Updated: June 20, 2024
Cloud computing adoption continues to gain momentum, with recent forecasts predicting substantial growth in cloud revenue. Since our initial analysis, it's clear that organizations can no longer afford to ignore the benefits of cloud computing. After significant research and discussions with our Cloud Alliance Partners, third-party software providers, and other consulting firms, we have identified five critical reasons why an optimized cloud strategy is essential for your organization.
Reason #1: Addressing the Skills Gap
Lack of resources and qualified staff remains a significant barrier to cloud adoption. Moving workloads and applications to the cloud impacts the business, operations, security, compliance, people, and processes. Delegating cloud strategy to your CIO/VP-IT without involving key stakeholders and experienced staff creates unnecessary risk. Before starting a cloud strategy initiative, realistically assess internal staff availability and skill sets to identify gaps. Consider augmenting your team with experienced consultants to ensure a successful transition. According to a 2023 report by the International Data Corporation (IDC), 67% of organizations cited a lack of skilled personnel as a major barrier to cloud adoption, highlighting the widespread nature of this issue.
Reason #2: Enhancing IT Security
A staggering 86% of cloud applications in us are unsanctioned, posing a significant security threat. Shadow IT not only increases security risks but also obscures the actual cost of IT. A comprehensive cloud strategy can bring unsanctioned applications into the light, improving IT security and financial reporting accuracy and enabling cloud vendor consolidation. This approach ensures that all applications adhere to your organization's security policies and standards. According to the 2023 Cloud Security Report by Netwrix, 86% of organizations reported that they had unsanctioned cloud applications running within their environments.
Reason #3: Optimizing IT Budget Allocation
Cloud computing can generate significant cost savings for existing applications and new projects. Building new applications that are "cloud-ready" can provide additional savings and allow for investment in new initiatives. According to Flexera's 2023 State of the Cloud Report, 59% of enterprises cited the ability to reallocate IT budgets to new projects as a major benefit of cloud adoption. A cloud strategy with a time-phased roadmap helps organizations target cloud workloads that reduce capital expenses (CAPEX) and reallocate operating expenses (OPEX) to new projects, optimizing IT budgets for innovation and growth.
Reason #4: Aligning Cloud and Non-Cloud Budgets
An emerging trend is the allocation of separate budgets for cloud and non-cloud IT by Boards and Executive teams. This trend reflects corporate leadership's recognition of the potential benefits of cloud computing. To prepare accurate budget estimates, a cloud strategy combined with Total Cost of Ownership (TCO) analysis is essential when categorizing cloud versus non-cloud IT budget workloads. Gartner's 2023 report indicates that 70% of organizations have started to delineate cloud and non-cloud IT budgets to better manage financial planning and resource allocation.
Reason #5: Avoiding Unplanned Migration Costs
A fragmented approach to cloud adoption can increase total migration costs. While we support a "Think Big, Start Small, Move Fast" approach, organizations without a cloud strategy may incur unplanned costs, such as labor, training, consultants, running duplicate environments, and penalties for early contract terminations. An established cloud strategy with TCO analysis helps avoid these unplanned costs and ensures a smoother, more cost-effective migration. According to a 2023 study by McKinsey & Company, 65% of organizations that migrated to the cloud without a formal strategy experienced significant unplanned costs during the transition.
Hybrid Cloud Complexities and Application Repatriation
Many organizations are now adopting hybrid cloud environments to balance the benefits of both public and private clouds. However, managing a hybrid environment adds layers of complexity and cost. Issues such as data latency, integration challenges, and inconsistent security policies can negate anticipated savings. Additionally, some organizations are repatriating applications back to on-premises data centers due to cost control, data sovereignty, performance issues, and security concerns.
According to a 2023 report by 451 Research, around 48% of organizations have repatriated at least one workload from the public cloud back to on-premises or private cloud environments. The average cost of repatriation, as estimated by IDC in 2023, can range from $1 million to $5 million, factoring in expenses related to infrastructure, labor, downtime, and potential penalties for breaking cloud service contracts.
Case Study: Retail Chain Repatriation
A national retail chain decided to repatriate several of its critical applications from the public cloud to its on-premises data centers due to escalating costs and performance concerns. The structured approach included:
Comprehensive Cost-Benefit Analysis: Evaluating the long-term financial impact of repatriation versus continued cloud usage.
Detailed Migration Plan: Outlining the steps for a seamless transition with minimal disruption to business operations.
Enhanced Security Protocols: Ensuring robust security measures to protect sensitive customer data.
Performance Optimization: Fine-tuning applications for optimal performance in the on-premises environment.
The result was a 25% reduction in annual IT costs and improved application performance, demonstrating that repatriation can be a viable strategy under certain circumstances.
High-Level Description of Methodology for Application Repatriation
Assessment and Planning: Conduct a thorough assessment of the applications and workloads to determine the feasibility and benefits of repatriation.
Cost-Benefit Analysis: Perform a detailed cost-benefit analysis to justify the repatriation decision.
Migration Strategy: Develop a comprehensive migration strategy, including timelines, resource allocation, and risk management plans.
Security and Compliance: Ensure that all security and compliance requirements are met during and after the migration process.
Testing and Optimization: Rigorously test the applications in the new environment and optimize for performance and reliability.
Monitoring and Support: Implement robust monitoring and support mechanisms to manage the repatriated applications effectively.
Rate of Change, Commitment, and Approach
These five reasons are just a few of the many considerations when establishing a cloud strategy for your organization. The rapid pace of change in both technology and business requires advanced planning and flexibility. Establish an overarching cloud strategy and manage the plan tactically to retain organizational agility. Through the addition of various cloud workloads on an opportunistic or ad hoc basis, many organizations find themselves with a Hybrid Cloud by default. Without a strategy and roadmap to guide the organization, the frequent outcome may include added operational complexity and increased costs with new requirements for monitoring, managing, and reconciling billings from multiple cloud service providers. Be committed to a strategic approach and maximize the benefits of cloud computing.
Small Investment, Big Return on Investment
Investment in creating and managing a cloud strategy is small compared to the potentially large (and quick) ROI. A cloud assessment involving business and IT stakeholders identifying three “easy to move” applications as a first step is the optimum departure point for long-term enterprise migration planning. This approach allows Executive sponsors to gain internal support with early success and demonstrate the benefits cloud computing can offer an organization.
Enhance Your Cloud Strategy and Reduce Costs!
There are an estimated 64% of organizations implementing cloud ad hoc or without any cloud strategy. Failing to take advantage of the innovation and reinvestment opportunities offered by cloud computing can impair your organization’s potential for growth. Your competitors may already have started their cloud transition, enjoying increased revenues, lower prices to gain market share, and faster product launches. Enhance your cloud strategy and begin reducing your costs now.
Brookey & Company uses a multi-step, phased cloud adoption framework to plan and execute cloud strategies that capture cost savings, manage risk, and keep Business and IT aligned.
For additional information on cloud computing, view our Insights “Cloud Computing - Looking Beyond the Cost Savings” and “5 Factors Preventing Cloud Computing Cost Savings”.
Partner with us to navigate your cloud journey with confidence and precision. Contact us today at info@brookeyco.com or call us at 858.568.7788 to start transforming your IT landscape.
© Brookey & Company, Inc. Unauthorized reuse—including by automated systems—is prohibited under applicable copyright law. Monitoring and enforcement in place.