Cloud Computing Business Case Study - A Practical Analysis

Transcription

1 Lohnt sich Computing? Überreicht durch die WiB Solutions AG Identity Management Business Process Management Qualitäts Management WiB BRINGT THEMEN AUF DEN PUNKT. W W W. W I B. CH WiB Solutions AG, Aarburgerstrasse 7, CH-4600 Olten

2 A closer look at the cloud computing business case A SCIENTIFIC METHODOLOGY FOR EVALUATION Daniel Kappeler Danillo Sprovieri Sandro Vogler

3 Agenda Computing Business Case 2 Introduction to Services Risks assessment, Value analysis & : Calculating the Business Case Conclusion

4 3 Welcome to the cloud salesroom AN INTRODUCTION

5 What Providers are promising 4 Reduce capital costs / pay-as-you-go Minimize software licensing Reduce IT risks Reduce spending on technology infrastructure Globalize your workforce on the cheap Streamline processes Monitor projects more effectively Less staff training is needed Achieve economy of scale

6 and what they are not telling you 5 Adoption of cloud computing often requires a transformation process Exception: Startups Advantages of could are not straightforward Companies have large investments in infrastructure, software and maintenance systems processes are costly Cost advantage of could solutions is not always given Due to the fact that it is not clear if a cloud service is financially beneficial, a method is needed to evaluate the opportunity.

7 6 Methods? Cost-benefit equation is different in each case Business Case Pilot study Pilot study Expensive to set up Only one solution is evaluated Return on Investment Total Cost of Ownership Time consuming For startups cloud solutions can be a business opportunity The calculation is simpler and mainly focusing on running costs

8 7 METHODOLOGY FOR CLOUD SERVICES

9 8 Business Case - Definition A scenario for the evaluation of an investment To convince the management of an investment, clear Return of Value need to been shown Analyses costs and benefits of certain investment options Also, risks and strategy of the company do have an influence on the investment Financial values are defined and compared over a certain period of time Risks Investment Options Cost Benefit

10 Problem Awareness Uncertainty if current solution is most competitive 9 Business Case Possible Solution transformation Analysis and Alignment Risk assessment Value analysis Business Case ROI and KPI Assessment Criteria Cost Key Criteria ROI and KPI

11 10 WHAT THE CHANGE MEANS

12 11 Solutions do not immediately reduce costs Cost advantages of cloud transformation by Increased HW and SW utilization Reduced facility costs Reduced labor costs Inherent effects of outsourcing Scaling and elasticity Reduced time-to-value Reduced risks

13 12 (2) Existing resources (hardware, infrastructure, employees) need to be adapted to new situation Shift of resources Bound resources prevent shifting Consequence: Repurpose or pull out Transition costs are dependent on transition time Depends on contracts for software, workforce, buildings E.g. need to sell building

14 13 Risks assessment, Value analysis &

15 14 Computing Risks Loss of governance Individual support usually too expensive Data security Loss of operational expertise Lock-in Dependency on external provider Interoperability Availability issues Compliance with regulatory and security standards Data recovery No exit strategy defined Technical issues (e.g. Firewall needed) SLAs (ensures Quality of service)

16 Generated Business Values 15 Cost that can be permanently reduced E.g. repurposed facilities, re-trained workforce Savings due to increased utilization Costs that can be avoided E.g. live meetings due to ubiquitous information access

17 Generated Business Values (2) 16 But often, impacts are difficult to quantify Increased efficiency due to knowledge sharing E.g. Employee happiness Easier global collaboration Widespread framework is missing Quantification heavily based on assumptions Possible approach: Integrate a productivity model in the cost model Further value: mini-meetings get protocolled can be reused, referenced, etc. gathered data might reveal problems when analyzed Scalability (on demand allocation of resources) Enabler for business agility can add value for business and customer Gaining competitive advantage (e.g. offering new business model) Often added value creates further values Transparency (performance, cost, quality)

18 17 Strategic Alignment Transition to cloud must fit the corporate strategy The cloud may not be the solution to all business models Depending on identified risks and values, different impact on strategy Service Level Alignment (weakness in IT infrastructure) Competitive Potential Alignment (weakness in Business ) Or fusion strategy

19 18 CALCULATING THE BUSINESS CASE

20 ROI Return on Investment 19 Compares cost and benefits of the current infrastructure in contrast to a cloud solution Common definition of ROI: Value vs savings (!)

21 20 Cost considered in ROI Increased scalability (short term agility) Less bound capital Optimizing ownership use Optimizing cost of capacity Savings in hardware and software costs Risk and labor

22 Hidden costs you might overlook 21 Energy costs (servers and A/C) Bandwidth can be your best friend or your worst foe Outbound bandwidth from cloud server might be expensive Replacement cost for on-premise systems (new hardware, software fees, labor) Costs for downtime of systems

23 22 Further Criteria for ROI Not all factors can be expressed in economical indicators Key criteria regarding non-monetary assets Time Knowledge Quality Those criteria allow to systematically analyze non-monetary factors

24 23 Key Criteria Time Accelerated time to market for new products (long term agility) Service delivery time Provisioning time Increased reaction time of workforce

25 24 Key Criteria (2) Knowledge Retain and transfer knowledge Causes external effects on other business units Knowledge does support core competences Degree of innovation Maintaining an IT Architecture Excessive use of different cloud solution might cause misalignment

26 25 Key Criteria (3) Quality Optimizing cost to execute or deliver Utilization Improved Quality of Service Improves business continuity Green costs of Increased End-User satisfaction Loyalty

27 KPIs Key Performance Indicators 26 Performance measurement on the basis of indicators, which are related to cloud computing characteristics The following indicators could support service providers to measure the performance: Default rates (measurement of failures or downtime) Automation (ratio of automated processes) Degree of use Average rate of successful delivery Profit generated associated to revenue Cost of goods compared to generated profit Satisfaction rate (Usability etc.)

28 27

29 28 Conclusion computing often sold as silver bullet But it is not always the best solution Often no appropriate calculation is done A cloud service solution is often more expensive in the long run To correctly assess the factors, an evaluation method is needed A business case is a suitable approach for this Our methodology gives a guideline to assess all relevant factors

30 and Take-home message 29 Risk management Actively decide which risks to take or to evade Business Values Consider unique values delivered by cloud solutions A Business Case must be calculated and must Show a positive impact (ROI & KPI) Consider all other Key criteria (Time, Knowledge, Cost) KPI are identified to measure the performance solutions often interesting for Startups Diverse expectations from the view of the provider and customer

31 30 Thank you for your attention! QUESTIONS?

32 Bibliography 31

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