This article originally appeared on CIOReview.com; it has been modified for this space.
Considering a move to the cloud? CIOs cite a variety of reasons to do so, including cost savings, scalability, and the ability to more quickly deliver/enable initiatives for the business. At the same time, the number of cloud vendors and products — from infrastructure to applications — is exploding. IT market research firm IDC predicts that digital transformation spending will consume up to 50% of IT budgets by 20231, with a large chunk of the spend going to cloud technologies. For many CIOs, pressure to migrate to the cloud is forcing premature decisions about which cloud technologies to invest in. Instead of adopting a cloud solution “for technology’s sake,” make sure that it aligns with business demands for growth and innovation; that is, “for business’ sake.”
CIOs are striving for quick and cost-effective wins as they move to the cloud. Two initiatives can help fast-track your cloud strategy:
1) Shifting your IT infrastructure to an open, flexible, cloud platform that allows for hyper-scaling
2) Augmenting core systems (such as ERP) with cloud technologies that enable business growth and create competitive advantage
“By shifting IT infrastructure to the cloud, you can save on capital and operating expenditures. By paying for computing capacity only as it’s needed, you can reduce the costs of underutilized resources. You can also decrease IT hardware maintenance costs because of the decreased reliance on in-house data center hardware.”
— Bob Violino, Contributing Writer, InfoWorld
These proven strategies provide opportunities for innovation that let you march with confidence to the cloud. They also help you avoid getting locked into an application vendor’s proprietary technology stack and provide flexibility for future growth and innovation.
Shift IT Infrastructure to the Cloud, But Pick Your Platform Carefully
Shifting IT infrastructure to Infrastructure as a Service (IaaS) — often called “lift and shift” — involves moving business applications, customizations, and interfaces to a hosted service. It preserves existing application licenses and custom code investments, giving the same functional fit but at a lower total cost of ownership by keeping the application portfolio intact (just hosting it on a third party’s infrastructure instead of yours). Think of it as keeping everything you built over the years, just running it on faster hardware with lower cost of operations.
Moving a data center to the cloud can be the least-complex and most cost-effective cloud strategy. IaaS frees the enterprise from owning and maintaining computer hardware, making it easier to keep your infrastructure current. IaaS can also increase the enterprise’s ability to modernize by allowing IT to more flexibly adopt changes, providing the agility to change faster. The timeline to deploy and go live on IaaS can be relatively short when compared to other cloud projects. Customers may potentially realize at least a 30% savings out of the gate2.
Even though IaaS can cost less than operating an internal data center and can support hyper scaling the business at a much lower price, using an application vendor’s proprietary IaaS can be problematic. Instead of supporting best-in-class options for your level of business complexity, you are limited to applications that operate on — or integrate with — the vendor’s technology stack.
An application vendor’s IaaS can also cost more. The IaaS sticker-pricing by compute unit may be attractive but it typically doesn’t reflect secondary pricing components (e.g. storage and other costs) that add to the total cost of cloud infrastructure. Add in other operational needs of running an application in the cloud, and it can cost more to operate a vendor’s cloud infrastructure.
Industry analysts consider vendor-neutral IaaS providers like Amazon Web Services (AWS) and Microsoft Azure to be “general-purpose providers capable of supporting a broad range of workloads” while application vendor proprietary solutions (such as Oracle’s cloud IaaS) are “primarily an infrastructure foundation for its other businesses.”3 Using vendor-neutral IaaS minimizes the risk of getting locked into an ERP vendor’s cloud technology stack.
The ‘lift and shift’ of existing perpetual applications licenses to IaaS reduces the need for certain operations skills (e.g. database, web and operating system skills) since many of the tasks associated with these skills will be automated in a cloud infrastructure model. Internal operations staff and budget may be freed up for reallocation to high priority business initiatives. When adopting an IaaS approach, review operations and support processes, staffing, skills, and budgets to understand where changes will be required. Conduct a roles/responsibilities assessment to identify the impact of the changes.
See 5 Ways to Leverage ERP in the Cloud Without Necessarily Moving to Cloud ERP for more on the value of lifting and shifting to IaaS.
Augment Existing Enterprise Applications with Cloud Technologies to Enable Business Growth
Most enterprises have made significant investments in implementing highly functional, stable ERP systems, many of which include configurations and customizations that meet specific business needs. When running well, a tailor-fit ERP can serve as a reliable, robust operational platform that allows the enterprise to continue to see ROI for many years to come.
The application vendors’ costly ERP maintenance programs don’t typically include meaningful innovation because most of their R&D is currently focused on new platforms and releases. For example, no large future upgrades are planned to be provided by SAP and Oracle for their flagship ERP products.
According to Gartner’s 2019 CIO Agenda survey, 3% or fewer of the enterprises surveyed see ERP as a game changer. That priority shift could mean that fewer ERP investments are being included in the CIO’s Business-Driven Roadmap. Yet, continued reliance on ERP vendor policies and support models force CIOs to spend limited budget, resources, and time on “keep the lights on” ERP projects that may not drive growth nor competitive advantage.
Moving the core functionality found in ERP to a completely new Software-as-a-Service (SaaS) platform (the cloud) is not a wise move for most enterprises, since most ERP deployments are highly complex, and moving ERP to SaaS can be very expensive and disruptive. SaaS ERP likely won’t make most enterprises better able to respond to business demands for growth and innovation. Additionally, SaaS ERP is an evolving solution with functionality and operational issues that are yet to be solved. The opportunity cost of a full-scale deployment to a less-mature, less-functional cloud solution is delaying or missing out on potential high-yield cloud investments.
Best practice is to focus budget and staff on initiatives that matter to the business. Most enterprises are choosing to preserve their investments in ERP systems while they innovate with cloud technologies around the edges.
Jump start your cloud strategy by deploying best-fit, cloud-based capabilities that enable business growth, create competitive advantage, and include systems that truly engage customers or users. These typically attach to (or sit outside of) ERP, making them less expensive and less time-consuming to deploy in the cloud. This move may involve replacing functionality that was previously force-fit into ERP, which added to the complexity of managing applications. Changes to these types of systems occur more frequently and must be delivered more quickly, so addressing them separately from ERP also increases flexibility and agility.
3 Gartner: “Magic Quadrant for Cloud Infrastructure as a Service, Worldwide” 16 July 2019