Business outcomes, governance and cost all key in determining cloud ROI

CIO Michael Lifson says IT departments must consider unique aspects of their business to determine if a cloud service is cost effective.

IT departments must consider governance and business outcomes if they’re to determine whether cloud is a cost-effective option for their organisation, Macquarie Generation’s CIO claims.

Speaking at the 2014 CeBIT cloud conference on Tuesday, Michael Lifson told attendees that he maintained three areas of focus in order to calculate the ROI for moving to the cloud: Dollars, governance and business outcomes.

“I like when the sales pitch from a cloud provider says ‘only pay for what you’ll use’ because that should also be ‘always pay for what you use’,” he said.

Having a firm grasp on your services, their components and unit costs are all critical to understanding the financial benefits of moving to the cloud, Lifson explained. As an example, he said the big question around applications on the cloud is performance.

“Sometimes there are things you can’t put in the cloud, or things you just don’t want to,” he claimed. “At the power stations I work at, we have very big pieces of equipment with a lot of monitoring, and the hardware to do that is intrinsically linked to the software. We can’t cloud that, it just can’t happen, so the coupling there is very tight.”

Complexity is another common pitfall to cloud services, particularly when organisations are aiming to integrate and analyse data spread across numerous providers. Lifson warned application portability also required considerable forethought in a cloud environment.

“What happens if you use someone else’s SaaS application and you want to move? In a traditional environment that’s not even something you have to consider. But if you’re in someone else’s environment, what do you do?” he asked.

Lifson said several options are available for getting out of a cloud environment that IT leaders should be discussing with cloud providers prior to deployment.

“With the cloud provider I worked with a couple of years ago, we had lots of concerns from customers about that, so we took a lead from one of our competitors to do the most unusual thing: Whenever asked by prospective clients to give them references of people who’d used our services, we also gave details about customers that had left, happily,” he said. “The logic being, first of all, they could leave, and secondly, how easy it was to leave.”

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Despite this, Lifson claimed panic over cloud services lock-in is a “storm in a teacup” and that the situation was no different to the current lock-in that exists today with any technology provider.

It’s also important to remember skills will change as infrastructure becomes software, which will ultimately impact cost. As for existing investments, Lifson says cloud is either going to replace or augment them. But whether moving infrastructure, platforms or systems to the cloud, the key thing is to decommission and write them off.

“If they’re still sitting on your books, as far as cost saving ROI goes, you’ve achieved nothing but increasing your costs,” he commented.

For companies trying to get their bearings on calculations and comparisons of cloud offerings, Lifson recommended adopting a clear framework which covered the essential services elements and maintained consistency and governance. He warned that while cloud deployments can be easy, it’s critical to remember who’s managing the cost and complexity, as well as risk and compliance.

“Do you really understand your risks? Because you can cloud all the technology, but you cannot cloud accountability,” he added.

While assessing the difference between DIY versus cloud, Michael Lifson, CIO for Macquarie Generation, says It departments need to consider the unique aspects of their business to determine if a cloud service is a cost effective option for them.

In his presentation at the 2014 CeBIT cloud conferece, Lifson discussed the challenges involved when calculating ROI and true cost benefit when moving to the cloud.

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“As an executive and a director, I have three areas of focus when I’m looking at cloud - dollars, governance, and business outcome,” says Lifson. “I like when the sales pitch from a cloud provider says ‘only pay for what you’ll use’ because that should also be ‘always pay for what you use.’”

When taking existing enterprise IT to the cloud, it’s important to take a step back and examine the benefits from a slightly different perspective, as from an executive perspective there is still the potential for loss, says Lifson. Understanding your services; their components and the unit costs is actually very critical to understanding whether your move to the cloud is going to benefit you financially.

“When you’re looking at the applications, the big question is performance. Sometimes there are things you can’t cloud, or things you just don’t want to cloud,” he adds.

“At the power stations I work at, we have very big pieces of equipment with a lot of monitoring, and the hardware to do that is intrinsically linked to the software that’s used. We can’t cloud that, it just can’t happen, so the coupling there is very tight.”

Complexity can also be a common pitfall, particularly when aiming to integrate and analyse data that’s spread across numerous different providers. Lifson cautions that application portability also requires considerable forethought.

“What happens if we use someone else’s SaaS application and you want to move? In a traditional environment that’s not even something you have to consider, it’s very simple, but if you’re in someone else’s environment, what do you do?” he asks.

As for existing investments, Lifson says the reality is that cloud is either going to replace or augment them. But whether moving infrastructure, platforms or systems to the cloud, the key thing is to decommission and write them off.

“If they’re still sitting on your books, as far as cost saving ROI goes, you’ve achieved nothing but increasing your costs.”

Meanwhile it’s important to remember that skills will change as infrastructure becomes software, which will ultimately impact the costs.

When discussing if, during your first foray into cloud, everything should “go pear-shaped”, Lifson advises that there are options available for getting out that you should discuss with cloud providers prior to deployment.

“With the cloud provider I worked with a couple of years ago, we had lots of concerns from customers about that, so we took a lead from one of our competitors to do the most unusual thing,” he explains.

“Whenever asked by prospective clients to give them references of people who’d used their services, they also gave details about customers that had left, happily. The logic being, first of all, they could leave, the second thing being, how easy it was to leave.”

Lifson says he finds panic over lock-in to be a “storm in a teacup” because while it is an issue, it’s not different to current lock-in that exists today with any provider.

For companies trying to get their bearings on calculations and comparisons for cloud, Lifson recommends relying on a framework to cover the essential elements of cloud in order to maintain consistency.

Lastly, for governance, he warns that while you can do cloud deployments easily, it’s critical to remember who’s managing the cost and complexity, as well as risk and compliance.

“Do you really understand your risks? Because you can cloud all the technology, but you cannot cloud accountability,” he says.

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