Value Realization with the Cloud

Value Realization with the Cloud

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We thought it would be helpful to share some perspectives on how we are seeing customers realize and accelerate business value from the four Mega-Trends (Cloud, Mobile, Social, and Big Data/Analytics), so we asked one of our colleagues to share what he’s learned about how companies are getting business value from Cloud in the Enterprise..

Here is Paul Slater sharing his observations and insights on Value Realization with the Cloud  …

Putting Strategy into Action

As an architect in the Microsoft Services Applied Incubation team, I work with enterprises, service providers, public sector organizations and governments. I get to help these organizations define their cloud strategy, and put that strategy into action.

In this post, I’m going to explain some of the core challenges my team sees organizations face in cloud adoption, and how we propose that these are addressed.

Getting Business Value from the Cloud

Increasingly, cloud computing is a mainstream concept in organizations. At this point, pretty much everyone knows what cloud is, and who the major players are in private and public cloud computing. Yet adoption still has a long way to go, and many organizations still lack a coherent cloud strategy.

In part, we believe that this is driven by an economic reality. Sure, the cloud can transform the way IT is practiced, allowing organizations to focus on activities that add value, rather than low level infrastructure management. But moving to the new world is not free, and can be highly complex.

New organizations will typically jump into the cloud head first, but for most existing companies, cloud use is limited to net new development, applications reaching end of support in their existing environment, and applications where the migration path is well understood and the benefits well documented. The rest of the applications and data remain in underutilized datacenters, gradually approaching obsolescence.

Ironically, while this approach can be driven by economics, it can costs organizations real money. Hidden inside a portfolio of thousands of applications could be real opportunities for cost reduction or improved revenuefor the business.

And once a critical mass of applications and data move to the cloud, then there are opportunities for real savings and reinvestment. SANs can get shut down, entire network segments removed, platforms retired, facilities closed.

A New View of Cloud

As my team works with customers and partners on their cloud strategy, we are starting to see a series of patterns emerge that suggest a different view of the cloud world. Firstly, as cloud becomes mainstream, it is starting to become the enabler of the other megatrends we so often hear talk about, namely Mobility, Social and Information. In effect, instead of this:


We are starting to see this:


Secondly, except for some very small organizations, hybrid computing models are a reality and they are here to stay. As organizations are deploying new applications they are making decisions on where they should deploy those applications, often by using a decision tree that looks something like this:


The result rapidly becomes a mix of applications sitting across different public and private clouds, but of course the complexity doesn’t stop there. Applications are often interconnected sets of components that may for technology, governance, risk, compliance or even political reasons may sit in different places. You will frequently end up with a mix rather like the picture below:


Another change we see is towards supplementing full public cloud and private cloud environments with in-country service providers. This allows enterprises and governments to choose a mix of services, and trade off cost, control and data sensitivity against each other.

Recognizing this trend, Microsoft is working closely with in country service providers to provide capabilities on a common Microsoft platform that supplement our public cloud and private cloud offerings, as shown in the following diagram.


Figuring out how to move forward

Amidst all this complexity and confusion, we frequently get asked to help organizations chart there way forward, and while every organization is different, there are a set of hurdles that need to be cleared in most organizations in order to progress:

  • Defining a consistent cloud strategy
  • Defining a supporting application and information strategy
  • Establishing a cloud ready organization
  • Assessing the IT portfolio
  • Modernizing the Datacenter
  • Building Cloud Ready Apps
  • Shutting down legacy environments

I’ll go into each of these in a little more detail.

Defining a Consistent Cloud Strategy

My grandmother had an investment strategy – she put all her money in the mattress. In the same way many organizations have a cloud strategy, but the strategy isn’t necessarily well thought out, consistent, or even actively useful. Microsoft conducts workshops with organizations to help them establish an effective cloud strategy, and there are many things that need to be established in order for it to be useful. These include understanding the business drivers behind cloud adoption, architectural principles pertinent to cloud, capabilities of the organization to execute on the strategy, approach to net new and existing applications, what cost savings are projected and how they will be reinvested, what the business value is of the transition, and how risks associated with migration and the target environment will be managed. If organizations do not have their cloud strategy defined and accepted, it will be very difficult to build effective business cases. For example, moving one application to the cloud may result in a net increase in costs, as you pay for the new cloud service, and resources that you were previously using (technology and people) remain in the organization. Only once you combine each of these individual projects together are you likely to see significant cost savings to the organization.

Defining a Supporting Application and Information Strategy

Cloud eliminates much of the need to care about underlying infrastructure, but organizations still need to care about their data, and how that data is generated and manipulated via applications. After all, when organizations move to the cloud, it is their data and applications that actually move.

Many governments have realized the importance of information classification for some time, and are now in the process of mapping their information classification frameworks to specific cloud solutions, allowing them to determine what data can go where in a complex hybrid world. Some are reevaluating decisions previously made, in the light of changing costs and improved reliability in the public cloud, but also as a result of the Snowden revelations. Enterprise are typically playing catch up here, developing their own information classification frameworks and information strategies. Applications are another critical part of the puzzle, and many organizations do not even know what applications they own, let alone the value they bring to the organization.

We recommend that organizations move over time to make both enterprise information management and IT portfolio management core competencies. By developing a detailed understanding of all of the information and applications in the environment, they can measure the value they bring, and ensure that that value increases over time.

Establishing a Cloud Ready Organization

Cloud ready organizations look very different from traditional IT organizations. Many traditional system administration skills diminish or disappear. Other skills, such as architects to manage the transition, and rapid response cloud consultants who help determine the approach for deploying a new capability, and piece together the various parts of a hybrid system that need to work become much more important. Traditional technology siloes, such as compute, networking and storage become irrelevant and destructive.

Building the organization ready for cloud is a very significant challenge for most IT leaders. It can involve significant retooling of existing staff, and sometimes new resources are required. We have worked with our internal IT organization to understand more deeply the types of skills most suited for this new environment, and alongside technical acumen, three skills come to the fore – situational awareness, impact analysis and effective triage.

Assessing the IT Portfolio

This is where the hard work really begins, but at least at this point it should be built upon a well-defined strategy for cloud, applications and information in the organization. The IT portfolio actually consists of a number of different related portfolios, as shown here:


Developing a full understanding of each of these portfolios, the dependencies they have on each other, and how they use data is a critical part of maximizing the value of any transition. That said, the reality is that many organizations at this stage will focus on one main area, the set of applications. They will trawl the application portfolio, looking for opportunities to move the cloud, either to improve capabilities, or to bring down costs.

The 5 R’s – Rehost, Refactor, Revise, Rebuild and Replace, are a good way to describe the work that needs to happen to applications. To this, we add two more – Retain and Retire, as in some cases you will actively choose to do nothing to the application, and in others you will eliminate it entirely from the portfolio as it is not adding value.

This kind of portfolio analysis is, unfortunately, always time consuming, and there are few shortcuts if done properly. There are literally hundreds of dimensions to consider when determining the right approach for an application. And to be effective, you need a combination of top down and bottom up analysis. Top down analysis of the portfolio starts at the business capability layer and helps to answer the question “what is the organization supposed to do?” Bottom up analysis starts with just a list of applications, and helps to answer the question “what is the organization actually doing?” There is frequently a surprising delta between the two, and that delta can be the source of significant cost reduction, or even potential innovation, as the organization finds a way to monetize existing capabilities.

Modernizing the Datacenter

Almost every large organization is likely to retain at least some capability on premise. And even those that don’t will likely use in country service providers. Organizations undergoing a cloud transition face a choice, maintain the existing datacenter footprint, consolidate datacenters without modernization, or embrace modernization to improve efficiency and capabilities of the portfolio.

To stay competitive in a cloud services world, Microsoft has fully embraced datacenter modernization. In fact we run some of the most modern datacenters in the world. We have invested more than $15 billion in an infrastructure that supports more than 200 online services, including Bing, Hotmail, MSN, Office 365, Xbox Live, and the Windows Azure platform. The Microsoft Global Foundation Services (GFS) organization is responsible for the Microsoft public cloud infrastructure, and comprises a large global portfolio of data centers, servers, content distribution networks, edge computing nodes, and fiber optic networks.

Sure, we run datacenters at scale far greater than most of our partners and customers. But we have realized that many of the lessons learned from our own experience apply directly to others. Key principles behind building and operating a modern datacenter include:

  • Design the data center as an integrated system
  • Design resilient, flexible software
  • Build to current requirements
  • Make data center operations more predictable
  • Understand and control costs

Organizations that design, build, and operate their data centers according to these principles will be positioned to provide reliable and flexible high-performance services at an effective price point. Those organizations that do not follow these principles will affect the cost and responsiveness of their IT services, and ultimately put their ability to remain competitive at risk.

Modernizing Existing Applications

Once organizations have a good understanding of the portfolio, and the proposed dispensation of their applications, they are now in a position to modernize the applications. As I already mentioned, a good way to think about this is through 7 Rs, but there are some important other considerations.

Firstly, modernization of an application represents a real opportunity to increase its value. So while rehosting an application may seem to be the easiest option, it is not always the best. To fully get to the value, you may need to refactor or even rebuild the application. However in a large portfolio, it can be difficult to build individual business cases for modernizing each individual application, so it’s important to go back to the overall cloud and application strategy and establish the value at that level.

Secondly, when determining candidates for application modernization, many organizations make the mistake of ignoring internal applications, leaving them to become more and more dated. This can have significant impact on productivity and on organizational morale.

Finally, if you are modernizing large numbers of applications in the organization, much of the work may be automated, or at least done following a standard pre-defined process. You may choose to build this yourself, or using a partner that has developed repeatable processes for doing this work.

Building New Cloud Ready Apps

Building applications for the cloud is requires a very different approach to traditional application development. In general you know very little about the underlying infrastructure, so you cannot rely upon redundancy in the underlying infrastructure to ensure uptime. Demand may scale unexpectedly for public cloud applications, or parts of an environment may fail. Application containers are not segregated from each other physically. Components may span multiple geographies, multiple security boundaries, and even multiple cloud service providers, and you may wish to move those components as platform capabilities improve or costs change. In addition to these challenges, there are huge opportunities to connect together social, mobile and information components into applications with capabilities that were formerly impossible.

To develop effectively for cloud, new skills are required. We have published guidance on this topic, called Failsafe: Guidance for Resilient Cloud Architectures. I’d highly recommend you read it and apply it to your own application services organization.

Shutting Down Legacy Environments

As I mentioned earlier, some of the larger economic benefits associated with cloud can only be realized by removing legacy environments, from servers and platforms to entire datacenters. This can be very difficult in many organizations – it is so much easier to new environments than retire existing environments. In some organizations, skills shortages are now starting to reach emergency proportions, with the workforce skilled in a particular application or platform literally dying out. Effective portfolio management and application lifecycle management can help with this problem, and it’s important to recognize that in most enterprises this is as much a political or cultural challenge as a technical one.

Fortunately, many organizations are now coming to terms with the fact that eliminating legacy environments has the capacity to redirect significant money away from keeping the lights on and towards technology that differentiates the organization. These organizations are providing top down mandates to enforce change, and ensuring that support for that change permeates throughout the organization.

What Some Teams at Microsoft are Doing to Help

As I’ve illustrated in this blog, simply building a set of cloud capabilities does not ensure that organizations or individuals will adopt cloud computing. While there are many benefits, the hurdles are big enough to make the journey difficult for most.

Recognizing this, some teams at Microsoft have made some significant investments to help our customers and partners undergo this transition. Our Enterprise Architects are working with organizations to help them define their cloud strategy, their approach to application and information strategy, and to analyze their portfolios. Our Cloud Vantage Services help organizations navigate the transition to Cloud.  Some teams at Microsoft have also invested in helping our customers modernize applications, and here we are working directly with customers, but also through our partner ecosystem.

As mentioned earlier, an essential part of our cloud strategy is to provide in country services through cloud service providers, supplementing Microsoft public cloud offerings, and on premise private cloud capabilities. This can be particularly important for local and national governments, so we have also established a National Cloud strategy to support governments in their transition to cloud. You can find more information about their work here.

Looking forward, my team and other teams in Microsoft are continuing work to make cloud adoption easier, and the value proposition of cloud higher. For example we are investigating how organizations can more accurately understand in their existing datacenters, and align them to services, so that they know when moving makes sense from an economics perspective. We continue to explore innovations in datacenter and infrastructure design, and methods to reduce the costs associated with application modernization. And we are working to ensure that when applications are deployed to the cloud, they are done so in the most efficient and flexible way. This will allow applications to be seamlessly redeployed when the capabilities of the underlying infrastructure and platform alters.

While Cloud transformation is well underway, there is still a long way to go for many organizations, and the destination will continue to evolve. However, I’m happy to say that as an organization that is fully committed to the cloud, we will continue to invest in capabilities and services that help our customers and partners navigate the journey.

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  • You framed up a lot of related topics here in a helpful way. Cloud strategy is key. Three things I'd add: 1) if you can shift a subset of current IT roles from operations and engineering to more business-focused service brokers/providers (perhaps requiring re-tooling on an individual's part), you start moving closer to solving the problem of business alignment and enablement. 2) On the front-end, organizations also need to continue their focus on user experience and enablement, which may benefit from a shifting of energy from operations and engineering enabled by cloud providers backfilling there; 3) All this takes a re-thinking of organizational capability development, both in business and IT. From MIT's Brynjolfsson (I forget which paper): "For every dollar of IT hardware capital that a company owns, there are up to $9 of IT-related intangible assets, such as human capital—the capitalized value of training and organizational capital (the capitalized value of investments in new business-process and other organizational practices). Not only do companies spend far more on these investments than on computers themselves, but investors also attach a larger value to them".

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