As a cloud architect, I often get asked by executives if moving a certain application to the cloud would save them money.
There was a time when I used to think about RoI (return on investment) calculations, find out break-even points and so on. I often asked them what their current costs are. To date, I have not found an executive who had the faintest idea of the cost of running his application on-premise. Not even a ballpark figure.
The cost of running an application on-prem can be divided into two parts – the datacenter costs and the application costs.
The true cost of a datacenter includes the cost of the hardware, the licensing and maintenance cost of the operating system, the personnel costs required to maintain them, the support personnel (procurement team, for example) the electricity, the cost of the land and so on. These costs are to be proportionately allocated to all the apps running in the datacenter.
Nobody knows these costs because they do not show up on any reporting tool every month. They are not tracked because they do not change and they cannot be optimized. They are sunk costs.
The application costs are relatively simple. They include licensing costs and the operational costs of running it. For the executive, the datacenter is a free, shared resource. There are no metrics on how efficient his application is in terms of computing resources, because the old technology did not allow for such cost breakdown. I have seen the most inefficient use of computing resources in a datacenter.
The huge fixed (sunk) costs coupled with opaque operational costs for the application means that the cost assessment is either over-indexed on the cloud migration costs or on the transformation benefits in the cloud. There is nothing objective about it.
All cloud RoI calculations are therefore, at best a point of view — a statement of intent of the executive running the program. How then, should a CXO frame the app migration question? Here is my take on it.
For the CXO, a €5 million cheque every 3 years for a datacenter seems like the cost of doing business. But a €5000 monthly cloud bill is something that one can see and try to optimize.
What gets tracked, gets improved.
Creating a culture of transparency and accountability will help cost control more than the technology in itself.
Leave a Reply