In my previous blogs we talked about why you would need a business case when moving to the Cloud and how you could allocate your budget. Today, in the final blog within this series I will talk about whether buying on-demand resources and capacity to run your IT has the potential to be less expensive.

3 reasons why Cloud should save you money

Every conversation on cloud I have with CIO and sourcing decision makers eventually turns to a discussion of cost and the assertion that cloud computing is less expensive. From a technology perspective, there are at least three key reasons why a well-run third-party public Infrastructure as a Services (IaaS) provider should be able to deliver compute resources less expensively than a typical internal IT organization:

• Load aggregation. By combining the highly variable compute loads from a pool of organizations, it should be possible to achieve better utilization levels.
  
• Cost of power and electricity. By locating datacentres in areas with low-cost power, hosting and IaaS providers can lower their cost of compute resources. Given that power can often represent 35% of operating costs, this advantage is significant.
  
• Labor utilization. Compared with a typical IT organization operating a Public IaaS platform that is standard and heterogeneous IT infrastructure and delivered in a one-to-many model is much more streamlined, efficient and cost-effective.
  

The key issue however is not the cost of delivering IT compute services as such. For IT buyers, the issue is comparing the price of acquiring a public IT cloud service versus the cost of providing it internally. Pricing is a function of market conditions, seller motivation, and buyer requirements. In mature industries, cost and price are usually highly correlated. The cloud computing market is in a period of rapid expansion, affecting both providers and their service offerings. Pricing varies from very short-term contracts, literally minutes of usage, to multiyear contracts with associated discounts. The scope of the public IT cloud service offerings varies even more widely.

The long-term outlook is that public IaaS has the potential to reduce the cost of IT delivery. However, there is no guarantee, even likelihood that any particular project or application will certainly be hosted more effectively with hosted or IaaS resources. As with most complex technical questions, the answer is a function of many variables. Nevertheless, IDC believes that public IT cloud services will evolve rapidly into a major IT platform, and for that reason, IT organizations should continue to explore new options and applications.

For midsize and larger projects, IDC recommends IT leaders and other business executives rely on the proven business case methodology factoring the relevant components, including direct resource costs (equipment, software, and services), assurance costs (such as monitoring, patching, and maintenance), and indirect costs (including buildings, energy consumption, taxes, and IT management), and comparing them with external options (also fully encumbered with all relevant costs including assurance and IT management).

This is the final blog in a 3 part series on the business case for Cloud.    In addition to the blogs, IDC in partnership with TELUS developed a Cloud workbook based on a 2011 IDC survey with Canadian businesses to determine how they can take advantage of the flexible, on-demand way to access infrastructure and applications via Cloud.  Highlights from the workbook include:

• Use cases detailing how companies of varying sizes across verticals are deploying Cloud
  
• Types of Canadian Cloud providers and their offerings
  
• Key consideration questions to assess infrastructure-based Cloud services as part of your IT strategy
  

You can get full access to the workbook here

Mark Schrutt

IDC Canada

One of the key success factors in moving to the Cloud is developing a robust business case.  The business case provides the rationale, benefits, and costs, as well as the expected results for investments by organizations.

This is the first in a three-part series on the importance of a business case, budgets; operating vs. capital, and expected results of a successful business case.    Today’s blog will cover the need for business case, followed by a deeper dive into how you allocate your budget of operating (OPEX) vs. capital (CAPEX) and finally, how to determine if you are meeting your business case objectives.

Cloud is another form of outsourcing. The discussion of the ROI should follow a similar thought process as outsourcing, contracting out or for that matter many other IT decisions. This starts with the business case. The business case has established itself as the primary tool in sourcing decisions.

The IT business case typically has seven components: Background, current state and options; financial review; risk management; strategic fit; execution plan; and ongoing management. In addition, there are four major steps in developing a business case: scope identification; data collection; market pricing; and contracting.

Not all business cases need each of the steps. At the very least, though, a financial review commonly referred to as a cost/benefit analysis should be done. The cost/benefit analysis is a comparison of the options a company has to support its IT requirements. The benefits of Cloud-based infrastructure (or Infrastructure as a Service, IaaS) need to be clearly identified and quantified to the extent possible. In addition, one-time costs for activities such as transition need to be included. Last, the financial implications of risk need to be woven into the business case. While the risk (which revolves around security and privacy that is frequently associated with Cloud) should be identified and their probability and priority to the organization needs to be assessed, the financial review focuses on the cost of reducing or eliminating such risk. For Infrastructure as a Service, IaaS (which are virtualized servers, storage and networking hardware delivered as a service) examples include the cost for data replication, mirrored sites and any cost differences for in-Canada solutions that address potential risk and concern.

Regardless of whether a full business case or cost/benefit analysis is done, the exercise really starts with a discussion between the business and IT. The business case is heavily dependent on communication between management, IT leaders and sourcing decision makers. These discussions should focus on a common understanding of the company's future direction and what will be required from IT to meet the corporate goals. These conversations will help form the scope of infrastructure services being considered for the Cloud.

Cloud is one option. And within IaaS there are various choices between Public and Private models. While Public IaaS offers many benefits, such as potential cost savings and the ability to scale, it does provide somewhat limited options on how infrastructure resources can be configured. Public IaaS is a one-to-many model and customization comes at a price. Public IaaS also has to be managed, whether by the service provider or internally. These costs have to be addressed in the ROI calculation. Cloud also introduces the discussion of operating (Opex) vs. capital (Capex).  My next blog will discuss this in more detail.

In the meantime, is your company thinking about moving to the Cloud but you don’t know where to start?  Do you think a business case would be the first step or have you done one already?

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This is the first in a 3 part series about the Business Case for Cloud by Mark Schrutt.  Director, Services & Enterprise Applications.  IDC Canada

Earlier this week, Paula Cusati shared with the TELUS Talks Business Community feedback from a flex work technology “Sneak Peak” event in Vancouver (include link to previous post). In partnership with Research in Motion (RIM), TELUS hosted a second event on Thursday across the mountains in Calgary.

Flexible work requires flexible technology and to the excitement of all, RIM demonstrated a pre-production version of the Playbook tablet.  In short, the Playbook is an impressive, professional grade device for business.  If you’ve never seen a preview of the Playbook, here’s a great video overview of its business specifics features:

Since there are many places online where you can find videos and specifications for the new Playbook (great sources include http://ca.blackberry.com/playbook-tablet/ and  http://blogs.blackberry.com/), let’s look at it from another angle.  How does a business interested in using tablets start to build their business case?

Desire: The growth of flexible work

The Flexible work movement (the ability to work in the office, at home and on the move) has grown dramatically over the past decade. It was not long ago when everyone traveled and worked at one central office. We went there because that’s where the people, documents and systems were. Then technology helped us break the rules. Today’s workforce has the ability to connect with people, information, tools and systems from just about anywhere and at anytime.  In fact today the typical knowledge worker is away from their desk more than 60% of the time.

But does the typical employee want flexible work options?  Here are some statistics to build the case:

• 73% of companies report higher productivity and loyalty.
• 89% indicated that a flex work program makes the company more attractive.
• Flexible work is the second most important consideration for a new employee after pay.

It’s easy to conclude that employees want flexible work and data specific to your company is the first element of a good business case.

Segmentation: One size doesn’t fit all

It would be nice if every member of your team were all the same. Everyone having the same desk, same computer and same technology needs.  The reality is that today’s employees have a variety of needs and expectations that stem from their job type, work tasks, location and work style.

By segmenting your workforce into work style based categories, you can identify employees who would benefit the most from flexible working technologies.  As the segmentation evolves, specific employee groups can be identified as receiving the greatest value for tools such as tablets.

Predict:  Your Triple Bottom Line

Business cases always come down to dollars and cents (and sense).  When examining flexible work, the Triple Bottom Line approach of Planet, people and profit is an effective system.

1. Planet : What is your environmental return?  By shifting to a more flexible work environment and using flexible technology such as tablets, you are likely to see a reduction in miles traveled, carbon footprint and fuel costs.
2. People:  What is your employee return?  Imagine freeing up 60 to 80 minutes in your day because you don’t need to go into the office today.  That’s the typical 2-way commute time in a  major Canadian city. Research tells us that 60% of that time is  re-invested back into the business.
3. Profit:  What is your return on investment?  Top level financial  benefits are primarily driven by real estate consolidation, fuel,  maintenance and depreciation for employees.  These financial impacts can  be quite significant for large organizations.

Assistance: Ask for it

Making the case for tablets like the Playbook and flexible work in general isn’t a simple task.  Look for support from companies who have deep experience in flexible work themselves and ask the tough questions.  Questions such as:  Have you calculated your real estate cost savings?  How many metric tons of greenhouse gases did you save last year? How many of your employees currently operate under a flexible work arrangement and have mobile technologies such as tablets?

An example of a valuable support system is a tool called Quickstart, which is available through TELUS.  In essence, it allows you to run an objective flexible work assessment, validate employee segmentation and report on the estimated triple bottom line impacts.  Just fill out a contact form if you would like a demonstration.

Stay tuned to TELUS Talks Business for more news and information about technology for Flexible Work in the weeks ahead.