|By Brad Vaughan||
|April 16, 2011 11:45 AM EDT||
A classic use of ROI or its twin TCO is in the Microsoft Economics of the Cloud, Nov 2010 paper. The conclusion is you can improve TCO by up to 80% by using applications in public cloud versus on-premise deployment. The basics of the calculation being:
- improved utilization (10% to 90%) enabled by virtualization/consolidation & elasticity
- the economies (power, operations, HW purchase etc..) of scale of multi-tenant cloud scale hosting
Given most costs in a DC are directly linked to the amount of infrastructure deployed, then improving utilization from 10% to 90% sounds like the primary justification for the 80% improvement. The misuse of the information is not more evident that when Phil Wainewright writes that the strength of this "research" is enough to put the nail in the coffin of the concept of private cloud. Definitive words indeed.. The problem I have with this conclusion is it is a black & white, monolithic view of "what is cloud". This is combined with TCO/ROI modeling that uses some pretty broad assumptions to underpin the cost model. It is often good marketing or publicity to offer polarized view of the issues, but it does not provide a real-world executable decision making capability (read "value") for future consumer of cloud services (public or private). So why are people needing to kill the concept of the "private cloud"? James Urquhart tweeted it best (4/12/2011):
- "I don't hear ANYONE who isn't a public cloud provider or SI who bet the farm on public cloud make any claims about "false clouds". Period."
- "Oh, wait. There may be one or two startups and journalists in there...all of which stand to gain from public cloud. Sorry about that. :\ "
If you take that approach and as a result just build a "cloud" for the sake of "cloud" then you are making "the BIG mistake". Implementing a framework as a product is doomed to fail. If you implemented SOA this way then disaster, ITIL would equal chaos, Prince2 would create inertia, Web2.0 would have resulted in mega-$$$. These concepts, whether they be architectural, process or other are meant to guide execution, not be implemented blindly. So how should ROI be used? So when people ask the question. "What's is the ROI of the cloud?" it is not an issue of "What is an ROI?" or "What is the benefit of Cloud?" or even "What data goes into a ROI calculation?". It is about how to answer the question of why, what and how to adopt the cloud. Most of the Cloud ROI (return-on-investment) or TCO (total cost of ownership) discussions are like the whitepaper from Microsoft. Comparing side by side a complex cloud deployment with a traditional infrastructure deployment. In reality, it's too difficult to develop a model to cater "true total cost of ownership", you quickly have to jump to broad assumptions, and narrow scope to make it manageable. If you start you model as a greenfield cloud deployment, your model has radical inaccuracies as you try apply this to brownfield or legacy enterprises. Try starting based on data of a legacy deployment and you have huge problems dealing with the depreciation of assets. Brownfield models also have the challenge of dealing with the elasticity of the delivery assets or opportunity costs; for example, you can manage 100 or 150 servers with the same team, or your existing 20% utilized asset can possible only support 2X or maybe as much as 10X the workload. You then overlay this with the changing economics of real estate facilities, HVAC, compute. The result is, you end up with a model that can have error factors upward of 100% It's too complex a problem to solve without a huge dataset to validate the variables, dependencies, etc... Armada takes a Fast Track approach to solving the problem. You are looking at cloud as a reference framework to help develop a solution that returns the business value. You calculate ROI based on a specific situation and end-state solution. A ROI needs to have a pay back of less than a year, so long-term theoretical modeling has no significant value. So how do you do it? Remember three things;
- You must have a triggering event
- Use scenario analysis and not lifecycle modeling
- Apply the 80/20 rule to data, and only the stuff that impacts your costs
Most of the time being a technical architect in consulting creates looks of skepticism from engineers in enterprise customers. Fair enough, when I was in that seat I felt the same way. When I gave up internal politics for politics of "revenue/pipeline", "everyone is a salesperson" and "whitepapers and webinars" a few things became pretty crystal clear. The most important thing is, don't waste time doing anything unless there is a pain point, problem to solve, triggering event. Wants are good, but needs are better. This is important in ROI calculation. The triggering event is the anchor point for the evaluation and defines where you are looking for the biggest "return" in the ROI.. The triggering event can be something specific like;
- "we will run out of datacenter space in 6 months"
- "it takes us 6 months to deploy an environment"
- "we are on CNN if our primary datacenter fails because we have no DR"
Alternatively, it can be softer and described as the business goal, business driver like:
- "we need to reduce operational management costs"
- "we need to improve our infrastructure utilization"
These things are scoping statements for the project and then the ROI is applied to the return for this project.
You scope the project, but if you try and calculate the return based on lifecycle costs over a long term, you will be scratching your head forever. If the ROI is not 1-3 years, then you are probably not doing it. Most likely it needs to be in less than a year. Scenario analysis is fairly simple, but a little time consuming. It is, however, a step down the direction of implementation, rather than a detour into developing a business case that will never be used or validated later. You create three (3) scenarios:
- Business as usual - sometimes this is the "no decision, decision" or just solve the problem the way you have in the past
- Option 1 - the "go big or go home" scenario, build the pure play cloud solution
- Option 2 - the "pragmatic solution", or sometimes called the cheap solution. This is often the winner, but generally can be folded into option 1 after a subsequent round of funding.
Gather the requirements. Design the end-state architectures for three options and price out the implementation and on-going costs. You are already starting the design, so when the solution is green lighted, you are ready to go..
80/20 Rule of Data
A basic premise of the Fast Track method is to make decisions based on readily available information. Creating data and model takes time and effort for little return. In the time it takes to do this, IT services are evolving and changing. So in collecting data for a ROI analysis, use what is available, don't over process it and limit yourself to the data that impacts your business. From Gartner and other models we know that the biggest contributors to ROI/TCO are;
- Hardware Costs (storage, compute, network)
- Hardware Maintenance/Support
- Software License (applications licenses, tools licenses etc..)
- Software Maintenance/Support
- Management & Operations (people, benefits etc..)
- Facilities (real estate, hvac, security etc..)
- Development/Customization/System Integration
- Opportunity Cost (increase costs in existing infrastructure by reducing its scale)
Focus on capturing this information to support the scope of your project. If your project is not looking for value in reduction of power costs, then don't include it in the model. Just deliver the value you have visbility and control over. You should try and be as complete as possible, without creating an environment of political inertia. So with this approach its easy to capture a return on investment (ROI) calculation. I need to add, that David Linthicum wrote a very relevant post that reinforced that ROI does not make a business case. You need to also include the soft value factors, which for the cloud revolve around agility and time-to-market. Hard to define or place a value, but critical to the final assessment.
SYS-CON Events announced today that Addteq will exhibit at SYS-CON's @DevOpsSummit at Cloud Expo New York, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Addteq is one of the top 10 Platinum Atlassian Experts who specialize in DevOps, custom and continuous integration, automation, plugin development, and consulting for midsize and global firms. Addteq firmly believes that automation is essential for successful software releases. Addteq centers its products an...
Feb. 25, 2017 07:45 PM EST Reads: 388
In his keynote at @ThingsExpo, Chris Matthieu, Director of IoT Engineering at Citrix and co-founder and CTO of Octoblu, focused on building an IoT platform and company. He provided a behind-the-scenes look at Octoblu’s platform, business, and pivots along the way (including the Citrix acquisition of Octoblu).
Feb. 25, 2017 07:30 PM EST Reads: 1,797
SYS-CON Events announced today that IoT Now has been named “Media Sponsor” of SYS-CON's 20th International Cloud Expo, which will take place on June 6–8, 2017, at the Javits Center in New York City, NY. IoT Now explores the evolving opportunities and challenges facing CSPs, and it passes on some lessons learned from those who have taken the first steps in next-gen IoT services.
Feb. 25, 2017 07:00 PM EST Reads: 1,670
SYS-CON Events announced today that WineSOFT will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Based in Seoul and Irvine, WineSOFT is an innovative software house focusing on internet infrastructure solutions. The venture started as a bootstrap start-up in 2010 by focusing on making the internet faster and more powerful. WineSOFT’s knowledge is based on the expertise of TCP/IP, VPN, SSL, peer-to-peer, mob...
Feb. 25, 2017 06:45 PM EST Reads: 1,932
For organizations that have amassed large sums of software complexity, taking a microservices approach is the first step toward DevOps and continuous improvement / development. Integrating system-level analysis with microservices makes it easier to change and add functionality to applications at any time without the increase of risk. Before you start big transformation projects or a cloud migration, make sure these changes won’t take down your entire organization.
Feb. 25, 2017 06:30 PM EST Reads: 1,385
With billions of sensors deployed worldwide, the amount of machine-generated data will soon exceed what our networks can handle. But consumers and businesses will expect seamless experiences and real-time responsiveness. What does this mean for IoT devices and the infrastructure that supports them? More of the data will need to be handled at - or closer to - the devices themselves.
Feb. 25, 2017 05:45 PM EST Reads: 2,216
Updating DevOps to the latest production data slows down your development cycle. Probably it is due to slow, inefficient conventional storage and associated copy data management practices. In his session at @DevOpsSummit at 20th Cloud Expo, Dhiraj Sehgal, in Product and Solution at Tintri, will talk about DevOps and cloud-focused storage to update hundreds of child VMs (different flavors) with updates from a master VM in minutes, saving hours or even days in each development cycle. He will also...
Feb. 25, 2017 05:15 PM EST Reads: 2,680
SYS-CON Events announced today that Dataloop.IO, an innovator in cloud IT-monitoring whose products help organizations save time and money, has been named “Bronze Sponsor” of SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Dataloop.IO is an emerging software company on the cutting edge of major IT-infrastructure trends including cloud computing and microservices. The company, founded in the UK but now based in San Fran...
Feb. 25, 2017 05:00 PM EST Reads: 2,917
A strange thing is happening along the way to the Internet of Things, namely far too many devices to work with and manage. It has become clear that we'll need much higher efficiency user experiences that can allow us to more easily and scalably work with the thousands of devices that will soon be in each of our lives. Enter the conversational interface revolution, combining bots we can literally talk with, gesture to, and even direct with our thoughts, with embedded artificial intelligence, whic...
Feb. 25, 2017 04:45 PM EST Reads: 1,736
Some people worry that OpenStack is more flash then substance; however, for many customers this could not be farther from the truth. No other technology equalizes the playing field between vendors while giving your internal teams better access than ever to infrastructure when they need it. In his session at 20th Cloud Expo, Chris Brown, a Solutions Marketing Manager at Nutanix, will talk through some real-world OpenStack deployments and look into the ways this can benefit customers of all sizes....
Feb. 25, 2017 04:30 PM EST Reads: 1,454
In his session at @ThingsExpo, Sudarshan Krishnamurthi, a Senior Manager, Business Strategy, at Cisco Systems, will discuss how IT and operational technology (OT) work together, as opposed to being in separate siloes as once was traditional. Attendees will learn how to fully leverage the power of IoT in their organization by bringing the two sides together and bridging the communication gap. He will also look at what good leadership must entail in order to accomplish this, and how IT managers ca...
Feb. 25, 2017 04:15 PM EST Reads: 1,816
DevOps is being widely accepted (if not fully adopted) as essential in enterprise IT. But as Enterprise DevOps gains maturity, expands scope, and increases velocity, the need for data-driven decisions across teams becomes more acute. DevOps teams in any modern business must wrangle the ‘digital exhaust’ from the delivery toolchain, "pervasive" and "cognitive" computing, APIs and services, mobile devices and applications, the Internet of Things, and now even blockchain.
Feb. 25, 2017 04:15 PM EST Reads: 1,774
In his keynote at 18th Cloud Expo, Andrew Keys, Co-Founder of ConsenSys Enterprise, provided an overview of the evolution of the Internet and the Database and the future of their combination – the Blockchain. Andrew Keys is Co-Founder of ConsenSys Enterprise. He comes to ConsenSys Enterprise with capital markets, technology and entrepreneurial experience. Previously, he worked for UBS investment bank in equities analysis. Later, he was responsible for the creation and distribution of life settle...
Feb. 25, 2017 03:30 PM EST Reads: 1,591
SYS-CON Events announced today that CA Technologies has been named “Platinum Sponsor” of SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY, and the 21st International Cloud Expo®, which will take place October 31-November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. CA Technologies helps customers succeed in a future where every business – from apparel to energy – is being rewritten by software. From ...
Feb. 25, 2017 03:30 PM EST Reads: 2,492
Building a cross-cloud operational model can be a daunting task. Per-cloud silos are not the answer, but neither is a fully generic abstraction plane that strips out capabilities unique to a particular provider. In his session at 20th Cloud Expo, Chris Wolf, VP & Chief Technology Officer, Global Field & Industry at VMware, will discuss how successful organizations approach cloud operations and management, with insights into where operations should be centralized and when it’s best to decentraliz...
Feb. 25, 2017 03:15 PM EST Reads: 2,005
TechTarget storage websites are the best online information resource for news, tips and expert advice for the storage, backup and disaster recovery markets. By creating abundant, high-quality editorial content across more than 140 highly targeted technology-specific websites, TechTarget attracts and nurtures communities of technology buyers researching their companies' information technology needs. By understanding these buyers' content consumption behaviors, TechTarget creates the purchase inte...
Feb. 25, 2017 02:30 PM EST Reads: 1,749
SYS-CON Events announced today that Cloud Academy will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Cloud Academy is the industry’s most innovative, vendor-neutral cloud technology training platform. Cloud Academy provides continuous learning solutions for individuals and enterprise teams for Amazon Web Services, Microsoft Azure, Google Cloud Platform, and the most popular cloud computing technologies. Ge...
Feb. 25, 2017 02:15 PM EST Reads: 1,737
The best way to leverage your Cloud Expo presence as a sponsor and exhibitor is to plan your news announcements around our events. The press covering Cloud Expo and @ThingsExpo will have access to these releases and will amplify your news announcements. More than two dozen Cloud companies either set deals at our shows or have announced their mergers and acquisitions at Cloud Expo. Product announcements during our show provide your company with the most reach through our targeted audiences.
Feb. 25, 2017 02:15 PM EST Reads: 2,305
Wooed by the promise of faster innovation, lower TCO, and greater agility, businesses of every shape and size have embraced the cloud at every layer of the IT stack – from apps to file sharing to infrastructure. The typical organization currently uses more than a dozen sanctioned cloud apps and will shift more than half of all workloads to the cloud by 2018. Such cloud investments have delivered measurable benefits. But they’ve also resulted in some unintended side-effects: complexity and risk. ...
Feb. 25, 2017 02:00 PM EST Reads: 1,990
SYS-CON Events announced today that Fusion, a leading provider of cloud services, will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Fusion, a leading provider of integrated cloud solutions to small, medium and large businesses, is the industry’s single source for the cloud. Fusion’s advanced, proprietary cloud service platform enables the integration of leading edge solutions in the cloud, including cloud...
Feb. 25, 2017 02:00 PM EST Reads: 4,058