Why Some Companies Succeed in their Cloud Migration and Why

I was at a conference last week and got to talking with my friend Michael Keefe, who is the National Director for Latisys. I have known Mike for about a dozen years and he has been a reliable source of information for me as technology changes. I asked Mike a very straight forward question. Why do some companies succeed in their migration to the cloud- and what makes a successful business case?

Mike provided me with some answers- and he continues to be a great resource.

Here are the basics:

How: Identify Strategic Goals- which is another way of saying, plan, assess and provide a realistic workload.

Why: Improve Business Functions- cost control, speed and agility, and elasticity.

Identifying Strategic Goals

Smart companies use the cloud as part of an IT strategy. Although the phrase “IT strategy” can have many different meanings, in this context we’re referring to the high-level plan to meet increasing demand for IT resources. Most companies must provide users with complex systems that achieve high performance in secure and scalable environments. These companies must manage mission-critical applications and increasing workloads across multiple platforms while transforming legacy applications and processes. They must accommodate ever-increasing storage and network capacity—and do it all at a reasonable cost. The particulars of these decisions vary by company, but for each of them, the long-term vision of how to meet these challenges comprises the IT strategy.

As functions such as e-mail become increasingly mission-critical, and as users gravitate toward rich media, most such strategies require new resources. So where to get them? Few CEOs are willing to increase the percentage of budget allotted to IT. They’re wary of capital-intensive development efforts, mindful of a legacy of misspent investments in IT. Meanwhile, reducing other existing IT expenses through virtualization has been a surprisingly productive approach for the past few years—but most companies have already gone as far as they can with such efforts.

Some users—and executives—push for the cloud. Yet many IT leaders resist, citing concerns with security, vendor lock-in, performance, availability, and integration. And although these concerns are legitimate, users rarely find them persuasive. This is why successful companies have an IT strategy. To be effective, to deliver ongoing value to the company, IT must be more than merely a provider of services. It must have a strategy to understand how external forces will continue to transform the business, and seek opportunities to move in the right direction. The value of IT comes in knowing which of the users’ problems are best served by the cloud, and making the appropriately strategic deployments. It comes in judging those problems, and other opportunities, in the context of the business’ overall goals. It also comes in knowing how to avoid threats.

Successful companies negotiate these opportunities and threats by having not just any strategy, but a good one. “Let’s move to the cloud” is a poor strategy—and so is “We can’t put anything in the cloud.” The savviest companies have strategies that find unique, upto-date, company-specific answers to the classic challenge of seeking to provide business users with the services they need while optimizing budgets. The cloud is merely one of many vehicles that these companies use to accomplish that strategy.

Improving Business Functions

For most companies, the IT strategy identifies one or more business challenges that will define the coming years. Three potential examples are:

1. Cost Control: As compute and storage requirements explode, how can companies avoid huge future capital outlays to purchase new processors or storage devices?

The operational advantage of the cloud is that it pools utilization across companies, so that one company can take advantage of another’s under-utilization. The financial advantage is that the cloud simultaneously shifts capital expenses (CapEx) to operating expenses (OpEx), which frequently results in better profits.

Thus, smart companies that have an IT strategy focused on cost control use the cloud to improve hardware utilization and finances. Some even use it to improve the utilization of their most important resources—their people. For example, many companies that run their email systems on Microsoft Exchange know that Exchange administrators are hard to find. Likewise, they may have legacy applications that require maintenance from senior IT staffers. By outsourcing such functions, they reduce headaches and improve employee morale. In the case of Exchange, their IT strategy likely debated the appropriateness of outsourcing an application as critical as email—and concluded that email may be critical to the business but is not one of its core competencies.

Successful companies thus gain significant savings from using the cloud to support their IT strategy with regards to scale, utilization, and CapEx-to-OpEx. They also manage expectations, realizing that the biggest effects are often not in reducing this year’s budget but in containing potential future cost increases.

2. Speed and agility: The pace of business today is faster than ever, and some businesses are held back by long, bureaucratic processes associated with IT resources. One such process is the provisioning of software tools to information workers. Many cloud serviceproviders are now offering software-as-a-service (SaaS) applications to perform functions such as customer relationship management (CRM). Although these applications have many drawbacks, including limitations in security and flexibility, a huge advantage is that where internal software development efforts can take years, these applications can be available in hours. Successful companies thus evaluate how the benefits and drawbacks of such applications fit into the priorities set by their overall IT strategy.

Less hyped, less transformative, but often boasting a bigger cost/benefit ratio is reforming the process of provisioning hardware. Provisioning in the cloud can reduce the time and costs associated with software development testing or other such temporary demands. The old approach often required several days to get a server up and running and loaded with the appropriate data.

Provisioning infrastructure-as-a-service (IaaS) in the cloud, a new server can be ready in hours. (See Figure 1.) Then, when the temporary demand is complete, de-provisioning the test environment ends its cost drain. Many successful companies also use the cloud to instantaneously provision CapEx-free resources for permanent demands, rather than purchase new hardware.

Using the cloud to speed up the business provisioning process

They can thus improve time-to-revenue and agility in expanding into new customer segments, quickly taking advantage of multiple site deployment, or experimenting with expansions of latency-sensitive applications.

3. Elasticity: Successful companies use their IT strategy to understand their workloads. They realize that they have three choices in addressing bursting demand in those workloads:

a) suffer from underutilization,

b) crash regularly during spikes, or

c) take advantage of cloud resources that can expand and contract with their needs. Examples of bursting demand include: when monthly financial reports are due, after a product is featured on TV, when an oil well is “hot” and needs to transmit massive amounts of seismic data, or when daily web traffic peaks.

Such scaling to react to customer needs is generally of huge benefit to a company’s business users. They can plan more confidently without capacity restraints. They can easily expand to new geographies or markets, execute promotional blitzes, or otherwise quickly respond to market changes.

In our experience, one of the biggest differentiators between companies that succeed or fail in the cloud is how well they understand their workloads. When they know if and how their demand bursts, they use cloud resources to manage it. When they don’t understand their workloads, they end up making poor cloud purchasing decisions.

I was really intrigued by Mike’s answer. I have more case studies and whitepapers to share with you. I will  continue to share via the PrimeTelecomBlog –or contact me and I can send them out to you with Mike’s compliments.