Okay, so you have defined the business services you provide and have gained enough experience to have a good idea of what public cloud services are like. Now you need to decide what, if any, of those you want to move to the cloud. So what makes a good candidate for transfer to the cloud?
Cloud services are basically next-generation outsourcing, and many of the same considerations that govern the choice of what to outsource apply to the cloud. So for instance services that require expensive, rare skills, particularly if you have difficulty maintaining those services in-house or do not have enough need to get full-time use of those services, make good candidates. A good example is the new field of data scientists and the Hadoop database admins that are needed for big data analysis. Many companies, including many SMBs, can gain competitive advantage from this kind of analysis, but few have enough need to justify the expense of a full-time staff to support that analysis, if they can recruit these presently rare skills at all.
Services that experience great seasonality in demand or very large demand growth are another set of prime candidates. Many retailers, for instance, do half their annual business volume between mid-November and mid-January. In a traditional architecture, these companies have to size the infrastructure supporting those sales for that peak period, which means that for the rest of the year they are paying for huge over-capacity. Replacing their in-house services with cloud services, or using Infrastructure-as-a-Service to handle the peak demands, eliminates that expense. They pay for the number of transactions they make each month, not for capacity they aren't using. That can mean a very high savings.
But outsourcing is not only about saving money or preserving capital. You might want to replace obsolescent infrastructure with a cloud service to allow the staff to retrain for its replacement or move commodity services to the cloud to allow your staff to focus on those that provide a competitive advantage or that have critical service level requirements. Outsourcing to the cloud can also be a strategy for eliminating non-standard services that are being protected by a business executive with political clout, a not-uncommon situation.
The cloud also provides tremendous agility to provision new services. You can fully provision a new business service in a day and pay for it on a credit card. Because these services live on the Internet and often have data centers worldwide, they are also good for extending business services to new geographies as the business expands, and for supporting remote sales and service offices, telecommuters, and contractors who may live and work in different parts of the world from your corporate offices. This provides a major business advantage — instead of recruiting only in your geography, your HR can search the world for the exact skills your company needs at the best price, even if your company is not a multinational enterprise.
It is also a superior way to support new, high-demand services. Game company Zynga, for instance, runs its new games on Amazon's Infrastructure-as-a-Service offering during their high-growth phase because it found that it could not keep up with the rapid growth of demand internally. When the game goes into maintenance phase, it brings it in-house partly because it finds that a Capex strategy provides financial advantages, and the huge steady demand for the game gives it economies-of-scale equivalent to that realized by the cloud service.
Another advantage of cloud outsourcing is eliminating the distractions of running an IT department, from provisioning services and sizing infrastructure to meet the anticipated demand over its lifetime — always a guessing game — to recruiting and maintaining a competent IT staff. That lets business management concentrate on the company's business — the same logic behind renting rather than buying the corporate offices or hiring an outside company to mow the lawns and plow the parking lot.
It eliminates the complex problem of translating the costs of IT infrastructure into cost versus actual value of IT services to the business. It makes answering financial questions like just what does it cost to support a specific business unit or strategy easier. That lets senior management calculate the the net profit/loss of individual business units, products and services, or strategies more accurately, a calculation that is fundamental to business management. This is one of the largest sources of senior management frustration with IT, and solving it is a major attraction of cloud services for management.
Action Item: The average 30% cost savings from using cloud services is one of its main attractions. However it is not the only reason for considering migrating to the cloud, and it should not be the only consideration in making cloud migration decisions. And it is important to remember that the least expensive service option is not always the best choice — the low bidder may not provide the services or service levels you need.