Why different operating and financial models are needed when working in the cloud

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The task of moving to the cloud is far more than simply migrating from physical storage. In fact, businesses need to rethink operating and financial processes to make the most of the opportunities moving to the cloud offers.

Moving from a physical data centre or on-premise solution to the cloud may seem as if it’s more a matter of logistics than business operations. After all – on one level at least – each solution ultimately provides a business with a similar outcome.

However, the operational side of moving to the cloud is equally important – if not more important – than the migration process itself. And to maximise the opportunity that comes with migrating to the cloud, businesses need to adopt different operating and financial models.

“With the cloud, you effectively architect for today,” says Sean Pilkington, Microsoft’s SAP on Azure Lead.

“You consume what you use today. That flexibility, that elasticity, really does help respond to business changes and market changes to fuel your growth and your transformation.”

Pilkington believes a change of mindset is required within businesses planning to make the move, as traditional operating models, both financial and technical, don’t apply to the cloud.

“The key aspect is the operational side – keeping track of costs once you’re there, and being able to manage that landscape,” he says. “Otherwise, the cost savings you get from the cloud – be it 20 per cent, 30, 40, 50 per cent savings – can be consumed within a month.

“There are key advantages of moving to the cloud, but so much of the information out there deals with the migration side, [and particularly] the automation of migration.”

Before moving to the cloud, organisations have typically become accustomed to running their own data centres with their own physical infrastructure. However, Pilkington says businesses can’t assume the same skillsets are needed to run infrastructure on a cloud solution such as Azure.

“The skills and the cost drivers [of running your own data centre] are very different from the cloud,” he says. “Even in terms of modelling it and then running it, you can’t assume you need the same skillsets, and so having specialists who have experience of doing this [operating on the cloud] and getting the absolute best out of it is really important.”

Managing the change to the cloud

The pandemic has demonstrated just how important it is for businesses to be able to scale up or down at a moment’s notice. And while physical data centres didn’t enable that too readily, the cloud does.

“The cloud gives you the ability to respond to market changes,” says Pilkington.

“You’re only paying for the consumption that you use, so businesses that have been able to take advantage and have seen their workload increase have been able to spin up new instances quickly.

“On the flip side, for organisations that went through a period of furlough, or market slowdown, they were able to reduce their costs and expenses by shutting down various project servers, by reducing their operational times.

“You can have the elasticity to respond to that – that’s part and parcel of the cloud – but you do have to have that operational side too.”.

And that business need marries perfectly with the way we – as consumers – prefer to purchase today.

“Consumers are used to consuming things as a subscription and as a service,” says Rob Furnivall, Edenhouse’s director of partnerships and alliances. “We do it at home when we’re buying our music, films or TV – it’s all now on subscription.

“[Business] customers are now thinking ‘I’d like to be able to do that myself’.

“A lot of it comes down to predictability on cost. Customers have a fixed amount of money they are going to pay every month for a fixed service.”

Preparing for the unknown

Having that flexibility and elasticity to respond to the ever-changing world of business is becoming an essential part of any business’s forward planning, and does require a different mindset to the one needed in years gone by, where you’d forward plan and buy capacity for two or three years in advance.

“You plan and have a roadmap and plan to be doing something in the future, but roadmaps constantly evolve and change,” says Furnivall. “Having that flexibility prepares you for those unknown events.”

In addition to that business flexibility, working in a cloud environment also enables organisations to try new things and fail fast, says Pilkington, referring to his own experiences within Microsoft.

“SAP is directly connected to all of our business processes, so if you buy anything from a Surface laptop right the way through to a Minecraft game or Azure itself, it’s all invoiced through SAP.

“We migrated our whole SAP system to run in Azure, we stabilised, we optimised, and we saw 20-25 per cent cost benefits from moving to Azure.We then started on our journey of moving to S/4HANA.

“We can spin up project instances and snooze them if we need to, we can be more agile in response to that project, so we’ve not got that big CAPEX investment. At Microsoft, we always make sure we design the systems as efficiently as possible.

“Then you get into things like failing fast, so if that project’s not working, if you decide there are no business benefits, you’ve not got that commitment about having spent all of this money on the new kit and having to make it work.

“You can just close it down and invest your physical and personal resources into another project.”

In a world of increasing uncertainty and change, businesses need the flexibility to switch direction at a moment’s notice – and they need the people, processes and infrastructure to support that, too.

If you’d like to hear more on this topic, download the latest Eden Talks podcast on your favourite podcast app.

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