For enterprises, moving to the cloud is no longer a question of if, but when. Three-quarters of you are already there in some form, taking advantage of the speed and scalability that the cloud offers. The popularity and benefits of the cloud do not mean that enterprises are abandoning traditional IT systems. The IT of the future, if we examine the trends, is that there will always be some form of hybrid IT landscape. Some recent reports predict that more than 80 percent of enterprise IT organizations will commit to hybrid cloud architectures by 2017.
Companies are choosing the cloud to deliver responsive IT and to innovate the way people work. Regardless of your role in your organization, you may find that cloud computing can open the door to business transformation. For corporate application managers, cloud is speeding the delivery of new products and services while also providing access to new services that can improve business processes. Managed services providers are using cloud to open new revenue streams and offer differentiated services while reducing support costs. Chief information officers have been able to use cloud to transform the responsiveness of their IT infrastructure and development efforts while improving management of compliance issues. For chief marketing officers, cloud can provide a better place to store and analyze data more quickly, helping to reinvent customer relationships based on data, and expertise can be shared among customers, employees, and partners. Data center managers can use cloud to provide self-service access to resources so that their staff can focus on higher-value projects, so important in a time when data center budgets strain the very best companies. Figure 2.1 shows the benefits by role.
Figure 2.1 Benefits of SAP cloud computing by role (Source: IBM)
Many of the benefits of moving to the cloud are well known, among them:
- Reduce IT costs, in many dimensions: space requirements, cooling systems, electrical and other power costs, administration overhead, and more
- Encourage and enforce standardization of applications, infrastructure, services, and processes
- Remove complexity, not only for users, but for your entire enterprise, especially in your SAP support areas, such as application managers and administrators dedicated to Basis
- Provide fine-grained services, tools, and options to enable sufficient customization and personalization without having to change or affect the core code
- Aggregate data thanks to cloud-based analytics tools that can work equally well with structured and unstructured data
- Shift capital expense to operating expense (or back, if that is your preference)
- Measure utilization to more precisely identify and cost IT services so that you only use the services you pay for, rather than building and maintaining capacity for the future
While the cloud offers tremendous opportunities for growth and cost savings, it is not for the risk adverse. Cloud deployments introduce greater complexity in areas such as security and compliance, service and operations management, and cost management.
Many organizations are finding that cloud adoption has a greater impact on their cultural fabric, even more so than a business impact. The cloud is forcing companies to transform. For many early adopters there was a change management component that was not accounted for in the original planning. Many cloud projects failed because of the natural resistance to change that afflicts every organization.
The area most deeply affected is IT. We suggest that before you even begin your cloud project you take a hard look at your IT organization, especially to establish a baseline that later can be used to project how it will transform once you move to the cloud. You might want to ask yourself the following questions:
- How is IT supporting the enterprise?
- Is IT “at the table” shaping strategy?
- What IT initiatives are under way to support strategic initiatives?
- What are the line-of-business requirements and is your IT organization meeting them?
- Are lines of business pursuing “shadow IT” solutions, that is, IT solutions independent of corporate IT?
One of the end goals of any project of this magnitude is to generate an organizational harmony with the final result that IT, the business, and the cloud strategy work in concert rather than at cross purposes. Doing so will help you go beyond cost savings and flexibility to realize the full business value of the cloud.
This can be a tremendous opportunity for IT organizations that are struggling or out of sync with the business or with corporate strategy. Not only can it align IT with stakeholders, it can allow IT to be seen as a strategic adviser to business leaders to help them determine the best cloud services.
A 2013 survey by IBM of more than 800 executives found that even then getting on the cloud was a central objective. Many of those interviewed perceived the cloud as a mature, stable, and reliable solution for solving business challenges and increasing competitiveness. Interestingly, while cloud services were viewed as an area for cost savings, it also was believed to be a source for product innovation.
To build your business case for the cloud, you need to determine which role your organization will take in using and operating in the cloud. You can be one of the following:
- A cloud consumer, which is by far the most common answer
- A cloud provider, providing cloud services for others
- A cloud broker, the middleman between cloud consumers and cloud providers
For the purposes of this book we will only be examining projects for consumers of cloud-based services, but know that your cloud strategy may expand to include becoming a cloud provider or cloud broker.
What Are Your Business Drivers?
As we have emphasized, projects exist to support one or more of three axes: increase revenue, reduce costs, or mitigate risk. Migrating SAP to the cloud offers several potential benefits:
- Helps improve cost efficiency: Uses economies of scale and helps shift capital expenditure to operational expenditure
- Helps reduces complexity: Uses automation and standardization
- Provides an enterprise-class infrastructure: Helps manage performance requirements
- Improves scalability: Provides an architecture designed to easily scale up or scale out
- Provides resiliency for core business processes: Uses a cloud-enabled infrastructure backed by clear key performance indicators (KPIs) and commensurate service level agreements
Based on those, common strategic and tactical objectives can be identified:
- Taking advantage of unstructured data from mobile sources or social media, and building analytics around it
- Streamlining test and development
- Transforming and expanding the capabilities of the data center
- Delivering innovative products and services more rapidly
- Gaining a robust foundation for transformational plays
- Running production workloads more cost effectively
Whatever your objectives, be they to reduce total cost of ownership, make IT more efficient, or deliver products to customers faster, what is important is to establish metrics and/or goals for each objective. Once you have established the business drivers and related metrics, then you have to determine what resources and infrastructure you need to achieve those objectives. This will require a gap analysis to take all the dimensions of your operating model and determine how far away you are from implementing the cloud properly to satisfy the business requirements attached to that major driver.
Defining Return on Investment (ROI)
The three project axes—reducing costs, increasing revenue, and mitigating risk—should always be front and center when estimating the ROI for any cloud project.
The common business case around moving to or starting a service in the cloud revolves around reducing IT budgets in one area—maintenance and operation, which can represent on average 70 percent of the IT expense—to increase spending on new initiatives where IT can contribute to revenue growth.
After thousands of cloud implementations, our company, IBM, has identified the four major areas where our clients have made and optimized ROI on their respective projects:
- Standardization: Simplifying and streamlining IT operations and minimizing customization
- Global or expanded delivery: Expanding into markets faster and more efficiently
- Information Technology Infrastructure Library (ITIL) processes: Improving IT management processes to speed the cycle time and agility
- Economies of scale: Scalability is at the heart of the cloud, where provisioning can happen almost with the push of a button
To continue reading, please visit the full publication SAP in the Cloud: Migration Roadmap