware and software specifications for the procurement of the hardware or software resources required to support the requested application.
    4. Once completed, a cost analysis is done to determine the acquisition costs of the hardware, any COTS software, an estimate of in-house developed software, testing and QA of the application, and the eventual rollout.
    5. The business analyst then takes that cost analysis and creates an ROI/TCO business case which the Business owner or LOB owner then takes to Senior Management to get the application approved.
    6. Upon approval, the application is assigned a project number and the entire package is turned over to Procurement who will then write and farm out an RFP, or, check an approved vendor list, or otherwise go through their processes in order to acquire the hardware and software resources.
    7. Approximately 8 to 16 weeks from the beginning of the process, the equipment is on the dock and shortly thereafter racked and stacked waiting for the Developer group to begin work on the application.
  1. Cloud:
    1. A business owner or LOB owner decides they need an application built that will provide a new revenue stream to the organization so they describe, to a Business Analyst, what they want the application to do to in the form of business requirements.
    2. The Business Analyst then takes those requirements and translates them to functional requirements (iterating with the Business
      as to end results required) and then uses those as the basis for the technical requirements which describe the supporting hardware and software.
    3. A Technical Analyst or developer uses the technical requirements and produces a series of hardware and software configurations required to support the requested application.
    4. Once completed, a cost analysis is done to determine the start-up and monthly utilization costs (chargeback details), an estimate of any in-house developed software, testing/QA, and the eventual rollout of the application.
    5. The business analyst then takes that cost analysis and creates an ROI/TCO business case which the Business owner or LOB owner
      then takes to Senior Management to get the application approved.
    6. Upon approval notification, the Developer group accesses a self-service portal where they select the required resources from a Service Catalog.  The resources are ready within a few hours.
    7. Approximately 3 to 6 weeks from the beginning of the process (up to 10 weeks earlier than a traditional datacenter), the computing resources are waiting for the Developer group to begin work on the application.
  1. Savings/Benefit:
    1. If the potential revenue from the proposed application is $250,000 a week (an arbitrary, round number), then having that application ready up to 10 weeks earlier means an additional $2,500,000 in revenue.
    2. NOTE: The greater the disparity of resource availability, traditional versus cloud infrastructure, the greater the potential benefit.

 Hardware Acquisition

  1. Traditional:
    1. A business owner or LOB owner decides they need an application built that will provide a new revenue stream to the organization so they describe, to a Business Analyst, what they want the application to do in the form of business requirements.
    2. The Business Analyst then takes those requirements and translates them to functional requirements (iterating with the Business as to end results required) and then uses those as the basis for the technical requirements which describe the supporting hardware and software (COTS or purpose built).
    3. A Technical Analyst or developer uses the technical requirements and produces a series of hardware and software specifications for the procurement of the hardware or software resources required to support the requested application.  The hardware specifications are based on the predicted PEAKload of the application PLUS a margin of safety (overhead) to ensure application stability over time.
    4. That safety margin could be between 15% and 30% which effectively means that the procurement of the equipment is always aligned to the worst case scenario (peak processing/peak bandwidth/peak I/O) so for every application, the most expensive hardware configuration has to be specified.
  1. Cloud:
    1. A business owner or LOB owner decides they need an application built that will provide a new revenue stream to the organization so they describe, to a Business Analyst, what they want the application to do in the form of business requirements.
    2. The Business Analyst then takes those requirements and translates them to functional requirements (iterating with the Business as to end results required) and then uses those as the basis for the technical requirements which describe the supporting hardware and software (COTS or purpose built).
    3. A Technical Analyst or developer uses the technical requirements and produces a series of hardware and software configurations required to support the requested application.
    4. The required configurations for the cloud infrastructure compute resources are documented and given to the developer group.
  2. Savings/Benefit:
    1. Because the hardware resources within the cloud infrastructure are abstracted and managed apart from the actual hardware, equipment specifications no longer drive procurement decisions.
    2. The standard becomes the lowest-cost, highest quality commodity class of server versus the individually spec’d purpose built(highest cost) class of server thus saving approximately 15%-50 of ongoing server hardware costs.
    3. NOTE: I mentioned this earlier but think it needs to be said again: savings become “real” after all cloud infrastructure implementation costs are recovered.

These are just two examples of where an internal cloud can specifically help an organization derive direct revenue benefit or cost savings (there are many more). But, as always, it depends on your environment, what you want to do, how much you want to spend, and how long you want to take to get there.  The best thing to do is ask your favorite cloud infrastructure specialist today (um, pick me, pick me!!) to help you determine if this journey to the cloud is right for you!

By Trevor Williamson

Sorry, comments are closed for this post.

Comic
Fully Autonomous Cars: How’s It REALLY Going To Work?

Fully Autonomous Cars: How’s It REALLY Going To Work?

Pros and Cons and What the Experts Think Science fiction meets reality, and modern civilization is excitedly looking forward to the ubiquity of self-driving cars. However, an omnipresence of fully autonomous cars won’t happen as quickly as even some hopeful experts anticipate. While the autonomous car pros versus the cons race (See infographic discovered via…

The Lighter Side Of The Cloud – Bottlenecking

The Lighter Side Of The Cloud – Bottlenecking

By David Fletcher Please feel free to share our comics via social media networks such as Twitter, Facebook, LinkedIn, Instagram, Pinterest. Clear attribution (Twitter example: via @cloudtweaks) to our original comic sources is greatly appreciated.

Recent Articles - Posted by
Fintech Systems, Advancements and Investments

Fintech Systems, Advancements and Investments

Fintech Growth According to a recent report, global investment in fintech companies including both venture-backed and non-venture-backed businesses reached $9.4 billion in the second quarter of 2016; investment in venture capital-backed fintech startups, however, fell by 49%. Nevertheless, the Pulse of Fintech, published jointly by KPMG International and CB Insights, suggests venture capital investment in…

How Identity Governance Can Secure The Cloud Enterprise

How Identity Governance Can Secure The Cloud Enterprise

Securing The Cloud Enterprise Cloud adoption is accelerating for most enterprises, and cloud computing is becoming an integral part of enterprise IT and security infrastructure. Based on current adoption trends, it’s clear that the vast majority of new applications purchased by organizations will be SaaS applications. The allure is evident, from cost savings to speed…

Achieving Network Security In The IoT

Achieving Network Security In The IoT

Security In The IoT The network security market is experiencing a pressing and transformative change, especially around access control and orchestration. Although it has been mature for decades, the network security market had to transform rapidly with the advent of the BYOD trend and emergence of the cloud, which swept enterprises a few years ago.…

Four Recurring Revenue Imperatives

Four Recurring Revenue Imperatives

Revenue Imperatives “Follow the money” is always a good piece of advice, but in today’s recurring revenue-driven market, “follow the customer” may be more powerful. Two recurring revenue imperatives highlight the importance of responding to, and cherishing customer interactions. Technology and competitive advantage influence the final two. If you’re part of the movement towards recurring…

Do Not Rely On Passwords To Protect Your Online Information

Do Not Rely On Passwords To Protect Your Online Information

Password Challenges  Simple passwords are no longer safe to use online. John Barco, vice president of Global Product Marketing at ForgeRock, explains why it’s time the industry embraced more advanced identity-centric solutions that improve the customer experience while also providing stronger security. Since the beginning of logins, consumers have used a simple username and password to…

Connecting With Customers In The Cloud

Connecting With Customers In The Cloud

Customers in the Cloud Global enterprises in every industry are increasingly turning to cloud-based innovators like Salesforce, ServiceNow, WorkDay and Aria, to handle critical systems like billing, IT services, HCM and CRM. One need look no further than Salesforce’s and Amazon’s most recent earnings report, to see this indeed is not a passing fad, but…

The Fully Aware, Hybrid-Cloud Approach

The Fully Aware, Hybrid-Cloud Approach

Hybrid-Cloud Approach For over 20 years, organizations have been attempting to secure their networks and protect their data. However, have any of their efforts really improved security? Today we hear journalists and industry experts talk about the erosion of the perimeter. Some say it’s squishy, others say it’s spongy, and yet another claims it crunchy.…

Utilizing Digital Marketing Techniques Via The Cloud

Utilizing Digital Marketing Techniques Via The Cloud

Digital Marketing Trends In the past, trends in the exceptionally fast-paced digital marketing arena have been quickly adopted or abandoned, keeping marketers and consumers on their toes. 2016 promises a similarly expeditious temperament, with a few new digital marketing offerings taking center stage. According to Gartner’s recent research into Digital Marketing Hubs, brands plan to…

Cloud Infographic – Big Data Analytics Trends

Cloud Infographic – Big Data Analytics Trends

Big Data Analytics Trends As data information and cloud computing continues to work together, the need for data analytics continues to grow. Many tech firms predict that big data volume will grow steadily 40% per year and in 2020, will grow up to 50 times that. This growth will also bring a number of cost…

Infographic: The Evolving Internet of Things

Infographic: The Evolving Internet of Things

Evolving Internet of Things  The Internet of Things, or IoT, a term devised in 1999 by British entrepreneur Kevin Ashton, represents the connection of physical devices, systems and services via the internet, and Gartner and Lucas Blake’s new infographic (below) explores the evolution of the IoT industry, investigating its potential impact across just about every…

Containerization: The Bold Face Of The Cloud In 2016

Containerization: The Bold Face Of The Cloud In 2016

Containerization And The Cloud “Right now, the biggest technology shift in the cloud is a rapid evolution from simple virtual machine (VM) hosting toward containerization’’ says the CTO of Microsoft Azure, Mark Russinovitch, a man who deals with the evolving cloud infrastructure every day. In his words, containerization is “an incredibly efficient, portable, and lightweight…

Disaster Recovery – A Thing Of The Past!

Disaster Recovery – A Thing Of The Past!

Disaster Recovery  Ok, ok – I understand most of you are saying disaster recovery (DR) is still a critical aspect of running any type of operations. After all – we need to secure our future operations in case of disaster. Sure – that is still the case but things are changing – fast. There are…

Why Small Businesses Need A Business Intelligence Dashboard

Why Small Businesses Need A Business Intelligence Dashboard

The Business Intelligence Dashboard As a small business owner you would certainly know the importance of collecting and analyzing data pertaining to your business and transactions. Business Intelligence dashboards allow not only experts but you also to access information generated by analysis of data through a convenient display. Anyone in the company can have access…