Cloud Economics for Enterprises

Cloud computing flowchart with businessman over skyline background

Key considerations to derive optimal value from cloud

When looking at cloud economics for enterprises, it is important to determine whether the cloud spend within the organisation is optimal today and will continue to be so tomorrow. According to Jon Tullett, Associate Research Director, IT Services & Cloud, at IDC sub-Saharan Africa, this is something that is often overlooked when determining whether the cloud solutions a company is using are providing optimal value.

Speaking at the International Data Corporation (IDC) Cloud and Datacentre Roadshow in South Africa, he said there are a lot of misconceptions about moving to the cloud, such as it is cheaper, costs would be more sustainable and it would be easier to manage, but it is not that simple. “The reality is that it’s harder than a lot of people think.   Many organisations end up with duplicate spending because they have some stuff in the cloud and others are not, or they are using two or more clouds. So, it is important to get a better handle on that to rationalise the spend.”

He says while he recommends that organisations actively and aggressively look for the best places to run their applications, this can be a difficult task. “People often focus only on the monthly cost or consumption cost, but what they’re overlooking are the hidden costs such as the cost of additional services and technologies to conduct a migration or to integrate a new environment into the existing infrastructure, the cost of retraining skills, switching both professional services and technology providers, or the egress costs of getting your data out of where it is, which often surprises people,” says Tullett.

Then there is also the potential cost around the risk that must be considered, such as the costs in the event of a failure, recovery costs and opportunity cost delays to roll out to the market. “So, there are a lot of hidden costs that need to be understood, over and above just the cost of the cloud solution you are considering. That said, organisations should continuously be looking at what the best environment for their applications  is. They must just not make the decision based purely on what it’s going to cost them at the moment,” he advises. “What many people don’t realise is that the marginal cost of running cloud services is relatively consistent from one to another. So, if somebody is massively underselling the competition, they are cutting costs somewhere else and eventually those costs will be recovered one way or another.”

While sustainability is a key priority globally, Tullett believes that there are more pressing issues facing organisations in South Africa and the rest of the African continent. “Right now, it’s all about power. In South Africa, our biggest concerns are around reducing power consumption and cost, while also reducing exposure to risk when the lights go out. Yes, you can manage that risk by moving stuff out of your data centre, which is very power-hungry and where managing risk is difficult and put it into a third-party data centre and just hope they will take care of the risk, but they have energy supply issues of their own. And the network has energy supply issues. So, in this country, the focus is on power availability and continuity,” he says. “That is what’s driving a lot of conversations and we’re seeing data centre operators investing in renewable energies just to support their operations, which is a good thing. In that respect, the data centre and cloud industry are leading some of the renewable energy conversations here, but it’s still a big concern.”

Tullett says the entire delivery chain of applications needs greater scrutiny. “You can offset a lot of risk by moving stuff out of on-premise into the cloud or a third-party data centre, but if you forget about the network component, that will fail eventually and then you have just lost access to this very expensive cloud application. That’s one thing. The other thing is modernization,” he concludes. “Don’t just lift and shift your old technology architecture into a new environment and expect miracles, because all you have done then is picked up your technical debt and moved it somewhere else and added some more. While it’s an important step, it can’t be your last step. You need to take the next step and the next step is to start modernizing and re-architecting those applications.”