How to Build a Business Case for Cloud Transformation

This is the second in a series of blogs on the subject of Cloud Transformation. As we stated in the first blog entry business is being transformed at the speed of cloud. The velocity of this transformation and marketing hype around the subject of cloud could cause a business to move too quickly into the cloud space.

One of the first things any business should develop is a clear business case for embracing cloud technology. Unfortunately, as Gartner points out, most IT organizations are not well trained in the development of business cases. Often the decision of adopting cloud technologies is left in the hands of the financial group. This “full” delegation of that decision usually leads to a stalemate for a variety of reasons.

The following approach for developing your cloud business case is best accomplished with full participation between all parts of your organization from business, finance, HR, IT, etc. This is one technology decision that has significant impacts on all aspects of the business. This is what has led to the use of the term “Digital Transformation” in the business world.

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There are two parts to our recommendation. For an organization to make a decision about cloud adoption it must identify the “Business Drivers for Cloud Adoption” and then flush out the “Business Case for Cloud Adoption”. There are many things to consider within each area.

Business Drivers

At the beginning of any effort to start Cloud Transformation it is critical to answer the “Why” question from a business and technology perspective. There are many different reasons why an organization would like to execute a Cloud Transformation. The following drivers are some of the common ones that we have identified.

1. Security – What is becoming clear about cloud across most industry segments is that most public cloud providers have a more secure environment than most private data centers. Some organizations will be able to improve their security/risk profile with a movement to public cloud.
2. Compliance – In the early days of the public cloud, compliance was not at the forefront of most offerings. Today, the top two providers offer full compliance environments to meet many different standards for governments, healthcare, financial, etc..
3. Cost – This is a tough one for most organizations primarily due to the differences in the way to count the cost between on premise and in the cloud. There are many different free calculators online now which can help an organization with the comparison. Organizations must be honest about including “ALL” of their cost and fully understand what is the real cost of the cloud.
4. Performance – Like many other drivers this one can be evaluated using different types of performance measurements. This can be Business performance, People performance, Application or system performance, etc..
5. Expansion without Construction – As most organizations will recognize it is very expensive to build new data center space and equip it with all the required components. If a business unit wishes to “try out” expansion into a new business arena with a lower probability of success it is tough to justify data center expansion. Yet, this is exactly what is required in today’s new Digitally Transformed business world.
6. Access to more tool’s with a pay per use model – In the same thought pattern as the “Expansion without Construction” driver, this one allows an organization to try out new tools on a subscription basis. Many cloud offerings will allow an organization to reduce cost, improve uptime, and improve performance with a very low cost approach.
7. Digital Transformation of the business to maintain and grow the business – Almost all Digital Transformation’s will include some kind of cloud based technology implementation. The speed at which industries and markets are changing simply requires a new way of delivering current products and services. That same speed is what is often driving the delivery of totally new products and services across multiple industries. Cloud technology has provided the platform for these new combinations.
8. Reliability and high availability – It becomes harder and harder for most organizations to maintain their environments over time to guarantee triple 9’s uptime. Add the need to maintain or improve performance and it becomes a costly and time consuming effort with minimal ROI.

Business Case Development

Once an organization understands their main drivers for embarking on a Cloud Transformation journey it will have defined set of business drivers. These drivers can then be used to develop the focus and nature (scope) of the business case. Business cases are used in many different parts of the organization for many different reasons. The following business case outline is a starting point for implementing cloud based technologies. This outline should be adjusted based on the type and nature of the chosen business drivers.

1. Why is the organization implementing cloud technology?
   1. Business reasons
   2. Technology reasons
   3. What are the expectations
2. What are the details around the current infrastructure and associated cost
   1. Servers & all related components (network, storage, power, rack space, etc.)
   2. Applications & related cost (licenses, workload mapping to servers, etc.) Movement to SaaS
   3. Data telecom cost
   4. Peak usage allowance for critical systems
   5. Overall Utilization
   6. Databases
   7. Integrations
   8. Facility capabilities, certifications, and cost
   9. Hardware maintenance and management software
3. What are the cost of replicating the same environments in the cloud
   1. Be sure to understand how you would replicate. (Lift and shift is rarely the best way.)
   2. Realize that different public cloud providers have different ways of delivering the same environments and different cost as a result.
   3. Seek assistance if needed to validate how to estimate this cost
   4. Utilize the free cost calculators located on the cloud providers website
      1. Azure Cost Calculator
      2. Azure Total Cost of Ownership Calculator
      3. AWS Cost Calculator
      4. AWS Total Cost of Ownership Calculator
4. What will be the staffing implications and cost
   1. Do you have the skill sets needed or will you require additional resources
   2. Will you need training for current staff?
   3. Will you need professional services to get started?
5. What are the migration cost
   1. Early termination of licenses or contracts
   2. Physical movement of apps and data
   3. Creation of new environments in the cloud
   4. Data connections from on premise to the cloud
6. What are the financial impacts
   1. Capital expense reduction
   2. Operating expense increase
   3. Retained Cash
   4. Reduced Opportunity cost
   5. Increased business revenue
   6. Evaluate five to seven year cost reduction to get more robust view
   7. Consider the use of Gartner’s opportunities for better investment
      1. 
      2. 
7. Benefits and Drawbacks Conclusions/Recommendation
   1. Faster speed to market
   2. Operating expense efficiency
   3. Application Delivery improvement
   4. Facilities consolidation gains

Hopefully, the approach for developing your cloud business was outlined above in a clear and concise manner. With full participation between all parts of your organization from business, finance, HR, IT, etc. this is one technology decision that will have significant impacts on all aspects of the business.

This blog was co-authored by Victor Wolters.