Category Archives: Cost Reduction

Business Transformation, Cloud Enablement, Cost Reduction, Enterprise IT, News & Analysis, SDN, Software Defined Networking

SDN on the rise and cloud still not understood – survey

Dollar SignsResearch from Viavi Solutions has indicated SDN technologies are on the rise within enterprise organizations, but there also might be a number of organizations who are implementing the cloud for the wrong reasons.

In its ninth annual State of the Network study, the team highlighted enterprise organizations are increasing deployment of 100 Gigabit Ethernet (100 GbE), public and private cloud, and software-defined networking technologies. Two thirds of respondents indicated they had some kind of deployment in the production environment, and 35% have implemented SDN underlay.

“There is a growing trend of enterprise customers realizing how they can improve the operations of their network,” said Steve Brown, Director of Enterprise Solutions at Viavi. “It’s been a slow burner, but SDN is beginning to break through into the mainstream. While encouraging, the statistics are a little higher than we expected. After comparing the adoption rates from the last couple of years, we expected SDN to be around 50%, but the survey does highlight some real momentum in the industry on the whole.”

The findings also highlighted that while cloud adoption is continuing to rise, 90% have at least one application in the cloud and 28% said they have the majority, there is still a level of immaturity in understanding the perceived and realized benefits of cloud computing. Lower operating costs was listed as the top reason for the transition at 63%, while the faster delivery of new services and the ability to dynamically adapt to changes in business demands were the least popular reasons, both accounting for 39%.

“If you look at what the chief benefits which people are seeing, we’re seeing a lot of feedback on the CAPEX/OPEX reductions,” said Brown. “This is great, but that’s not really what the point of cloud is. Expenditure reduction is something which the top decision makers in the business want to see, it’s more of a tactical play. If this is the end objective these companies are not really seeing the promise of cloud and what makes me excited about cloud.

Deploying cloud

Top reasons for adopting the cloud

“The areas which I see the key benefits are the ones which are lowest on the results, delivering services faster and dynamically changing to meet the needs of the business. I found it quite surprising that these were quite low. The results show that the decision to enter the cloud for the majority of consumers is more tactical than a strategic decision.”

One conclusion that can be drawn from the findings is a lack of understanding of what the cloud can offer. Gartner’s ‘Cost Optimization Secrets’ highlighted the average cost reduction for companies implementing cloud propositions was just over 14%. While this is encouraging, whether cloud adoption would remain an attractive option for organizations if they knew expenditure would be reduced by just 14% remains to be seen.

“There’s more than just cost saving when adopting the cloud,” said Brown. “Are there savings, absolutely, but the majority don’t come upfront. If you’re going to be running applications which could see aggressive spikes, the flexibility of and agility of the cloud will reduce the cost. But at the same time it’s difficult to justify the cost savings because you may be taking on new projects due to the fact you have the ability to scale your capacity at a moment’s notice.

“Rather than thinking about it as a cost saver, hybrid cloud should be seen as an initiative enabler. Until this idea is recognised by the industry, adoption may continue to struggle to penetrate the mainstream.”

For Brown and the team at Viavi, the benefits of cloud computing are focused around the business capabilities which are enabled in the medium and long-term. Cloud offers companies the opportunity to react to diversifying market conditions faster and ensure products remain relevant on an on-going basis.

“In my own personal opinion, I would like to see people embrace a hybrid cloud model because it enables them to develop competitive edges,” said Brown. “This also justifies future investment in technology, it moves these new concepts and implementations from ‘nice to have’ to ‘must have’ as technology will then be one of the supporting pillars of the business strategy. Cloud has the ability to do this and to be a competitive enabler.”

Cost Reduction, Deloitte, Enterprise IT, hybrid cloud, Opinion

Understanding the economics of the cloud – its more than just a money saver

Businessman drawing business planA recent survey from Spiceworks highlighted 93% of enterprise organizations are now using at least one cloud based service within their operations, but there does seem to be a general feeling within the community that the benefits are not clearly understood.

While most early adopters of such platforms, as well as other future tech, have focused on the performance capabilities which cloud can offer, the mainstream market believes the cloud is a cost reduction tool, a point which professional services giant Deloitte disagrees with.

“The image of the cloud projected by the market is sometimes that all forms of cloud are cheaper, but it is a question of using the right tool for the right job,” said Gwil Davies, Director & Cloud Lead in the EMEA IT Infrastructure at Deloitte. “What decision makers at these organizations need to realize is that the cloud is not necessarily cheaper.”

“I think it’s more important for organizations get a real understanding of how to use the cloud and perhaps not automatically assume that moving all of their current IT into cloud is going to be the cheaper solution.”

The concept of the cloud being a cheaper alternative to traditional IT is sometimes a case of a lack of understanding of the technology itself, but also the journey on which organizations need to undertake to ensure cloud computing is being used in an effective manner. Selecting a cloud provider is only a small facet of the cloud itself, a fact which can be under-appreciated by enterprise decision makers.

“Technology is a small part of the challenge, business transformation of the organization is key to the success of the cloud,” said Davies. “You have to be really clear on the why, the what and the how. Specifically you have to have a keen eye on value. Some of the most successful cloud implementation projects generate value in new ways. These decision makers have specifically identified where clear business value can be generated. If the answer is to reduce costs, the cloud is not always the right option.”

Speaking at Cloud World Expo, Davies highlighted that a successful journey to the cloud is not one which focuses on reducing CAPEX and OPEX throughout the organization, but identifies where value can be achieved through a cloud-enabled business. Identifying where the value is, but also monitoring the progress of the project can be the difference between effective investment and throwing money away.

“There are sometimes surprises – and most organisations will need to invest in some base capabilities, before a migration of systems into the cloud can begin,” said Davies. “The business case needs to be defined around what the value of the transition is to the business – huge benefits can be realised, and often it’s not just about reducing the current cost of your IT systems.”

One conclusion which can be drawn from the aforementioned survey as well as others, is the concept of cloud computing has penetrated into the mainstream market. But the question as to whether the benefits of scalability, compute power, agility, flexibility etc. have been effectively received is less clear.

“It varies very widely (whether benefits beyond cost reduction are understood), as customers are in different stages of their cloud journey,” said Davies. “In my opinion, the cloud as a technology is one of the most transformative opportunities available to enterprise organizations in recent years. The cloud is unlocking a huge amount of value throughout the organization, which wouldn’t have been possible even two years ago. There is a huge potential to reach new customers, create new opportunities and experiences, as well as become more competitive in the market place.

Different organizations are in different places though. The starting point for organizations, who are at the investigating the cloud, and haven’t identified what the cloud means to the wider business, is mostly cost saving.”