Thought Experiment--Forget ROI

Boys and girls, today's homework assignment is a thought experiment. I want you all to put yourselves in the shoes of the CXO team making a decision to move to private cloud. There is, of course, one catch: You may not factor in ROI. We're dropping ROI because it clouds the subject (bad pun intended.) Let's skip the why-should-I-do-this-experiment; I'd of course default to,"Because I told you so."

Joe Onisick

January 23, 2012

4 Min Read
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Boys and girls, today's homework assignment is a thought experiment. I want you all to put yourselves in the shoes of the CXO team making a decision to move to private cloud. There is, of course, one catch: You may not factor in ROI. We're dropping ROI because it clouds the subject (bad pun intended.) Let's skip the why-should-I-do-this experiment; I'd, of course, default to, "Because I told you so."

Let's work through this together; it may be a tough one. Many of us have been trained to make all IT-related decisions based on ROI. Some of this is self-induced, some may come from vendors with ROI spreadsheets utilizing amazing formulas, industry data and handfuls of pixie dust to show how much money you'll save over the next three years with widget X.15. For whatever reason, ROI is a big part of most IT-related decisions.

IT decisions weren't originally made this way. Instead, they were made based on the business value that would be gained from an IT system. IT was purchased based on how it would enable the business to increase profits, build better products or better service its customers. That's really what the technology should be about.

The decision to move to private cloud should be based on the competitive advantage it can provide. If we can justify that private cloud can give us the ability to do something better, faster or at lower cost than the competition, we're halfway there. Let's take a look at gaining competitive advantage with private cloud.

Let's start with some example numbers for the time it takes to bring a new service online:

1 week - Design and validate a BOM (bill of materials)

1 week - Receive approvals and submit PO

2 weeks - Wait on required gear

1 week - Rack, stack, cable and configure

3 weeks - Build service, test and validate

2 months - Total time

This is just an example; some of these times may be laughably short or long depending on your organization. Using these example numbers you have a two-month period between identifying a new service that will enable your business and having that service online. This doesn't take into account rollout of and training on the service once online. If you could cut that time in half, would that provide competitive advantage?

By using a private cloud model for delivery of IT services, this process can be trimmed to three weeks (using the same example numbers.) The infrastructure would be in place, carved into flexible pools and the tools to automate deployment of the required subset would be available to IT staff, developers or both. Through a self-service portal the first four steps above can take place in minutes.

Additionally, scale is simplified through standardized infrastructure components. Rather than deciding on which server, storage or switch is required per project, pre-defined components are purchased and plugged into the resource pools as capacity is required. Is your network at capacity? Add a switch to the mesh. The hardware itself becomes nothing more than CPU, RAM, storage and I/O capacity for the delivery model you've built.

The flip side of the above model is removing old or under-performing services. When an application or service is removed from the cloud, the resources are returned to the pools. In a legacy data center build, it is difficult to repurpose hardware when a service is no longer needed, and as such often doesn't happen. Scaling down occurs, and services are eventually retired. This model allows for seamless return of the underlying hardware resources to the cloud.

The last piece of competitive advantage is of course cost. Any reduction in cost without a reduction in revenue will inherently increase profits. This is why the ROI model persists so strongly. Private cloud can, and does in many cases, reduce costs, but this depends on how mature your IT organization is at the onset. Much of private cloud's cost reduction comes from the virtualization of the underlying hardware; automation and orchestration are not required for that, but help provide the business value shown here.

While cost is always quite important, it should not be the first or most important criteria. Cost is more easily modeled and budgeted for once the end goal has been defined. If you begin with an attempt to show ROI, you end up with models of very subjective soft costs showing savings over time. These are not solid foundations for such a large change. Define the advantages private cloud can provide your organization, decide whether they provide enough value to embark on the journey, and then model the costs into your budget.

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