As cloud providers compete to slash prices and make cloud computing an attractive option for all, businesses remain under pressure to reduce capital and IT expenses.
A move to the cloud appears to be the Holy Grail, and with cloud prices dropping it should be good news for everyone. Yet many organisations find themselves wondering why these savings aren’t showing on their bottom lines, says Grant Morgan, Cloud GM at Dimension Data.
South African organisations are affected by the same evolving global trends – where today’s IT is less about buying and owning hardware, and more about how to use technology as a business enabler. Cloud-based services can help drive innovation and improve productive efficiency, yet for many the key challenge is how to translate global cloud savings into real-world use scenarios.
Strategy and pay off
Ageing infrastructures and performance issues are driving business’ need to centralise IT and cut costs. In the search for alternative solutions, a move to the cloud – where an internet connection is all you need – is hugely appealing.
By offering a strategically viable substitute to traditional IT models, cloud services can offer greater solution choices across all infrastructure layers to help organisations achieve their goals of greater business agility, lower risk and reduced costs through utility-based pricing models.
The benefits start with removing fixed IT costs, which enables businesses to match IT spending with consumption, while ensuring the correct capacity at the right time. Through variable costs, organisations are able to bank cloud cost savings immediately. This, rather than being locked into escalating price hosting models – where cost reductions are often only seen three to five years later on contract renewal.
But it’s only when you combine the benefits of a pay-as-you-use consumption model with right size and right time concepts that you’ll really see a move to cloud pay off. Practically, it means looking for ways to extract savings through reducing the costs of existing IT systems and driving innovation to promote growth.
Right size. Right time.
The first step begins with shifting IT expenses from capital to operating expenditure. By limiting capex below depreciation, you’re able to target your investments to improve cash flow and working capital, to ensure IT is no longer on the balance sheet.
The second step focuses on containing group IT service costs. Through right timing and right sizing, you’re able to benefit from cost savings secured by your service provider’s large scale buying power. Simply put, variable per hour costs are much cheaper, when you use cloud IT services as and when you need them.
Right sizing and right timing – enables you to switch off or downscale servers in quiet times, and deploy them when your project needs them – just in time. Automated server shut downs and start-ups can be easily set up, which means you only pay for them when you use them. For example, why pay for test systems capacity over the weekend when your developers are not working on the platform?
This means you’re not overprovisioning, or wasting time or money by paying for something before you actually need it. For seasonal business owners, this ability to scale systems up and down in line with peak periods can add up to a huge saving.
To extract even more cloud savings, the concepts of right sizing and right timing extend to the following opportunity areas:
Testing and development
To maintain a proper testing and development environment, you’ll often need two or three times the servers required which means server resources aren’t being used all the time. By being able to scale up and down easily, you could save 73% compared to paying for resources 24/7 x 365 – just by limiting server resources to 9-5pm working hours.
Disaster recovery (DR) set ups are usually highly wasteful and provide a very low return on assets. Until you declare a disaster, you could be paying more than double your costs as data centres sit idle. Wouldn’t it be more cost effective to pay per hour for all DR resources when you declare a disaster or test your recovery?
When proving the business case for project resources, you’ll often find yourself ordering equipment ahead of time. As inevitable delays occur, this infrastructure commitment drives up costs. With cloud, you pay for what you need, when you need it, giving you the ability to power up your resources the day before you need them.
Reduced costs with programming
Variable costs can be incredibly useful when it comes to optimising the application environment. Normally this optimised code means more idle unused capacity – not lower infrastructure costs which are fixed. With cloud however, by optimising existing code or using new versions of vendor codes that are more efficient, many businesses have been able to reduce costs significantly – and it means you need less fixed cost infrastructure.
Business unit sales
When disposing of a business unit, fixed IT costs can hurt your IT budget – where despite user numbers dropping you may find the cost allocation to your remaining users go up. With variable costs and flexible contracts, you’re able to immediately transfer cloud servers and storage back to suppliers and maintain your IT costs per user.
Choosing the correct cloud platform can help reduce your carbon footprint through more power efficient, large scale data centres that will benefit your business. By working with a local cloud vendor, there’s the added advantage of providing more South African IT jobs which helps drive economic sustainability.
Making the move: what to consider
With immediate savings opportunities on offer, there are a plethora of available cloud services that will help deliver on your goals of reduced risk, lower costs and increased agility. As your business passes on the risk of IT ownership to a cloud provider, your business should begin to enjoy the benefits of cloud features, functionality and cost.
When choosing your cloud provider, it’s worth considering its cloud footprint and coverage across the globe. To enjoy immediate cost savings as cloud prices come down, you’ll need to find out about your preferred provider’s global buying power. If your business is based in South Africa, you may want to ask about network connectivity options – where local bandwidth is much cheaper than international fibre – and whether local support is available.
More mature IT service providers are able to offer a full range of cloud services to suit your needs – from automated, self-provisioning public services to fully customisable, tailored private and hosted cloud services. Having already cut memory and vCPU prices by 15% in only one year, and with further cuts on the horizon, large IT organisations like Dimension Data are better able to pass on the reduced price benefits directly to you – through global economies of scale and established cloud platforms across the world. Add to this the benefit of local support and local internet connectivity, and you may find yourself wondering why you haven’t made the move yet?
Key cloud benefits include:
* It’s cheaper;
* Less risk;
* Agile – up and down scaling;
* Consumption-based; and
* Business process-enabled.