When Uber announced in February that it was ditching its on-premises data centres and moving its business to the cloud with Oracle, IT professionals around the country would not have been in the least surprised.
Here was another example of an organisation admitting it’s not in the business of running data centres. As its CEO Dara Khosrowshahi put it, Uber is in the business of “revolutionising the way people and products move across continents and through cities”. Not forgetting that the deal with Oracle aims to “maximise innovation while reducing overall infrastructure costs” for Uber.
There it is in a nutshell. Cloud computing can help businesses slash costs while becoming amazing for the very reason they exist in the first place. If only it were that simple.
Uber’s shift from running its own data centres to moving to cloud services is significant. As Steen Dalgas, senior cloud economist at cloud infrastructure firm Nutanix suggests, data centres have become “increasingly expensive and complex to run”. Volatile energy costs and coping with the scale of generated data have made running data centres untenable, which is part of the reason the cloud seems so attractive.
But businesses must be careful. The image of cloud computing as a cheaper alternative is fair enough – to a point. Dalgas talks about the sticking plaster analogy and highlights how one of Nutanix’s customers started a cloud transformation three years ago, only to determine it was “too difficult and expensive to go to the public cloud”.
Cloud is the means to an end, not an end in itself
It’s indicative of the image. Hitting the wall with public cloud for Nutanix’s customer meant going back to basics, modernising its entire infrastructure and taking a hybrid approach to the types of cloud services it required to fulfil its business goals. Saving costs was just one of its aims.
An IT-centric ‘lift and shift’ approach to moving to the cloud is not enough to make a difference. This is where businesses can miss out on opportunities
While a Forrester report, Navigating the 2023 Downturn: Technology Executive, points to “a strong cloud strategy” as one of the key elements for facing up to a recession, it comes with caveats. As Dario Maisto, senior analyst at Forrester, warns: “Cloud is the means to an outcome, not the outcome itself.”
Maisto adds that cloud migration goals need to move beyond cost-cutting.
Cloud platforms and services do allow firms to move expenses from capital to operation expenditure, so there is some accounting gain. But the case for cost reduction is limited. And as Maisto points out, the “pay-as-you-get dream” can quickly become a “pay-as-you-forget nightmare” – a bit like signing up for a gym membership in January and then realising in August you’ve been regularly paying for something which you haven’t been regularly using.
What we’ve learnt about cloud configuration
In PwC’s 2023 Cloud Business Survey, 78% of those who took part said they have adopted cloud to some level in most or all parts of their business. Yet more than half have not realised the outcomes they were after, such as lower costs, greater resilience and new revenues.
“An IT-centric ‘lift-and-shift’ approach to moving to the cloud or simply running functions or parts of a business on the cloud is not enough to make a difference,” says Warren Tucker, a partner and cloud and digital lead at PwC UK. “This is where businesses can miss out on opportunities.”
The lift-and-shift model, also known as rehosting, is when a business moves exactly what it is running on its own servers onto cloud services. Traditionally, this has been public cloud via one of the big providers, such as AWS, Microsoft, Google, IBM, Oracle and Alibaba.
According to Dalgas, the thinking around public cloud has shifted. Two years ago, due largely to the pandemic, conversations were mainly around using public cloud services for every workload. Today, that is no longer the case. Businesses are looking at specific workloads and choosing appropriate cloud services to fit. By assessing each workload through a set of metrics, including cost, data sovereignty, security, compliance and so on, businesses can determine the most appropriate route to take.
“Steady workloads work better in private clouds. The economics just stack up better,” says Dalgas. “But if you are running a project or data processing for just two days a month, very spiky workloads, you will be better off in the public cloud, which is more elastic.”
Still ‘a bastion of safety and innovation’
There is plenty of chatter online that this year will be the year of cloud repatriation, with businesses moving away from the large public providers and adopting a hybrid strategy. It’s a hangover from the pandemic where so many businesses panic-bought public cloud services to enable remote working. The costs of public cloud have since been rising rapidly and, according to Gartner, spending on cloud will continue to dominate IT budgets this year.
With good reason. As Sid Nag, vice-president analyst at Gartner says, inflationary pressures and macroeconomic conditions are having a push-and-pull effect on cloud spending but cloud will continue “to be a bastion of safety and innovation, supporting growth during uncertain times due to its agile, elastic and scalable nature”.
This multi-cloud or hybrid strategy – a mix of public and private cloud services – is, according to IDC at least, expected to be the main beneficiary of this line of thinking. In its report FutureScape: Worldwide Future of Digital Infrastructure 2023 Predictions, IDC claims that those organisations that can best optimise multi-cloud and hybrid digital infrastructure environments “consistently realise higher levels of operational resiliency, security, revenue growth, and overall productivity at scale”. All features prized in times of economic uncertainty.
The actual mix of cloud services will depend, as Dalgas says, on workloads. Factors such as data sovereignty, the kind of data processed and the number and quality of SaaS vendors involved can determine the direction. Whether or not the organisation works in a regulated industry is also a big factor.
Maisto suggests that a hybrid cloud strategy can deliver a certain flexibility to cloud expense management but would inevitably add a layer of complexity to the infrastructure and applications landscape. This will likely come at a cost, he says, so it has to be weighed against the actual savings and functionality gains. A cost-effective cloud strategy will leverage all the opportunities offered by the cloud vendors to reduce costs and will be successful only if cloud costs are carefully monitored.
This is where FinOps comes in, which enables organisations to manage their cloud costs more effectively. It also promotes collaboration between finance, tech, and business teams in the public cloud, to drive more accurate data-driven decision-making.
A measured approach will be needed more than ever during difficult economic times. Businesses will be defined by how they balance the desire for automation, IoT devices, increased flexibility in the workplace and multi-channel experiences for customers, with the expense of cloud computing services.
Cloud computing is not the panacea for managing costs during a recession. But, provided it is managed carefully, it will certainly help.
