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Moving your data center to the Cloud

Jon Bradbury

Most companies have already been through a first phase of driving cost efficiency in their IT infrastructure, taking measures such as consolidating into fewer (or one) global data centers, and outsourcing infrastructure operations. However – according to the hype, at least – The Cloud (or infrastructure as a service, IaaS) promises to offer a whole new wave of cost reductions, efficiency savings, and service improvements, but probe just a little deeper, and some big questions quickly become apparent. 

  • What is really meant by ‘Cloud services’ in this sense? Every supplier seems to use the term, but do they all mean the same? 
  • Enabling both cost savings and service improvements sounds like ‘having the cake and eating it’ – surely too good to be true? 
  • What suppliers should we turn to for help? Are our established IT suppliers (and/or infrastructure outsourcers) best placed, or does the brave new world of the Cloud imply new and different suppliers? 
  • What are the big challenges and risks in doing this? 
  • And – probably the biggest question of all – are these types of Cloud services really ready for the big time? By which we mean not just for supporting the odd web site – but for big, mission-critical, transactional systems (e.g. ERP) for top tier, global, blue-chip companies .

We have worked with two clients – one a FTSE 250 manufacturer, one a FTSE 250 consumer goods company, both global brands and household names – on pioneering programs to move their data centers to the Cloud. Based on that experience, this paper explores some practical answers to those big questions. 

What do we really mean by Cloud in this sense?

Cloud is one of those terms, like Big Data, that has become so frequently used and hyped that you will see the terminology used – whether justifiably or not – to describe a very wide range of services. For the sake of IT Infrastructure as a Service (data center services), we use the model and terminology as shown in the table below. 

So the first key point to note is that when you go out to market to procure Cloud services, you may get a wide range of responses in any one of those four categories described below, or they may have characteristics that span more than one category. Typically, the ‘industrial strength’ offerings that are suitable for big, mission critical, transactional applications are the middle two – with Virtual Private Cloud arguably offering the most promising ‘best of both worlds’ combination, many of the cost and agility benefits of public cloud, but with the control, tailoring, security and risk-mitigation benefits of traditional hosting.

We don’t currently see public cloud (most famously Amazon Web Services) as being the preferred option for these sort of industrial strength corporate applications – other corporate uses certainly, but ready to host the ‘big iron’ transactional ERP systems of some of the world’s largest companies? Probably not yet – but it’ll be interesting to see how the space develops.

We’ve helped one of the world’s largest energy companies move the entirety of their external web site hosting to the public cloud and a major automotive manufacturer put their SAP CRM instance on public cloud (with a third party service wrapper). But we haven’t yet seen anyone put true, ‘backbone’ transactional ERP on public cloud.

Fig-1-Moving-your-data-centre-to-the-cloud.jpeg

What flavor of Cloud do I want? 

In determining which of these models is best for you the key, as ever, is to understand what your needs are, i.e. what characteristics of the service really matter for you? These characteristics tend to fall into two groups: 

Some key commercial characteristics:

Some key technology and service characteristics:

Both cost savings AND service improvements…. really?! 

This may sound like both having your cake and eating it, and we were originally skeptical that both could be achieved. But the reality is that for a well run and well implemented Cloud service, the pure economies of scale mean that it should be able to offer a better service for a lower cost. But obviously, the big caveat here is that it all depends on your starting point (in terms of how cost effective, and how good a service, your previous IT infrastructure operational arrangements offered).

In our practical experience of migrating the entirety of a global data center for a FTSE 250 manufacturer (both SAP and all non-SAP, Windows and Unix), the transition will have achieved: 

  • Total operational cost savings (on a cash basis) of 42% 
  • Service level improvements – most key SLA metrics (for availability, incident and change management, etc.) were better than previously, and the remainder were the same (i.e. none were worse, and the net position was certainly an improvement) 
  • Flexibility – a largely (but not completely) utility-based pricing approach, with a 50% capacity floor, means there is ample room for major service changes (e.g. to support corporate acquisitions and divestments) with the commercial model flexing on demand, and little risk of being left over-or under-capacity
  • Responsiveness – the time to stand up new environments (e.g. new development and test environments for projects) will go from a matter of weeks to a matter of days (albeit still not hours / seconds like public cloud would be; but that is simply not a requirement for this particular client) 
  • Security – having done extensive review and analysis, the client’s internal IT security experts considered the Cloud service to offer the same or better IT security overall than the provisions under their previous hosting arrangements – despite the multi-tenanted approach. Importantly, the contractual recourse (i.e. warranties, indemnities and limits of liability) in case of security breaches is also better than their previous arrangements. 

Which suppliers should I turn to? 

The suppliers of these types of Non-Public Cloud Services generally fall into three groups, each of which has strengths and weaknesses as shown below (although we risk some unfair generalization in this list – clearly, each specific supplier will have their own strengths and weaknesses).

We would recommend including a range of suppliers across those categories to respond to your RFP / RFI, so you can see the full extent of the services on offer. You may also want to consider whether you want the same partner for the transition and transformation work as the hosting, or whether different partners offer the best approach. See the ‘One throat to Choke’ discussion below!

Examples of supplies and their approaches to moving data centres to the cloud.

What are the big challenges and risks? 

Again, it’s worth considering both the commercial risks and also the technology and service risks. Although this is by no means an exhaustive list, some of the common themes (in our experience) of risks and challenges we see across clients in this area are as follows:  

Overall – is it ready for the big time? 

Our view would be an unequivocal (although still cautious) ‘yes’. There are now a number of case studies of where this has been done at large scale, for major global companies, and for their most mission-critical transactional applications – so it is still advanced, certainly, but no longer ‘bleeding edge’. And the benefits of very material operational cost savings (approaching 50%) and gaining some worthwhile service level improvements are simply too good to ignore. So our view would be unquestionably that if CIOs are not exploring this already, then they should be – and will be soon.

The author

Jon Bradbury

Jon Bradbury, Partner