Surveys done by Gartner, Forrester and others agree that over 90% of all companies have moved at least some workloads to the Cloud. In 2016, that’s surely no surprise. Some have well thought out plans and Cloud Strategies in place, others….not so much. While companies of different sizes and verticals have different reasons for moving workloads to the cloud, the one reason they all have in common seems to be “cost savings”. Everyone believes that they’ll be able to save money by moving to the Cloud. The question is usually “with which Provider can I save the most money?”
To be sure cost savings is always the conversation starter, but unfortunately it’s also (and far too often) the perceived end goal. I attribute this to directives emanating from somewhere in or around the office of the CFO (or the like) in an attempt to reduce the cost of IT. Rightly so, reducing the cost of IT is certainly one lever to reduce the overall operating expenses of the company. Reducing the company’s operating expenses increases profit margins which would be favorable to the bottom line. So, at some level of the financial model, that makes perfect sense. Who wouldn’t want to reduce costs and increase profits?
Continuing down the cost savings path of Cloud computing, it quickly progresses into validating the cost savings in terms of the Total Cost of Ownership (TCO) of the Cloud model as well as the all important question of Return on Investment (ROI). To be sure, these are all good questions to be asked and answered before the start of any Cloud journey. While there are many variables that factor into TCO and ROI calculations, my experience has shown that many companies can typically (not always) realize cost savings by moving workloads the Cloud. Having said that, I often see that the promised cost savings may not amount to what was originally anticipated and sometimes even deteriorate over time. If everything goes well and the myriad of “cloud gotchas” don’t “getcha”, the cost of delivering IT services may indeed be lessoned thereby reducing the overall cost of IT, which in turn improves the company’s margins and the bottom line, all of which makes the CFO and CEO very happy. Great! Let’s move to the Cloud for the cost savings!
Now, It’s not that I don’t want to realize cost savings in any new technology implementation, it’s just that I’m certain it shouldn’t be the end game. Cloud computing can be far more than a new technology or new compute model that can drive the cost of IT down. It can be a means to get to a very different end state beyond simple cost savings and simple ROI. Cloud Computing is a technology that companies can use to actually grow their business. Not just growth by increased profitability through cost savings (bottom line growth), but rather top line growth. Allow me to explain.
Instead of asking “how much money can II save by moving to the Cloud?”, more revealing questions might be “how can I use Cloud computing technologies to reach new target markets”? “How can I use Cloud computing to bring products and services to the market quicker than my competition and/or at a lower price, to scale to keep ahead of market demand”? How can I use Cloud computing to take advantage of the digital market opportunities”? The answer to these questions provide for top line business growth. Whether it’s the cost savings from implementing a Cloud solution or the Cloud technologies themselves, the ability to realize the broader business benefits that can actually grow the business should be the real focus of Cloud computing. Stated a different way, “It’s great to save 20% of your IT budget; It’s even better to use technology to grow your business by 20%”. ROI is just cost savings over time relative to spend. But, if you factor in the potential for top line business growth into a more comprehensive ROI calculation, the ROI is far more favorable, especially in the eyes of the CFO/CEO.
How can we use Cloud computing for top line business growth? The answer lies in considering all of the IT assets that can be affected by the move to a Cloud model. Of course we could focus on the technology itself (hardware, software, networking, storage, licensing, maintenance, support, etc.). But, it’s only when we include the people resources into the mix do we open up other key areas of consideration for both cost savings and the resultant business growth end goal.
IT organizations are staffed with a variety a very talented and skilled people focused, to a large degree, on engineering, design, configuration, management, support, development, etc. - the care and feeding of the technology infrastructure and the applications it supports. The ability to produce top line business growth can only really happen if these people are able to focus their technical talents on the business needs, not the care and feeding of the infrastructure.
The IT organization should be working directly with the business leaders and asking the questions relative to what technologies can be brought to the business (now that we are in the Cloud) to allow the the business to reach new target markets, gain competitive advantage, implement new digital strategies, etc.
· How can I leverage the Cloud to bring market differentiating technologies to the business that will capture more market share?
· How can I leverage my data through business analytics to spot and take advantage of market trends and directions that will better allow me position my products and services?
If you’re not asking these kinds of questions, you can be sure your competition is and the answers will provide them with the coveted competitive advantage.
Let the Cloud providers focus on the care and feeding of the infrastructure. Stop spending money on growing technical skills and struggling with technical talent retention. In order for an IT transformation to occur, the IT organization must re-invent itself to be a technology service delivery organization to the business at large. This, in turn, spurs operational efficiencies by being able to shorten the time for new project implementation, new business initiatives, etc. and/or new technologies capable of reaching new markets or providing competitive advantage. All of these and more facilitate top line business grown.
The end goal of Cloud computing isn’t bottom line cost savings. The end goal of Cloud computing is top line business growth. If you approach it with this end goal in mind, all of the technical considerations as well as the Cloud Provider selection decisions may have different answers and will definitely have a much better end result.