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
Cukes and the Cloud

Cukes and the Cloud

The Cloud, through bringing vast processing power to bear inexpensively, is enabling artificial intelligence. But, don’t think Skynet and the Terminator. Think cucumbers! Artificial Intelligence (A.I.) conjures up the images of vast cool intellects bent on our destruction or at best ignoring us the way we ignore ants. Reality is a lot different and much…

Ransomware’s Great Lessons

Ransomware’s Great Lessons

Ransomware The vision is chilling. It’s another busy day. An employee arrives and logs on to the network only to be confronted by a locked screen displaying a simple message: “Your files have been captured and encrypted. To release them, you must pay.” Ransomware has grown recently to become one of the primary threats to…

InformationWeek Reveals Top 125 Vendors Taking the Technology Industry by Storm

InformationWeek Reveals Top 125 Vendors Taking the Technology Industry by Storm

InformationWeek Reveals Top 125 Vendors Five-part series details companies to watch across five essential technology sectors SAN FRANCISCO, Sept. 27, 2016 /PRNewswire/ — InformationWeek released its list of “125 Vendors to Watch” in 2017. Selected by InformationWeek’s expert editorial team, the companies listed fall into one of five key themes: infrastructure, security, cloud, data management and…

Part 1 – Connected Vehicles: Paving The Way For IoT On Wheels

Part 1 – Connected Vehicles: Paving The Way For IoT On Wheels

Connected Vehicles From cars to combines, the IoT market potential of connected vehicles is so expansive that it will even eclipse that of the mobile phone. Connected personal vehicles will be the final link in a fully connected IoT ecosystem. This is an incredibly important moment to capitalize on given how much time people spend…

Embedded Sensors and the Wearable Personal Cloud

Embedded Sensors and the Wearable Personal Cloud

The Wearable Personal Cloud Wearable tech is one avenue of technology that’s encouraging cloud connections and getting us all onto interconnected networks, and with the continued miniaturization and advancement of computing the types of wearable tech are always expanding and providing us with new opportunities. A few years ago, smartwatches were rather clunky devices with…

Three Tips To Simplify Governance, Risk and Compliance

Three Tips To Simplify Governance, Risk and Compliance

Governance, Risk and Compliance Businesses are under pressure to deliver against a backdrop of evolving regulations and security threats. In the face of such challenges they strive to perform better, be leaner, cut costs and be more efficient. Effective governance, risk and compliance (GRC) can help preserve the business’ corporate integrity and protect the brand,…

The Rise Of BI Data And How To Use It Effectively

The Rise Of BI Data And How To Use It Effectively

The Rise of BI Data Every few years, a new concept or technological development is introduced that drastically improves the business world as a whole. In 1983, the first commercially handheld mobile phone debuted and provided workers with an unprecedented amount of availability, leading to more productivity and profits. More recently, the Cloud has taken…

Protecting Devices From Data Breach: Identity of Things (IDoT)

Protecting Devices From Data Breach: Identity of Things (IDoT)

How to Identify and Authenticate in the Expanding IoT Ecosystem It is a necessity to protect IoT devices and their associated data. As the IoT ecosystem continues to expand, the need to create an identity to newly-connected things is becoming increasingly crucial. These ‘things’ can include anything from basic sensors and gateways to industrial controls…

How To Humanize Your Data (And Why You Need To)

How To Humanize Your Data (And Why You Need To)

How To Humanize Your Data The modern enterprise is digital. It relies on accurate and timely data to support the information and process needs of its workforce and its customers. However, data suffers from a likability crisis. It’s as essential to us as oxygen, but because we don’t see it, we take it for granted.…

Ending The Great Enterprise Disconnect

Ending The Great Enterprise Disconnect

Five Requirements for Supporting a Connected Workforce It used to be that enterprises dictated how workers spent their day: stuck in a cubicle, tied to an enterprise-mandated computer, an enterprise-mandated desk phone with mysterious buttons, and perhaps an enterprise-mandated mobile phone if they traveled. All that is history. Today, a modern workforce is dictating how…

Cloud Infographic – Cloud Public, Private & Hybrid Differences

Cloud Infographic – Cloud Public, Private & Hybrid Differences

Cloud Public, Private & Hybrid Differences Many people have heard of cloud computing. There is however a tremendous number of people who still cannot differentiate between Public, Private & Hybrid cloud offerings.  Here is an excellent infographic provided by the group at iWeb which goes into greater detail on this subject. Infographic source: iWeb

5 Considerations You Need To Review Before Investing In Data Analytics

5 Considerations You Need To Review Before Investing In Data Analytics

Review Before Investing In Data Analytics Big data, when handled properly, can lead to big change. Companies in a wide variety of industries are partnering with data analytics companies to increase operational efficiency and make evidence-based business decisions. From Kraft Foods using business intelligence (BI) to cut customer satisfaction analysis time in half, to a…

Cloud Infographic: The Explosive Growth Of The Cloud

Cloud Infographic: The Explosive Growth Of The Cloud

The Explosive Growth Of The Cloud We’ve been covering cloud computing extensively over the past number of years on CloudTweaks and have truly enjoyed watching the adoption and growth of it. Many novices are still trying to wrap their mind around what the cloud it is and what it does, while others such as thought…

Cloud Security: The Top 8 Risks According To ENISA

Cloud Security: The Top 8 Risks According To ENISA

Cloud Security Risks Does security in the cloud ever bother you? It would be weird if it didn’t. Cloud computing has a lot of benefits, but also a lot of risks if done in the wrong way. So what are the most important risks? The European Network Information Security Agency did extensive research on that,…

Report: Enterprise Cloud Computing Moves Into Mature Growth Phase

Report: Enterprise Cloud Computing Moves Into Mature Growth Phase

Verizon Cloud Report Enterprises using the cloud, even for mission-critical projects, is no longer new or unusual. It’s now firmly established as a reliable workhorse for an organization and one that can deliver great value and drive transformation. That’s according to a new report from Verizon entitled “State of the Market: Enterprise Cloud 2016.” which…

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…