Business leaders often believe the cloud provides cheaper IT operations. They may draw this conclusion from financial estimates, IT hearsay, or word of mouth. In reality, depending on the scenario, the costs of cloud can be similar to those of dedicated infrastructure, or even greater. The accrued total is predicated by the workload required in the cloud. A large portion of the cost occurs in the organisation’s transition to cloud services and operating the business’s IT in the cloud. It is therefore vital that businesses know which workloads to move to the cloud and what internal skills are needed, or risk wasting a fortune in time and money.
Australia has moved through the early adoption phase of cloud. We are now seeing a number of organisations trying to back out of their cloud choice, due to unpredictable costs, limitations of their chosen cloud, an inability to move workloads into other formats or work in a hybrid-IT environment, and restrictions against working with more than one cloud partner.
Organisations need to understand the financial implications of cloud, prior to adoption. Senior business and financial leaders must understand the total cost of cloud ownership, or TCCO, which is calculated based on each organisation’s particular circumstances. Organisations should ask specific questions to determine their IT requirements. They should also challenge potential cloud providers to deliver a scalable and customised solution that is most appropriate for their business needs.
TCCO includes the combined cost of: moving the organisation’s IT to the cloud; actual cloud resources consumed; operating the cloud; managing multiple vendors; and the cost of managing risk associated with cloud transitions and maintenance.
Organisations should work with their cloud or service provider to assess the following factors, before choosing the most appropriate cloud solution to meet their needs.
- The organisation’s starting position: Is the business moving from an established, optimised, in-house platform, or starting a new application or project?
- The organisation’s current platform: Will the cloud have the same operating platform as what is currently used, or is it a different one that requires applications to be re-written?
- The specific workloads being moved to the cloud: Does the organisation know which workloads will generate a higher performance/price return in the cloud, compared to keeping the workloads in-house or using another type of managed solution?
- Staff skillsets for cloud transition: Are staff already skilled in the new cloud platform, including processes and security protection? If not, what is the cost of training or recruitment? Have you considered the productivity that could be lost due to migrating to a new operating environment?
- Managing cloud consumption: Has management considered who will manage the business’s cloud consumption? How will budgets be set and enforced? How will cloud costs be reported on, for chargeback purposes?
- Moving workloads to and from the cloud: Will the business need to move workloads back out of the cloud, on a fluid basis, to integrate with the existing IT environment?
- Required modifications to IT governance: What modifications are required for internal IT support processes, helpdesk, cost management and approvals, security policies, and risk management procedures to deal with the new IT resources?
Considering each of these factors will often result in a different TCCO. With a choice of four global public clouds now available in Australia, the right cloud choice may not be the one you initially expected. Companies should ensure they work through these factors with their cloud vendor(s) or service provider to ensure they’re getting the best cloud solution for their needs.
It’s important for organisations to consider TCCO to ensure the move to the public cloud delivers a positive performance and price outcome. This measure can also prevent businesses from making costly mistakes that are often difficult to unwind.