Cloud Computing Business Case Study - A Practical Analysis
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(2) A closer look at the cloud computing business case A SCIENTIFIC METHODOLOGY FOR EVALUATION Daniel Kappeler | Danillo Sprovieri | Sandro Vogler.
(3) 2. Agenda – Cloud Computing Business Case . Introduction to Cloud Services. . Business Case & Methodology. . Cloud Transformation. . Risks assessment, Value analysis & Strategy. . Evaluation: Calculating the Business Case. . Conclusion.
(4) 3. Welcome to the cloud salesroom AN INTRODUCTION.
(5) Introduction. Business Case & Methodology. Cloud Transformation. Risks, Benefits, Strategy. Evaluation. Conclusion & Summary. What Cloud Providers are promising… . 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. 4.
(6) Introduction. Business Case & Methodology. Cloud Transformation. Risks, Benefits, Strategy. Evaluation. Conclusion & Summary. … and what they are not telling you . Adoption of cloud computing often requires a transformation process . . Exception: Startups. Advantages of could are not straightforward . . 5. Companies have large investments in infrastructure, software and maintenance systems. Transformation 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) Introduction. Business Case & Methodology. Cloud Transformation. Risks, Benefits, Strategy. Evaluation. Conclusion & Summary. Evaluation Methods Cloud? Business Case Return on Investment Total Cost of Ownership. . Cost-benefit equation is different in each case. . Pilot study. Pilot study . . Expensive to set up. . Only one solution is evaluated. . Time consuming. 6. For startups cloud solutions can be a business opportunity . The calculation is simpler and mainly focusing on running costs.
(8) 7. Business Case & Methodology METHODOLOGY FOR CLOUD SERVICES.
(9) Introduction. Business Case & Methodology. Cloud Transformation. Risks, Benefits, Strategy. Evaluation. Conclusion & Summary. 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. Strategy. Investment Options Cost. Benefit.
(10) Problem Awareness Uncertainty if current solution is most competitive. Possible Solution. Business Case – Methodology. Cloud transformation. Analysis and Alignment Risk assessment. Value analysis. Strategy. Business Case ROI and KPI. Assessment Criteria Cost. Key Criteria. 9. ROI and KPI.
(11) 10. Cloud Transformation WHAT THE CHANGE MEANS.
(12) Introduction. Business Case & Methodology. Cloud Transformation. Risks, Benefits, Strategy. Conclusion & Summary. Evaluation. Cloud Transformation. 11. . Cloud 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) Introduction. Business Case & Methodology. Cloud Transformation. Risks, Benefits, Strategy. Cloud Transformation (2) . . Evaluation. Conclusion & Summary. 12. 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 & Strategy.
(15) Introduction. Business Case & Methodology. Cloud Transformation. Risks, Benefits, Strategy. Evaluation. Conclusion & Summary. Cloud Computing Risks . Loss of governance . . Data security. Lock-in . Interoperability. . Availability issues. . Data recovery. . No exit strategy defined. . Technical issues (e.g. Firewall needed). . SLAs (ensures Quality of service). 14. . Individual support usually too expensive. . Loss of operational expertise. . Dependency on external provider. . Compliance with regulatory and security standards.
(16) Introduction. Business Case & Methodology. Cloud Transformation. Risks, Benefits, Strategy. Evaluation. Generated Business Values . . 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. Conclusion & Summary. 15.
(17) Introduction. Business Case & Methodology. Cloud Transformation. Risks, Benefits, Strategy. Evaluation. Conclusion & Summary. Generated Business Values (2) . . But often, impacts are difficult to quantify . E.g. Employee happiness. . Widespread framework is missing. . Quantification heavily based on assumptions. Possible approach: Integrate a productivity model in the cost model. 16. . Increased efficiency due to knowledge sharing. . Easier global collaboration . 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. . Cloud 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) Introduction. Business Case & Methodology. Cloud Transformation. Risks, Benefits, Strategy. 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 Strategy). . Or fusion strategy. Evaluation. Conclusion & Summary. 17.
(19) 18. Evaluation CALCULATING THE BUSINESS CASE.
(20) Introduction. Business Case & Methodology. Cloud Transformation. Risks, Benefits, Strategy. Evaluation. ROI – Return on Investment. Conclusion & Summary. 19. . Compares cost and benefits of the current infrastructure in contrast to a cloud solution. . Common definition of ROI:. . Value vs savings (!).
(21) Introduction. Business Case & Methodology. Cloud Transformation. Risks, Benefits, Strategy. 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. Evaluation. Conclusion & Summary. 20.
(22) Introduction. Business Case & Methodology. Cloud Transformation. Risks, Benefits, Strategy. Evaluation. Conclusion & Summary. Hidden costs you might overlook . 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. 21.
(23) Introduction. Business Case & Methodology. Cloud Transformation. Risks, Benefits, Strategy. Evaluation. 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. Conclusion & Summary. 22.
(24) Introduction. Business Case & Methodology. Cloud Transformation. Risks, Benefits, Strategy. Evaluation. Key Criteria . Time . Accelerated time to market for new products (long term agility). . Service delivery time. . Provisioning time. . Increased reaction time of workforce. Conclusion & Summary. 23.
(25) Introduction. Business Case & Methodology. Cloud Transformation. Risks, Benefits, Strategy. Evaluation. Key Criteria (2) . Knowledge . Retain and transfer knowledge . . Knowledge does support core competences . . Causes external effects on other business units. Degree of innovation. Maintaining an IT Architecture . Excessive use of different cloud solution might cause misalignment. Conclusion & Summary. 24.
(26) Introduction. Business Case & Methodology. Cloud Transformation. Key Criteria (3) . Quality . Optimizing cost to execute or deliver. . Utilization. . Improved Quality of Service. . Improves business continuity. . Green costs of Cloud. . Increased End-User satisfaction . Loyalty. Risks, Benefits, Strategy. Evaluation. Conclusion & Summary. 25.
(27) Introduction. Business Case & Methodology. Cloud Transformation. Risks, Benefits, Strategy. Evaluation. Conclusion & Summary. 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. Conclusion & Summary.
(29) Introduction. Business Case & Methodology. Cloud Transformation. Risks, Benefits, Strategy. Evaluation. Conclusion . . Cloud 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. Conclusion & Summary. 28.
(30) Introduction. Business Case & Methodology. Cloud Transformation. Risks, Benefits, Strategy. Evaluation. Conclusion & Summary. Summary and Take-home message . Risk management . . Business Values . . Actively decide which risks to take or to evade 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. . Cloud solutions often interesting for Startups. . Diverse expectations from the view of the provider and customer. 29.
(31) 30. Thank you for your attention!. QUESTIONS?.
(32) 31. Bibliography.
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