There are three general benefits for companies using Cloud services.
Performance, agility, and cost reduction.
Let's look at these three benefits in more details.
Performance. Cloud services can be more reliable
building disaster recovery mechanisms that many businesses forget or under-invest in.
They can also give access to peak capacity
that would not be economically viable if built in-house.
Agility. Not only can Cloud services be set up quickly,
they can also be scaled as the business grows.
They allow seamless upgrade and are device diagnostic.
Cost reduction is a tricky one.
In theory, we know that running
a Cloud service especially on the lower layers is a scale business.
If we discard other migration and regulatory cost,
you can derive two types of cost benefits from the Cloud.
First, using Cloud services can reduce
a company's upfront investments, the capital expenditure.
This is especially important if there is
high uncertainty on how much capacity is actually needed over time.
Therefore, opting for a pay-per-use model
can reduce the risk of over-investing at the start.
Second, Cloud services can reduce the total cost of
ownership of your hardware or your software,
and even the people needed to run the application.
It is important here to look at the total cost.
I have seen many times IT or
procurement department led to the wrong decision because they have forgotten
the factor of maintenance or upgrade cost
or any other type of hidden cost in comparing multiple solutions.
Of course, the magnitude of cost reduction will vary
widely depending on the business needs and the starting position.
For a typical company,
the Cloud drives dramatically lower spending on a like for like basis.
This can result in
anywhere between 20 to 50 percent savings on IT cost.
Now, what does a company need to keep in mind when using Cloud services?
We talked about the need to look closely at the economics and pay
close attention to the total cost of ownership before triggering the migration.
But from a technology perspective,
hyperscale ability is the key for successful Cloud solution.
Hyperscale is the definition of
an architecture that can scale appropriately with increased demand.
Why is this important?
Let me tell you a story. One of our clients,
a telecommunication company was starting to outsource
its customer relationship management system to a Cloud service provider.
Reliability but also customization of the solution were extremely important.
Therefore, they purchased a highly advanced, very personalized service.
As our client acquired another company,
they needed to scale up the solution very quickly in order to add new stores.
However, they realized that scaling up their Cloud was costly and
took a long time due to the level of customization.
This caused serious problems and delays in the post-merger integration.
This is why hyperscaleable solutions already make up 20 percent of data center market,
and they are becoming more and more pervasive.
Let's review the key takeaways from this lesson.
The shift to the Cloud is here to stay.
It is driven by fundamental shift in technology economics.
There are different possibilities to leverage Cloud services
from infrastructure to platform to software,
all the way to business processes as a service.
A company should choose wisely,
balancing the business benefits with the
capability needs and the economics of any solution.
Among all those benefits of using Cloud services,
cost reduction is the trickiest.
Before any Cloud migration,
a company needs to carefully estimate its total cost of ownership including maintenance,
upgrades, and maybe even re-migration.
Hyperscaleability is key.
If you design an architecture with a limitation in mind,
remember that you are more likely to underestimates than overestimate your future needs.
Michael LenoxSenior Associate Dean and Chief Strategy Officer
Amane DannouniPrincipal at Boston Consulting Group, Singapore
Sonja RuegerProject Leader, Boston Consulting Group
Ching Fong OngSenior Partner and Managing Director, Boston Consulting Group
