The hidden cost of cloud that is rarely discussed.

KPI’s for resources/people – more important than ever with cloud integration. Getting the right skilled people is going to become increasingly difficult.

Most companies have adopted cloud to some level by now, selling themselves on increased flexibility and the pay per use approach that is inherent to the cloud model. CFO’s have been sold on the idea of reducing the significant value of datacenter assets (which nobody except the IT department understood) and the negative publicity of traditional outsourcing has somehow been avoided (for some reason, moving thousands of servers to the cloud is viewed positively, in contrast to the negative image often connected to outsourcing where the jobs related to those servers were moved to external suppliers). More recently, multi-cloud and hybrid cloud strategies have increased in popularity to cover potential cloud disruptions, ensuring that both capacity and resilience follow business needs.

Unfortunately, for most people the far-reaching implications of cloud are still difficult to assess and only the above topics tend to be used to drive decisions. I have seen many business cases which push cloud on these merits, taking an all too simplistic view of the cost base. For those concerned with taking the next step and others who may want to add points which I have missed, I have a short summary of aspects which should be considered when growing your cloud consumption/diversity and hopefully included in your business case.

Firstly…people! Whether you’re a small company with just a few SaaS based apps or a global enterprise with more legacy than you care to remember, consider that most people with an understanding of cloud are those working in the IT department. It is those people who you are encouraging to leave, either through outsourcing or through cloud adoption, leaving your company with an environment which few people will understand, let alone are able to manage or troubleshoot, if something goes wrong. Of course, you can listen to your trusted suppliers who will all claim to have cloud integration capabilities and are able to take the role of integrator, but this comes at a price and often covers only a small number of technical aspects. Even if engaging a supplier to ensure integration and cross cloud collaboration, it is likely that you will still need some in-house skills to understand how everything is pieced together and bridge the link to the business needs. This is no different to the years when diverse applications were hosted in on-premise datacenters, but this complexity is often over-looked when moving cloud based. All too often, people respond to this challenge by saying ‘but we keep our architects and own our strategy’, which is a good first step. Now consider that architects do not manage performance or service delivery issues; they are not change managers; whilst aware of security topics, they are not security officers and do not consider all data protection regulations and they most certainly do not like to get involved in contractual and commercial discussions which are desperately needed when aligning KPI’s across multiple suppliers. Budgeting alone for these resources is also not enough, the complexity of multi- and hybrid- clouds is relatively new and expertise in the market is limited. Consider costs for hiring externally to at least train the team. 

Assuming you’ve taken people into account, a largely undervalued aspect of any cloud business case is software licensing. Whilst SaaS based apps clearly include licensing, many software packages in use today hold true to the processor-based licensing model. Without due care, expanding into the cloud or multi-cloud can suddenly destroy any business case. Considering that software typically accounts for at least 25% of the IT budget, knowing the impact on these costs when moving to a flexible cloud infrastructure should be high on your agenda.

Licenses and people are not the only running costs which may be missing or hidden! Network connectivity, data retention, security measures, monitoring across multiple clouds and reporting capabilities often tend to be afterthoughts which bring additional costs. Many organizations appear to forget that the gigabytes of data that previously traversed the on-premise DC LAN, now bounce between datacenters of cloud providers (especially when tiered applications host the database in one cloud whilst the application resides in another) and if any level of performance needs to be guaranteed you will likely need to provide additional capacity at your own expense. Similarly, many clouds are designed to deal with significant amounts of data, but this is volatile data and retention policies, backup and long-term archiving capabilities tend to come at additional cost.

Now depending upon the industry that you operate in, you will have different requirements and obligations towards disaster recovery capabilities. Whilst cloud offers resilience at both the compute and storage layers, don’t mistake this for disaster recoverability. A disaster can also be caused by virus attack or a disgruntled employee and virtualization or compute capacity is not going to save you from this kind of event. You may very well have an obligation to perform annual recovery tests which will demand switching processing facilities and/or restoring data from backup. Cloud providers do not typically include such test events or duplicate data sets to enable DR tests, so evaluate your requirements and plan budget accordingly. You may now be thinking ‘sure, but we needed to do this before cloud too, so there is no change’, but before you moved to the cloud you probably had dedicated DR facilities and more control over where and how your data was stored. The level of coordination in a multi-cloud environment and complexity of testing hybrid environments will require additional effort.

Whilst the above pose tangible costs that can be evaluated, also take the time to consider the impact of items such as KPI alignment and contract negotiation/change. Whilst it is relatively easy to adopt cloud and accept the KPI’s being offered, it is unlikely that those KPI’s will meet business demands when placed in the context of a hybrid or multi cloud environment. Although many of the larger cloud provider will not bend to your needs in terms of KPI’s, you may need to create some level of translation between the multiple contracted KPI’s and the business’ expectations and this costs effort and money. The business will not be thanking you when their application chain fails to function, whilst all individual cloud providers are shown to be meeting their KPI’s.

These are just some of my thoughts based on experiences over the past 10 years in both building, consuming and contract cloud environments. Feel free to comment and add your thoughts.

One thought on “The hidden cost of cloud that is rarely discussed.

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