As more and more enterprises move infrastructure from in-house data centers to off-site public clouds, they begin to see changes in staffing requirements and functions almost immediately. At the very least, IT shops are freed from the work of purchasing, installing, configuring and upgrading hardware. You already know about those benefits. But when an enterprise moves further along their migration journey to include a much larger percentage of the infrastructure and perhaps higher levels of the software stack, it will eventually reach a tipping point -- where the benefits begin to build on one another, exposing unanticipated opportunities that can increase organizational efficiency, reduce staffing requirements and lower asset costs in a step-wise manner.

Leaders are wise to understand the nature of the benefits of cloud — where tipping points occur, when and why they matter—so they can adequately assess risks and develop more comprehensive business cases for their cloud plans.

 

Economies of Scale

Where on the cloud journey do benefits tend to occur? The initial impact of the cloud on IT costs is broad, and some areas are easy to overlook. Even organizations in the early stages of migration to cloud-based services will see an immediate decrease or an elimination of staffing levels in a long list of areas, including:

  • Hardware Moves/Adds/Changes
  • Software Distribution
  • Support
  • Hardware Maintenance
  • Monitoring & Supervision
  • Database Administration
  • Procurement
  • Premises (space/power planning, cabling, physical security, plant maintenance, etc.)
  • HR Management
  • Asset & Configuration Management
  • Request Management
  • Change Management
  • Relationship Management
  • Strategy & Innovation

This is fairly straight-forward: the more infrastructure you move to the cloud, the greater the reductions you will see in staffing requirements for each of those functions.
Cloud computing encompasses many types of solutions, all of which act to converge technologies. Once an organization gets past the first few trial applications, and the cloud provides a material part of the infrastructure for the production environment, it will make sense to begin growing a cloud team that brings together expertise that was once separated. Significant organizational efficiencies start when a company goes from managing different technology architectures (Wintel, Linux, RISC-based Unix, disk storage, tape storage, etc.) to simply managing the cloud. Though the streamlining of architecture management may not be significant during initial adoption, it becomes more noticeable as larger portions of the IT infrastructure have migrated. The further an enterprise moves toward a full cloud migration, the more benefits it will reap from managing an increasingly simplified and homogenized environment.

Some of the earliest adopters of public IaaS, particularly those in industries not subject to heavy security and regulatory requirements, are seeing significant reductions in staffing, not all of which were obvious when they were writing that first cloud business case.

When a company migrates enough of its application portfolio to the cloud, arrival at the tipping point sets off a process of organizational simplification that is accompanied by a series of abrupt cost reductions. Those cost reductions are not generally accounted for in business cases that focus on a single migration project. A tipping point results in benefits that show up specifically in areas such as the following:

  1. 1.     Backup and archival. The higher the number of backup requirements that move to the cloud, the less time spent implementing backup software, the less money spent procuring it and the less effort spent worrying about the backup server capacity and media management. For an IT shop contemplating the move from tape to disk-based backup, a move to cloud-based backup accomplishes multiple objectives at once.
  2. 2.     Planning and design. The upfront planning and design work required for cloud implementations lessens over time as hardware refresh projects become irrelevant. Since elasticity and scalability are built into public cloud solutions, much of the need for complex planning of migrations, upgrades and decommissions also goes away.
  3. 3.     Project work. Because of the scalability of the cloud, the number of large IT infrastructure projects designed to increase capacity will decline. Many changes that were once a project are now handled more quickly by automation.
  4. 4.     Monitoring and capacity planning. Public cloud providers’ ability to link monitoring to autoscaling saves ongoing costs by allowing the environment to self-adjust resources, and the need for labor-intensive capacity planning diminishes.
  5. 5.     Security. Because cloud providers must aggressively provide solid security in order to protect their revenue streams, a buyer can examine and assess their level of diligence and innovation rather than dictating requirements and putting governance around it. Issues that arise with public cloud solutions tend to be openly discussed online rather than hidden behind non-disclosure agreements, allowing the market to do much of the work of holding providers accountable.
  6. 6.     The cost of mistakes. This may actually be the most overlooked benefit of all. If you add the high technological complexity of today’s IT solutions to the extreme pressure to deliver quickly at minimal cost, mistakes in the planning and design phase are bound to happen. Let’s say, for example, you provision the wrong size servers for an important new application, either because the application is less efficient, the user base is larger or the workload is more volatile than anticipated. In the world of traditional IT, reworking the implementation is a big issue that takes considerable labor. When the server is in the public cloud, a fix requires little more than going online and selecting a different set of instances.

 
Once an enterprise begins reaching a tipping point, entire categories of spend begin to lose relevance. The process snowballs when new hardware procurement becomes less important, data centers start to consolidate and automation moves off-premises. As the benefits accumulate, IT staff begins to take on a role in which they manage technology services rather than the installation and support of the technology itself. When buyers of cloud services no longer have to purchase, install, move, configure, support, repair, upgrade or refresh hardware, they are freed from the considerable work of routine installs and changes on the lowest levels of the software stack.

Key Milestone Moments

So when does a company begin reaching a tipping point? Evidence to date suggests companies that move from 35 percent to 60 percent of their infrastructure to the cloud begin to see the snowball effect of accruing benefits. Of course, a company will see more or less benefit depending on its specific situation in regards to license contracts, leases, business unit requirements, etc. Interestingly, this means the variance is from one organization to the next, rather than by industry or geography.

Even more important than the cost savings, perhaps, is the application functionality and process improvement enterprises see when they implement multiple cloud projects and migrate significant parts of their infrastructure. Once specific limitations imposed by the infrastructure have been removed and developers become accustomed to the platform, they begin to see possibilities they didn’t see before and are able to do things they couldn’t do before. Organizations that are really thinking about what they can do with applications can provision almost instantly, make them available from anywhere, make them available on multiple device types and automatically scale up and down as required. These are the organizations that are reaping the greatest benefits.

In this way, cloud does more than change the cost picture; it changes the revenue picture as well.

Scott Feuless is principal consultant at Information Services Group.

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