Today in the cloud and then we'll see!

Cloud Services

Cloudy Monday IV: Into the cloud today and then we'll see!

In many areas, measures have been taken to reduce costs in recent years due to increasing price pressure. Efforts have been made in various areas, often involving additional costs in the short term. Be it through a project or through the acquisition of infrastructure or software. In principle, there is nothing to be said against this approach and savings have also been achieved as a result. But where is there still potential? In IT in particular, the migration and consolidation of IT resources to the cloud promises potential savings that should not be underestimated.

By Nicolas Dörig, Product Manager

But how do you ensure that the Journey to the Cloud is a success?

Deciding in favour of such a step from a financial point of view is one thing, but winning over the culture and not least the various individuals in your own company as unconditional supporters or promoters of such an approach is a Herculean task in itself. Last but not least, such an endeavour also gives rise to existential fears and major resistance, which can cause the desired goal of reducing costs and increasing efficiency to fail. In addition to selling the technical solution, an interesting approach for providers of cloud solutions would be to offer a range of services relating to culture change.

One success factor is therefore the alternatives and future prospects that a company can present to employees at the start of such a project.

However, it is not just the culture that has to adapt to the new circumstances, because you don't just change the culture on the side! It is therefore essential for the decision to embark on the journey to the cloud that employees understand why this should be done and where the opportunities and benefits arise for them.

Another success factor lies in rethinking the planning of resources and budgeting of infrastructures and software. In the beginning, the company operated the mostly small IT itself and costs were secondary. With increasing cost awareness and the fact that IT expertise was becoming more broadly based, IT went from being the undisputed protagonist to a means to an end and solutions were sought to reduce costs. Terms such as outsourcing, offshoring and nearshoring looked good in every annual report and demonstrated the desire to minimise costs. However, resource management was still closely linked to controlling and financial accounting. It was analysed, evaluated and, usually on the basis of costs and benefits, a decision was made as to which solution should be used. It was clear that customers were not really looking for services with defined SLAs from an IT outsourcer, but wanted to have a say down to the last bit and byte in what the outsourcer had to operate and how.

Why should it be any different in the cloud?

Now it's time to move to the cloud, and this is exactly where a rethink needs to begin. The provider of a cloud solution uses technical components that are of no interest to the customer whatsoever. What customers need to be interested in are the guaranteed service levels and performance parameters. Customers purchase a standard and thus save costs, while the cloud provider in turn saves costs through the mass or similarity in the production of the service and the resulting synergies, also known as economies of scale.

Here is a small example from Swisscom's Dynamic Database product:

This service provides the customer with an Oracle DB as a Service, i.e. the infrastructure, licences, support and options such as high availability, disaster recovery and backup, all in one daily or hourly price. The customer only pays for what they use and is not tied in for the long term.

In the past, customers had to size their infrastructure at the procurement stage so that the licence costs were affordable, but the solution did not have to be replaced after just one year in the event of steady growth. Miscalculations were expensive and there were three possible scenarios that could occur:

  • A) Oversizing: The infrastructure was too expensive and more licences had to be purchased, but it was never used.
  • B) Undersizing: Additional investment, as a new system had to be procured and licences purchased before the first system was written off.
  • C) Jackpot: The assumption corresponded to the actual development.

If you were to ask companies today which scenario they have encountered most frequently, I don't think that many would point to scenario C if you were to answer this question honestly! What is also being ignored here is that scenario B had a valid chance of ending in undersizing or even oversizing.

In addition to the misjudgement regarding the dimensioning of a solution, another point is at least as relevant. Regardless of which scenario the investment ended up in, it was a pre-investment that tied up capital and entailed annual costs for licence support and maintenance due to contractual conditions.

All in all, it was a very cost-intensive affair that did not even take into account the system renewal costs and the personnel costs for database specialists!

To stay with the example: Dynamic Database would make this investment obsolete after a short migration job (as a guide, 2 working days). However, the condition for the customer is obvious. He obtains a standardised service that allows the choice of certain options and also offers certain service levels such as availability and support time. However, the customer is no longer responsible for determining infrastructure elements such as server type, CPU clocking, etc. In return, the customer saves money, possibly even a lot of money.

This brings me back to the initial question: Why should it be any different for the cloud?

Because the rules of the game have changed and IT budgeting is becoming more variable, just like a mobile phone bill a few years ago. After a stabilisation phase, you could say roughly what you would have to pay per month because you knew your own usage behaviour. Especially in younger years, when money was tight or you wanted to buy something expensive, you might have written a few fewer text messages or used the landline to optimise your costs. It's no different in the cloud and who knows, the first flat rates for the B2B cloud may soon be available.

Rethinking is therefore another success factor on the road to the cloud. I'm always amazed at the discussions I get involved in when I present Dynamic Database to customers: How many want to philosophise with me about the hardware and its performance and how many want to discuss the included licence package. How they then explain to me that they don't need certain licence options that are offered with the service and whether these can be excluded to achieve a lower price. However, the fact that they have been over-licensed for years due to oversized hardware and that Dynamic Database would enable them to get rid of their high investments and capital commitment immediately seems out of the question for many in the first conversation. Presumably because many are still operating in their old ways of thinking and simply want to minimise the price and are looking for potential by trying to eliminate services that are irrelevant to them. But it is precisely because of this individualisation that IT providers have struggled in the past to keep their cost structures under control and make interesting offers to customers.

To summarise:

If you want to be successful on the Journey to the Cloud, you have to clearly show your employees the associated goals, turn employees into stakeholders, show them perspectives and throw old thought patterns overboard. Above all, you have to be prepared to purchase a standardised service where you cannot have a say in every detail of how it is produced, but can of course always make demands on performance in terms of service levels.

We are currently in a learning phase in which precisely this rethink is taking place. Here is a nice statement from a customer that I heard a few weeks ago: "We would like to use your standard service, but we only want 15 days, not 31 days of backup and with the XS offer we don't need 16 GB RAM, 8 GB is enough. How does this affect the prices?" 🙂

With this in mind, let's get ready for the Journey to the Cloud.

Nicolas Dörig

Nicolas Dörig

Product Manager

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